New research that aims to quantify the fund industry’s economic impact in Ontario finds that fund management is an important source of jobs and tax revenue and also contributes significantly to the province’s gross domestic product (GDP).

According to a new report from the Conference Board of Canada — which was funded by industry lobby group, the Investment Funds Institute of Canada (IFIC) — in 2013, the funds industry directly employed 44,413 people in the province, and generated $4.1 billion in direct real GDP in Ontario (up from an estimated $2.8 billion in 2005).

The research also estimates the total economic footprint of the industry (which includes direct, indirect, and induced impacts) at $11.4 billion, or 1.8% of the province’s total real GDP. Indirect impacts include the business created for other industries such as legal and accounting services, and induced impacts include the resulting spending of employee income and corporate profits.

Consider these various knock-on effects detailed in the report: the total number jobs in the provincial economy that are sustained by the funds industry is 119,100; the total lift in economic activity resulted in $7.9 billion in personal income and $1.6 billion in corporate profits; and the total tax revenues collected from this economic activity were $2.8 billion in 2013, including indirect taxes and corporate and personal income taxes.

The Conference Board report says that Ontario’s funds industry has an economic multiplier of 2.8, which means that every $1 million increase in real GDP generated by the industry increases provincial real GDP by a total of $2.8 million when accounting for the supply chain and induced impacts.

Within the province, the largest supply chain and induced impacts occur in the finance, insurance, and real estate industries, the report notes, along with commercial services, and the information and cultural industries. These effects are also felt outside the province, as the industry creates demand that benefits industries in other provinces, too. The report says that notable supply chain and induced impacts are also felt in the Prairies, in British Columbia and in Quebec.

However, Ontario captures a disproportionate share of direct employment and GDP in the fund industry. The report finds that for the country overall, the funds industry directly employed an estimated 67,941 people in 2013, with Ontario accounting for about two thirds of that, despite the fact that the province represents only about half of assets under management (AUM). The report says that Ontario’s share of industry employment (and GDP) is larger than its share of AUM “due to the large proportion of headquarters — where portfolio management occurs — located in the province.”

Citing data from Investor Economics, the report also notes that mutual fund and exchange traded fund (ETF) assets almost doubled between 2004 and 2013. It says that Ontario residents account for about 49% of industry assets, and that AUM in Ontario were valued at an estimated $257 billion in 2004, which grew to $489 billion by 2013.

“One of the reasons that funds assets have increased so significantly is the changing landscape of retirement planning. Declining pension coverage and a move away from defined benefit pensions have resulted in a situation where Ontarians are increasingly responsible for their own retirement savings and funds have become a popular vehicle for these retirement savings,” the report notes.

“The funds industry has grown in importance as the 21st century has ushered in a period of economic change in Ontario,” said Pedro Antunes, executive director, economic outlook and analysis, at the Conference Board.

“This report concludes that Ontario’s funds industry plays a valuable and significant role in the Ontario economy based on all leading economic measures,” noted Joanne De Laurentiis, IFIC president and CEO. “In addition to its primary purpose — to help Ontarians save to meet their financial goals — the industry is making a significant contribution to the province’s employment, GDP and tax revenue.”

“The industry is proud of its contribution to a strong provincial economy,” added De Laurentiis. “While putting investors’ money to work for their own financial security, we are raising capital to finance business growth and innovation for companies — large and small — in the province. We also provide capital to governments in the province through the purchase of provincial and municipal bonds.”