RBC Global Asset Management and BlackRock Asset Management Canada’s ETF alliance represents an “alignment of capabilities,” creating synergies for both financial giants, National Bank analysts say.
The Toronto-based firms announced on Tuesday that they were joining forces, creating a unified ETF family featuring 150 ETFs with a combined $60 billion in assets under management.
The new RBC iShares brand will bring together 106 index-based ETFs managed by BlackRock Canada with 44 ETFs managed by RBC GAM, bringing the number one and number five ETF providers in the country together.
In a research note, National Bank analysts said the move “signals the meeting of two independent trends” in Canada’s ETF market: traditional asset managers seeking to offer ETFs, and ETF providers trying to enter existing fund distribution networks.
The new brand demonstrates RBC’s growing to commitment to ETFs, the note said. “This signals the shared belief that ETFs are the future of investment portfolios, given the popularity with young investors; ease of use; accessibility; and profile in markets.”
While ETFs have just one-tenth of the assets mutual funds have in Canada, it noted, they outsold mutual funds in 2018 for the first time since the financial crisis.
For BlackRock, the merged brand offers access to a big bank’s distribution and marketing networks as the ETF business becomes more competitive. BlackRock’s leading position represents a 36% share of the Canadian market, compared to RBC’s 3%.
“Penetrating a bank’s wide-scale distribution network may be an ETF provider’s best chance of keeping pace with the breakneck growth that the industry has experienced over the past few years,” the report said. “iShares’ choosing to partner with RBC underscores its commitment and desire to integrate its ETFs into a wide variety of investment solutions.”