- Global ETF market hit record high of US$4.6 trillion in AUM
- Key trends for 2018: fixed income and thematic investing
- Canadian ETF industry expected to reach C$400 billion in AUM by 2023
TORONTO, Jan. 30, 2018 /CNW/ - BMO Global Asset Management (BMO GAM) today released its annual ETF Outlook Report, which examines the growth of the Exchange Traded Fund (ETF) market in 2017, and highlights the opportunities and challenges for the year ahead.
According to the report, the global ETF market hit a record high of US$4.6 trillion assets under management (AUM) at year-end, which included over US$649 billion in new assets.
- The Canadian ETF market, once again, had a record year, with total AUM reaching C$145 billion and inflows of C$26 billion – an increase of 56 per cent from 2016.
- The Canadian equity ETF with the most inflows last year was BMO S&P/TSX Capped Composite Index ETF (ticker: ZCN).
- The Canadian fixed income ETF with the highest inflows last year was BMO Aggregate Bond Index ETF (ticker: ZAG).
- The U.S. ETF market ended the year with US$3.4 trillion in AUM and had US$465 billion in new assets.
- The European ETF market had a strong year, with US$762 billion in AUM – a 40 per cent increase from last year –and inflows just over US$102 billion.
- The Asia Pacific market had a record-breaking year as well, with inflows of US$61 billion and the total ETF market surpassing US$437 billion.
"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," said Mark Raes, Head of ETF Business Development. "The array of ETF choices available to investors is now greater than ever. This industry growth has seen the emergence of new ETFs that transcend traditional equity and fixed income exposures, giving investors access to innovative market trends and complex derivative strategies."
Today, BMO GAM offers 95 ETF listings and has a market share of nearly 32 per cent in Canada, according to Bloomberg data.
The report also looked at themes affecting the ETF industry.
Fixed Income Investing: There was an increased demand for fixed income investments in 2017, as they provide liquidity, transparency and diversification to an over-the-counter asset class. As a result of the macroeconomic environment, adjusting interest rate risk in portfolios is a top priority for investors.
Valuation Levels and Market Growth: The extremely popular FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) were fundamental drivers of market growth in 2017 and have pushed indices to new heights. This impact on equity markets has encouraged index providers to consider sector classifications, which will, in turn, affect ETFs that track the Information Technology, Consumer Discretionary and Telecommunications sectors.
Currency: With ongoing NAFTA discussions, oil prices rebounding and the ongoing central bank activity, CAD/USD currency volatility will likely continue in 2018.
Thematic Investing: A growing industry trend over the past year has been investing in thematic ETFs; for example, ETFs that cover artificial intelligence or Environmental, Social and Governance (ESG) investing.
"We expect to see the ETF industry continue to grow and we project that by 2023, the global ETF industry will double to more than US$10 trillion and the Canadian industry to grow even faster to C$400 billion," said Mr. Raes.
He added that as markets grow and the landscape changes, it is important to work with an established provider that delivers not just effective products, but has the experience to emphasize the entire ETF infrastructure, including trading, liquidity, education and support.
*BMO ETFs are administered and managed by BMO Asset Management Inc., which is an investment fund manager and portfolio manager and a 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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About BMO Exchange Traded Funds (ETFs)
Established in May 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
Serving customers for 200 years and counting, BMO is a highly diversified financial services provider – the 8th largest bank, by assets, in North America. With total assets of $710 billion as of October 31, 2017, and more than 45,000 employees, BMO provides a broad range of personal and commercial 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.
SOURCE BMO Financial Group