BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal
BMO Global Asset Management

BMO Global Asset Management

September 05, 2012 08:05 ET

REPEAT-BMO Bi-Annual ETF Report: Exchange Traded Funds Gaining Traction in 2012

- Canadian ETF market experiencing double digit growth in 2012; now stands at $50 billion in assets under management

- Investors are favouring fixed income and dividend-based ETFs

- Ongoing success of ETFs will be driven by price, additional suppliers and new distribution channels and strategies

TORONTO, ONTARIO--(Marketwire - Sept. 5, 2012) - According to the BMO Canadian ETF Outlook Update 2012, issued today by BMO Global Asset Management (BMO GAM), the Canadian Exchange Traded Fund (ETF) industry is expected to continue its strong pace of growth through the rest of the year.

The industry currently stands at $50 billion in assets under management (AUM), up 15.9 per cent since the start of the year. The report predicts that ongoing growth in 2012 will, in part, be driven by competitive pricing, more choice, new suppliers, new distribution channels and the potential entry of actively-managed ETFs into Canada.

"Increased awareness of the benefits of ETFs among Canadians is translating into increased adoption rates," said Rajiv Silgardo, Co-CEO, BMO Global Asset Management. "The ETF space should continue to grow as long as suppliers continue to focus on innovation and anticipate the needs of investors."

Mr. Silgardo noted that BMO Asset Management Inc.'s ETF business has grown dramatically since being launched in 2009, with AUM recently surpassing $7 billion and increasing 16 per cent in the last two months alone.

According to the BMO Canadian ETF Outlook Update 2012, several notable trends are contributing to the Canadian ETF industry's impressive growth this year:

  • Bond ETFs continue to dominate fund flows, growing from $12.9 billion to $17.8 billion in AUM thus far in 2012
  • An increased demand in higher-yield, non-Canadian bond ETFs, such as U.S. high yield corporate bonds and emerging market debt
  • A preference for dividend-based ETFs over growth-oriented areas- the growth of AUM in dividend-based ETFs year-to-date has already surpassed its entire 2011 growth by 45.2 per cent
  • Continued innovation from Canadian ETF manufacturers, which is helping investors reduce volatility and/or source yield in the current market environment

Looking ahead, the report examined the key drivers that will fuel asset growth in the Canadian ETF industry:

  • More distribution channels: With a growing number of asset managers now offering both active and passive solutions, we may see an increased penetration of ETFs in defined contribution (DC) pension plans. The possibility also exists of greater use of ETFs within managed programs in various brokerages.
  • Additional entrants in the ETF space: The Canadian industry has grown from two to seven providers in just a few years, offering investors considerably more choice. As more entrants come on board over the next several years and existing manufacturers ramp up their product offerings, it will open the door to more solutions, a wider range of investors and more diverse portfolios.
  • A growing number of implementation strategies: As a result of their varying styles, exposure types and niches, ETFs are being used in various ways by investors. New applications will most likely be a driver of ETF growth. With increased segmentation and ETFs based on specific areas, even basic uses of ETFs, such as cash equitization, will become more efficient for investors.
  • Less expensive options: Given that today's investors are increasingly cost-conscious, they will continue to turn to ETFs as a popular solution to reduce costs while attaining market exposure.
  • Debut of actively-managed ETFs: Continued success of mutual fund providers in offering actively-managed mandates in the U.S. ETF space may lead some Canadian mutual fund companies to consider ETFs to complement their existing offerings.

The report also noted that there must be a strong emphasis on client education for the ETF industry to continue to flourish.

"Although existing ETF users are becoming increasingly sophisticated, it's critical that newer investors also receive the same level of support to ensure a superb client experience," said Mr. Silgardo. Local expertise and on-the-ground specialists will be essential to ensuring new and existing clients get the education and support they need."

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

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

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

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