BMO Financial Group

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BMO Financial Group

February 07, 2013 06:00 ET

BMO Annual ETF Report: 2013 Will Be Another Banner Year for the Canadian ETF Industry

- Canadian ETF assets increased by 33 per cent in 2012

- 2013 will see an expansion of the user base of ETFs

- Canadian ETF industry to benefit from developing new uses for ETFs

- Investors will seek out defensive growth strategies and lean towards equities

TORONTO, ONTARIO--(Marketwire - Feb. 7, 2013) - BMO Global Asset Management today released its annual BMO Canadian ETF Outlook Report which finds that the growth of the Canadian Exchange Traded Fund (ETF) industry over the next year will be driven by, among other factors, increased awareness among investors of the fundamental benefits of ETFs and more strategic long-term use of ETFs within portfolios.

The report notes that ETFs enjoyed tremendous growth in 2012: at year-end, the Canadian ETF industry had approximately $56.4 billion in assets under management, up 33 per cent from 2011. Canada had its largest ever annual inflows in 2012, at $12 billion.

"The rapid growth of the ETF industry in 2012 is likely to continue this year," said Kevin Gopaul, Senior Vice President and Chief Investment Officer, BMO Asset Management Inc. "We can look to the American ETF industry as a predictor of what we can expect in Canada this year. We believe this will include expanding to new user groups and innovative ideas for using ETFs in portfolios. This, in turn, will help increase awareness and grow adoption rates."

According to the report, growth will come as a result of stronger competition, the convergence of the mutual fund and ETF industries, and using ETFs as more long-term strategic portfolio holdings.

The report predicts the following trends for the industry in 2013:

  • Stronger competition and possible new entrants as market share evens out across industry players.
  • Investors will seek out defensive growth strategies with a potential for leaning towards equities.
  • Increased merging of mutual funds and ETFs in portfolios.
  • Price competition will remain a priority across providers.
  • Investors will look to enhance yield through income-generating investments.

Benefits of ETFs

A large driver of growth has been the numerous benefits ETFs provide investors. These include:

  • Transparency, as portfolios are published on a daily basis.
  • Liquidity, as investors can buy and sell on the exchange when markets are open.
  • Tax efficiency, as units are traded between investors instead of directly from the fund.
  • Diversification, as portfolios often replicate an index or exposure instead of picking a select number of holdings.
  • Lower cost, as ETFs tend to have lower management fees.
  • Market returns, as closely mirroring an index limits benchmark deviance.

"In order for the Canadian ETF industry to continue to expand, it will be essential that ETF providers recognize the evolving nature of the investing landscape and develop offerings that appeal to a broader base of investors," added Mr. Gopaul. "We look forward to maintaining our place as a leader in this space and look forward to helping Canadians realize their financial goals through the many benefits offered by ETFs."

Since its inception in June 2009, BMO Asset Management Inc.'s ETF business has grown to 48 funds; each offers numerous benefits to investors, including lower costs and tax efficiencies, while covering a number of diverse asset classes, sectors and regions.

To view the full report or for more information on ETFs, please visit: www.etfs.bmo.com.

BMO ETFs are managed and administered by BMO Asset Management Inc., a portfolio manager and investment fund manager and separate legal entity from Bank of Montreal.

Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

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