BMO Financial Group

BMO Financial Group

September 28, 2015 08:00 ET

BMO ETF Report: Liquidity, Diversification and Transparency Will Continue to Be Key in Industry Growth

- Canadian ETF industry stands at $84 billion in AUM, up more than 10 per cent over year-end 2014

- BMO MSCI EAFE Index ETF has led Canadian ETFs in most net inflows to date in 2015

- Trading efficiencies and concentration concerns around ETFs are two key factors impacting the industry

TORONTO, ONTARIO--(Marketwired - Sept. 28, 2015) - Today BMO Global Asset Management (BMO GAM) issued its Canadian ETF Outlook 2015. The report looks at top trends and topics in the Exchange Traded Fund (ETF) market and expectations for the future of the industry.

So far, the Canadian ETF industry stands at $84 billion in assets under management (AUM), an increase of more than 10 per cent over the end of 2014. Equity ETFs have accounted for $4.5 billion in inflows so far in 2015 and fixed income ETFs $4.7 billion.

The report noted that the Canadian ETF with the most net inflows to date in 2015 is the BMO MSCI EAFE Index ETF (ticker ZEA). The popularity of this type of ETF demonstrates that ETFs are highly efficient vehicles for making allocation decisions. For instance, given the monetary easing in Europe, investors are using ETFs to gain a broader exposure to international markets. The next highest net inflows so far this year have been in BMO Mid Federal Bond Index ETF (ticker ZFM), demonstrating the convenience of using ETFs for fixed income.

"The domestic ETF industry has seen strong momentum in 2015. Its user base has expanded as investors grow more comfortable with these funds," said Rajiv Silgardo, Co-CEO, BMO Global Asset Management. "ETFs have been able to maintain their popularity and continue to prove to be useful through changing market conditions because of their flexibility and diversification benefits."

BMO GAM's ETF business recently celebrated its sixth anniversary and currently sits at $22.9 billion in AUM*.

Two Key Factors That Are Impacting the Industry:

Trading Efficiencies: ETFs are an access vehicle for an asset class. The report noted that, given the natural liquidity between ETF buyers and sellers on the exchange, it may be more efficient to trade an ETF compared to the underlying asset class. Additionally, ETFs have intra-day liquidity on the exchange where the market bid and ask prices provide full transparency into the trading costs.

Concentration Concerns: According to the report, there have been questions regarding whether ETFs are driving up the price of the securities within their benchmark. However, a properly designed ETF diversifies across liquid holdings and allows all investor types to participate in the asset class.

Mr. Silgardo added, "One of the takeaways from these industry trends is the importance of working with an established ETF provider who focuses on portfolio construction and can manage various complex underlying assets across index rebalancing and inflows."

Trends Moving Forward:

According to the report, providers have been able to offer more precise portfolios by offering more targeted exposures. Since ETFs hold a cross section of an asset class, diversification is maintained and effective portfolios can be constructed around narrower market bands.

The report noted that ETFs will continue to gain in popularity in various geographies because of their low cost and lack of fee complexity in markets that are undergoing structural reform such as the U.K. and Australia, as well as in North American markets with more usage by larger institutional players.

The report concluded that as global ETF markets mature and approach the status of the U.S. market in terms of size and sophistication, there is a positive cycle where increasingly diverse investor and user groups raise the liquidity and efficiency of trading ETFs.

To view the full report or for more information on ETFs, please visit:

About BMO Exchange Traded Funds (ETFs)

Established in June 2009, BMO Financial Group's ETF business is a leading ETF provider in Canada. BMO ETFs provide Canadian investors with broader choices and greater access to an innovative portfolio of investment products.

About BMO Financial Group

Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of approximately $672 billion as of July 31, 2015, and more than 47,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets.

*As at July 31, 2015

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.

BMO Global Asset Management comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp. and BMO's specialized investment management firms.

®"BMO (M-bar roundel symbol)" is a registered trade-mark of Bank of Montreal, used under licence.

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