Canada’s exchange-traded fund (ETF) industry is growing exponentially, with the number of ETF providers more than tripling in the past few years, and more entrants to the industry expected in the years ahead, according to Daniel Straus, director of ETF research and strategy for Montreal-based National Bank Financial Ltd, who spoke at the 2016 Exchange Traded Forum in Toronto on Wednesday.
In fact, there were only four ETF providers in Canada five years ago, and that number has jumped to 14, said Straus: “We do believe it’s only a matter of time before most of the large mutual fund companies and banks in Canada really do considers ETFs as a primary vehicle for offering their asset management solutions to Canadians.”
One of those companies, Toronto-based Mackenzie Financial Corp., is the most recent major player to enter the ETF market as the asset-management firm launched its first four ETFs on Tuesday.
Mackenzie has filed preliminary prospectus documents to add another six ETFs to that lineup, including: Mackenzie Maximum Diversification Canada Index ETF, Mackenzie Maximum Diversification US Index ETF, Mackenzie Maximum Diversification Developed Europe Index ETF, Mackenzie Maximum Diversification All World Developed Index ETF, Mackenzie Maximum Diversification Emerging Markets Index ETF and Mackenzie Maximum Diversification All World Developed ex North America Index ETF
These “maximum diversification” ETFs track the performance of indices managed by Paris-based Tobam Core Investments.
“Mackenzie has licensed those indices for what are effectively smart beta ETFs for various geographies,” Straus told the audience of financial advisors and product provider representatives.
In addition to Mackenzie, Toronto-based TD Asset Management Inc. recently rejoined the ETF market and is the third Canadian bank — in addition to BMO Asset Management Inc. and RBC Global Asset Management Inc., also in Toronto — to offer these products.
Although some Canadian firms may not be directly involved in providing ETFs to their clients, they still have a presence in the market in some way, notes Straus, citing the example of Toronto-based Manulife Financial Corp., whose U.S. unit, John Hancock Financial, has launched its own line of smart beta ETFs.
Furthermore, some of the smaller, independent entrants to the market are catering to their own investing niche, said Straus. For example, Auspice Capital Advisors, a Calgary-based asset-management firm that specializes in commodities, has released an ETF based that tracks the performance of Canadian crude oil.
The number of products released within a year is also increasing. Approximately 70 ETFs were put on the market in Canada in 2015 and with more than 30 launches in 2016 so far, the industry is on track to beat last year’s number, said Straus.
Although the mutual fund industry is still a juggernaut in Canada and will likely remain that way, the ETF industry’s share of the market is definitely growing, according to Straus.
“ETFs are now at 6.7% market share relative to mutual funds. They were at 4% a number of a years ago and that number is rising,” he said.
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