TORONTO, ONTARIO--(Marketwired - Jan 29, 2014) - BMO Global Asset Management (BMO GAM) today released the latest edition of its bi-annual BMO Canadian ETF Outlook Report.
The report finds that the Canadian ETF industry experienced impressive growth in 2013 and that its ongoing success will be determined by how well providers respond to key investor needs such as more fixed income alternatives, increased exposure to income producing equity holdings and a growing demand for innovative exposures.
The report notes that the growth of the Canadian ETF industry continued unabated in 2013 and currently stands at $63.1 billion in assets under management (AUM), up $5 billion over last year and an increase of 11.9 per cent over year-end 2012. Equity ETFs experienced $2.7 billion in inflows in 2013, while fixed income inflows slowed slightly but still reached $2.3 billion.
"The domestic ETF industry enjoyed another stellar year in 2013 with a variety of new and innovative portfolios contributing to its growth," said Rajiv Silgardo, Co-CEO, BMO Global Asset Management. "Investors concerned about the impact of monetary policy on financial markets and the sustainability of global growth prospects continued to invest in ETFs, largely because of the flexibility they offer and their cost-effectiveness."
BMO GAM's ETF business led the the Canadian ETF industry in new assets for the third consecutive year in 2013, bringing their market share to 20 per cent of industry AUM. Moreover, BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR) was the top selling individual ETF in Canada, attracting investors who were seeking diversified yield sources and lower interest rate sensitivity relative to fixed income.
"Canadian investors are benefitting from increasing competition in our industry," stated Mr. Silgardo. "ETF providers are focusing more on product innovation than ever before and we're all being compelled to develop stronger product suites and to find ways to differentiate ourselves."
Key Trends for 2014
According to the report, the following trends will impact the Canadian ETF industry in 2014:
More Fixed Income Alternatives: In late 2013, investors shied away from fixed income purchases and avoided longer-term exposure. This has highlighted a need for alternative ways to generate yield to make up for a lack of income. Alternative fixed income options include preferred shares and credit-focused fixed income such as floating rate securities, high yield debt and investment grade corporate bonds.
Equity Income: More defensive fixed income holdings means a need for more income from equity holdings. Equity exposures combining both growth potential and income will be highly favoured in 2014.
Smart Beta: Market capitalization weighting continues to be a key strategy to achieve market exposure. However, investors are also exploring alternative-weighting strategies, known as smart beta. Products that offer exposure based on various factors such as low volatility, momentum and quality are growing in popularity.
Currency Hedging: Traditional international ETFs based in Canada hedged the foreign currency exposure. However, the recent decline of the Canadian dollar has heightened interest in unhedged products, which provide a way for investors to take advantage of foreign currency gains. Also, the increased volatility in currencies has compelled investors to use technical trading signals, and have been switching between hedged and unhedged ETFs based on short-term currency movement.
To view the full report or for more information on ETFs, please visit: www.bmo.com/etfs.
About BMO ETFs
Since its inception in June 2009, BMO GAM's ETF business has grown to 48 funds; each offers numerous benefits to investors, including lower costs and tax efficiencies, while covering a number of diverse asset classes, sectors and regions.
BMO ETFs are managed and administered by BMO Asset Management Inc., a portfolio manager and investment fund manager and separate legal entity from Bank of Montreal.
Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.
BMO Global Asset Management comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp. and BMO's specialized investment management firms.
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- fixed income