- Canadian ETF industry assets up 20 per cent from 2019
- Innovation and responsible investing trends expected to continue growing
TORONTO, Feb. 2, 2021 /CNW/ - BMO Global Asset Management (BMO GAM) today issued its annual ETF Outlook Report, reporting on the exchange traded fund (ETF) industry and key trends for 2021.
Assets in ETFs grew globally in 2020 as investors recognized the benefits of using ETFs amid times of heightened volatility. At the end of December 2020, the global ETF industry had 7,602 ETFs from 485 providers on 73 exchanges in 60 countries, and assets of US$7.7 trillion(1).
The Canadian ETF industry reported another year of record numbers with C$257 billion in assets and C$41 billion in net new flows (2). The top 20 selling ETFs accounted for 40 per cent of the total flows. BMO ETFs led the industry with net new flows of C$8.4 billion and 22 tickers reporting inflows greater than C$100 million (3).
"As the pandemic brought the global economy to a standstill, ETFs displayed resiliency and provided investors with the liquidity to rebalance portfolios," said Mark Raes, Head of Product, BMO Global Asset Management Canada. "We expect the momentum of 2020 to continue to push ETF providers to differentiate themselves and partner with investors by developing products that build on emerging trends."
Trends for 2021
Megatrends: This take on thematic investing seeks to identify future drivers of market growth driven by the adoption of new economy technologies and disruptive innovations. BMO GAM recently launched a suite of innovation ETFs that provide Canadian investors exposure to emerging themes.
Responsible Investing: Environmental, Social, and Governance (ESG) investing was a leading theme in 2020, and further growth in thematic ESG exposures such as clean energy is expected in 2021.
Rotation in Factor Based ETFs: Amid the extreme market volatility of 2020, there was a rotation in factor performance with defensive portfolios trailing the market and quality factor ETFs maintaining positive returns and enduring downturns better than the market.
Fixed Income: Rapidly changing markets in 2020 demonstrated the benefits of fixed income ETFs, as they provided investors the liquidity needed to quickly rotate into and out of different exposures. Fixed income ETFs continued to trade when many of the underlying bonds did not during the worst of the correction in March.
Inflation: Investors are looking for ways to add inflation hedges to portfolios heading into 2021, as inflation remains a concern given economic and monetary stimulus in 2020.
The global ETF industry is projected to double to more than US$16 trillion over the next five years, and the Canadian industry is expected to grow beyond C$600 billion by 2026. The ETF industry is well positioned to support portfolios, either through broad market exposures or more precise market segments.
"The opportunity for growth in the ETF industry remains significant as the efficiency, low cost, and tradability of these products continue to bring in new investors," said Mr. Raes. "It's important to work with a provider that delivers the support, education, and partnership required to succeed in this changing environment."
(1) ETFGI Industry Insights Report, December 31, 2020
(2) National Bank, January 5, 2021
(3) BMO Global Asset Management, December 31, 2020
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