Canadians Embrace ETFs

Investors in Canada are contributing substantially to a worldwide trend that has seen global exchange traded fund (ETF) assets hit an all time high according to the latest report from Barclays Global Investors (BGI).

“There has been a visible shift in the investing habits of Canadians over the past six months as net inflows have increased and investors join a global trend,” according to Deborah Fuhr, Global Head of ETF Research & Implementation Strategy at BGI. Fuhr believes that in Canada and elsewhere, ETFs continue to enjoy considerable momentum as an investment vehicle given their ability to offer exposure to such a wide variety of asset classes.

In Canada, the ETF industry has grown by 49% to date in 2009, from C$19.4 billion to C$28.8 billion, at the end of September 2009. Fixed income ETFs experienced the highest growth during that period, with C$2.4 billion in net new assets, and asset under management (AUM) growth of 100%. Other areas of significant growth were income-oriented equities (such as REITs) with C$521 million in net new assets, and international equities with C$517 million in net new assets. The Canadian ETF industry has 97 ETFs with 119 listings from four providers at the end of September 2009.

This growth complements a worldwide trend as global ETF assets hit an all time high of US$891 billion at the end of August 2009 which is 3.9% above the previous all time high of US$858 billion set in July 2009, and 10.6% above the high set in April 2008. The global ETF industry had 1,773 ETFs with 3,137 listings, assets of US$891 billion from 95 providers on 41 exchanges at the end of August 2009. Year-to-date (YTD) assets have risen by 25.3% which is more than the 18.0% rise in the MSCI World Index in US dollar terms.

Contrasting this to latest data from Strategic Insight, net inflows to mutual funds (excluding ETFs) were US$5.3 billion, while net sales of ETFs were US$49.0 billion during the first six months of 2009.

Heather Pelant, Head of iShares, BGI Canada points out that “Today’s investors are demanding better investment vehicles with solid upside but which remain cost efficient and transparent. iShares ETFs stand out as the proven market leader when measured on the basis of all these attributes.”

With 80.4% of the total ETF assets under management in Canada, iShares, a division of BGI, remains the undisputed leader as it celebrated its tenth anniversary of providing pioneering leadership in the ETF industry with the iShares CDN LargeCap 60 Index Fund (XIU) on September 28th. In the nine months ending September 2009, net redemptions of mutual funds (excluding ETFs) in Canada were C$800 million, according to the Investment Funds Institute of Canada (IFIC), compared to C$3.0 billion in net sales of iShares ETFs, and C$5.9 billion in total net sales of ETFs over the same period.