Assets in exchange traded funds in Canada have surged nearly 50% so far this year, according to a new report from Barclays Global Investors.

The most recent ETF Landscape Industry Review shows that the ETF industry in Canada has grown by 49% to date in 2009, from $19.4 billion to $28.8 billion at the end of September.

The rapid growth trend has also been occurring around the world. Global ETF assets hit an all time high of US$891 billion at the end of August 2009, which is 3.9% above the previous all time high of US$858 billion set a month earlier. Year-to-date, global ETF assets have risen by 25.3%.

“There has been a visible shift in the investing habits of Canadians over the past six months as net inflows have increased and investors join a global trend,” said Deborah Fuhr, global head of ETF research and implementation strategy at BGI. “Clearly, in Canada and elsewhere, ETFs continue to enjoy considerable momentum as an investment vehicle given their ability to offer exposure to such a wide variety of asset classes.”

In Canada, fixed income ETFs have experienced the highest growth this year, with $2.4 billion in net new assets, and asset under management growth of 100%. Other areas of significant growth included income-oriented equities, such as REITs, with $521 million in net new assets, and international equities, with $517 million in net new assets.

“Today’s investors are demanding better investment vehicles with solid upside but which remain cost efficient and transparent,” said Heather Pelant, head of iShares at BGI Canada.

The report also shows growing investor interest in inverse and leverage ETF products. Net assets in all inverse and leveraged products nearly doubled in the first nine months of 2009, with $1.4 billion in net new assets, for a total of $2.8 billion in assets under management as at September 30. The bulk of the increase was in commodity-based products, while assets in fixed-income leveraged and inverse ETFs declined during the period.

The report notes significant contrast between investment activity in ETFs compared to mutual funds. In the nine months ended September, net redemptions of mutual funds in Canada were $800 million, according to the Investment Funds Institute of Canada. This compares with $5.9 billion in total net sales of ETFs over the same period.

The Canadian ETF industry has 97 ETFs with 119 listings from four providers at the end of September 2009.

The global ETF industry had 1,773 ETFs with 3,137 listings, assets of US$891 billion from 95 providers on 41 exchanges at the end of August 2009.

IE