The popularity of ETFs was supported by statistics from the 2019 investment funds report released by the Investment Funds Institute of Canada (IFIC) on Thursday.
ETF net sales totalled $27.9 billion in 2019 — a record high, the report said. It was the fourth year that ETF net sales exceeded those of mutual funds, which were $16.9 billion in the year. (The other years that ETF sales overtook those of mutual funds were 2008, 2009 and 2018.)
At the same time, ETFs still follow well behind mutual funds when it comes to total assets.
While ETF assets have grown by more than five times since the end of 2010, that translated to an additional $167 billion in assets, the report said. During the same period, mutual fund assets doubled, adding $852 billion.
As reported earlier this week, mutual fund assets totalled $1.6 trillion in 2019, and ETF assets totalled $205 billion.
The IFIC report attributed the increase in assets for both types of funds to positive sales and positive market effect.
“While 2018 saw a negative market effect of $54.1 billion (representing the largest negative impact of market effect since 2008), this was followed by the largest market effect ever, in dollar terms, of $190 billion in 2019,” the report said.
The report also noted that, relative to mutual funds, ETF asset growth is more dependent on sales than market effect because of ETFs’ smaller asset base.
More firms offer funds
Also on the rise is the number of firms offering ETFs and mutual funds — and, accordingly, the number of funds being offered.
At the end of last year, 36 companies offered ETFs, the report said. That figure represents a doubling of firms offering the funds over the last three years.
In comparison, 121 companies offered mutual funds, which included a net increase of 11 firms — the largest increase in the last decade, the report said. It attributed the increase to new entrants offering liquid alternatives in response to regulatory changes in January 2019 that allowed fund manufacturers to offer prospectus-qualified alternative funds.
The majority of firms offer both ETFs and mutual funds, the report noted.
On a net basis, 42 mutual funds were added in the year, bringing the total number of funds to 3,496.
For ETFs, 84 (net) were added in the year, bringing the total number to 746 — nearly half of which were launched in the last four years, the report said.
Increased focus on responsible investing, bond ETFs
Both mutual funds and ETFs hold a relatively small amount of the total assets in responsible investment (RI) funds, with large institutional investors being the key players in the space, the report noted.
At the end of 2019, RI funds accounted for $12 billion of mutual fund assets and $654 million of ETF assets, representing 0.7% and 0.3%, respectively, of total mutual fund and ETF assets.
Despite the small amount, 16 firms offered 69 RI mutual funds, the report said, and 10 firms offered 23 RI ETFs.
Among asset classes, the majority of mutual fund assets at year-end were held in balanced funds (50%), while most ETF assets were in equities funds (62%).
Of note, about one-third of ETF assets were in bond funds. Bond funds have gained significant share of the ETF marketplace, the report said, with assets doubling over the past decade.
For full details, read IFIC’s 2019 investment funds report.