TORONTO, June 24, 2019 /CNW/ - BMO Global Asset Management (BMO GAM) has released a special edition ETF Report to mark 10 years since launching Exchange Traded Funds (ETFs) in 2009. The report highlights the top 10 trends in the Canadian ETF industry over the past decade, as well as what will shape it moving forward.
"The industry has seen tremendous progress over the last decade, prompting innovative investment products and tools," said Kristi Mitchem, Chief Executive Officer, BMO Global Asset Management. "As the popularity of ETFs accelerates in Canada and across global markets, there is a greater need for education and support to maximize portfolio efficiency."
"As a proud leader in the Canadian ETF industry, we have been growing and evolving our business in order to stay ahead of the curve and ensure we're meeting the needs of advisors and investors," said Kevin Gopaul, Global Head of ETFs, BMO Global Asset Management. "Ten years later, with a third of the market share, we remain well-positioned offering a comprehensive product suite that includes core equity ETFs and a broad range of fixed income ETFs, as well as solution-based ETFs."
Top 10 Trends
- Blending active and passive: Moving beyond the conventional wisdom of one or the other, the combination of active and passive investing allows for a more effective portfolio. For example, using passive investing in developed markets and active investments in less efficient markets where active management can make a difference.
- Resetting the core: Core ETFs continue to represent the backbone of the industry, as a vehicle delivering diversified broad market returns, especially in the event of a strong market rally as they typically include all the holdings in a market. BMO S&P 500 Index ETF (ZSP) is the largest U.S. equity exposure listed in Canada, with a market leading index.
- Changes in distribution: The popularity of ETFs across different investor types creates demand for various distribution models rendering ETFs more accessible. An innovative development in the industry, robo-advisors serve as an effective low-cost ETF investment platform. Currently the robo-advisor industry holds more than C$7 billion in assets and has an anticipated annual growth rate of 35 per cent. Additionally, the last ten years has seen a shift in advisor activity towards fee-based investing accounting for 73 per cent of assets under management (AUM).
- Adding new exposure: The industry recognized the importance of growth in over-the-counter (OTC) exposures early on, seeing it as an opportunity to invest across a range of asset classes and to help investors build and adjust portfolios with efficient, low-cost ETFs. In the last ten years, investors have relied more on ETFs in building fixed income portfolios, instead of focusing solely on equity markets. As one of the top ten fixed income ETF providers globally, BMO offers the largest fixed income ETF in Canada, BMO Aggregate Bond Index ETF (ZAG).
- Fees and CRM2: The implementation of CRM2 represented one of the biggest regulatory initiatives over the last decade. A significant step forward in client communications promoting transparency about costs and performance between advisors and clients. ETFs support this regulatory agenda, allowing advisors to establish individualized fee agreements with clients.
- ETF solutions: To make ETFs accessible to all investors, the industry has evolved towards ETF based funds, offering advisors untapped areas in which to invest while delivering lower cost solutions. Because of their effectiveness, active managers choose to include ETFs when creating portfolios.
- Portfolio guidance: The growing popularity of ETFs has led to the development of public access tools, positioning users to build robust portfolios based on different investment strategies.
- Active ETFs: The launch of active ETFs has generated a lot of investor interest, since they offer many of the same benefits as their passive counterparts, but with the added benefit of a manager that can adapt to changing market conditions. In response, the industry has seen a rise in actively managed ETFs, including active fixed income exposures like BMO Global Strategic Bond Fund (ZGSB).
- Education: As the ETF industry continues to mature, educational resources help to dispel myths and address misconceptions surrounding ETFs. Encouraging a better understanding of ETFs as an effective, transparent, low-cost vehicle in which to invest, remains an important goal for many providers, including BMO GAM.
- Asset allocation ETFs: More recently, balanced ETFs have re-emerged, offering a simple and convenient one-product approach to achieving a balanced portfolio. With more than 800 ETFs in Canada from 35 providers, investors must sort through increasing amounts of research, leading to a demand for simple basket ETFs.
S&P 500® is registered trademark of Standard & Poor's Financial Services LLC ("S&P"). This trademark has been licensed for use by S&P Dow Jones Indices LLC and sublicensed to BMO Asset Management Inc. in connection with BMO S&P 500 Index ETF (ZSP). ZSP is not sponsored, endorsed, sold or promoted by S&P Dow Jones LLC, S&P, TSX, or their respective affiliates and S&P Dow Jones Indices LLC, S&P, TSX and their affiliates make no representation regarding the advisability of trading or investing in such ETF.
BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO's specialized investment management firms.
Commissions, management fees and expenses (if any) all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.
For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the prospectus. BMO ETFs and ETF series trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.
BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal.
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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 $830 billion as of April 30, 2019, and a team of diverse and highly engaged 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, BMO Wealth Management and BMO Capital Markets.
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