The global ETF industry enjoyed strong growth last year and assets under management (AUM) will more than double again over the next five years, predicts a report published on Tuesday from BMO Global Asset Management (BMOGAM).
The annual ETF Outlook Report examines the growth of the ETF market in 2017 and highlights the opportunities and challenges for the year ahead.
According to the report, the global ETF market finished 2017 with a record high of US$4.6 trillion in AUM, an increase of US$649 million from 2016.
In Canada, the ETF industry also saw stellar growth last year. Net inflows totalled $26 billion in 2017, pushing total AUM to $147 billion. Equity ETFs led way, generating $13.1 billion in net inflows, while fixed-income ETFs garnered $10.7 billion in net inflows.
A combination of strong equities markets gains and the continued shift to low-cost, passive investing strategies helped drive the growth, according to the report. As well, ETF lineups continue to expand and diversify beyond traditional passive strategies.
“The diversity of ETFs and array of opportunities available to investors is now greater than ever,” the report states. “An investor today can access traditional equity and fixed-income exposures, in addition to innovative market trends such as artificial intelligence or complex derivative strategies such a swaps or covered calls.”
Indeed, BMOGAM expects ETF industry growth to accelerate in the next several years amid a rise in both retail and institutional demand. The global ETF industry will top US$10 trillion in AUM over the next five years, the report predicts, and Canadian AUM will more than double to more than $400 billion during that same period .
“The efficiency of ETFs resonates with investors, both as long-term holdings and as tactical trading vehicles and we have seen increased acceptance of them across institutional, advisory and direct investors,” says Mark Raes, head of ETF business development, BMOGAM, in a statement.