The rapid pace of growth in Canada’s exchange-traded fund business is continuing, with a number of new market entrants – including some of the country’s largest mutual fund companies – joining the industry this year.Getty Images/iStockphoto
The rapid pace of growth in Canada's exchange-traded fund business is continuing, with a number of new market entrants – including some of the country's largest mutual fund companies – joining the industry this year.
Franklin Templeton Investments will be the next asset manager to join the herd later this month with four new funds, while Excel Funds Management – known for its actively managed emerging-markets funds – has filed to launch two multiasset ETFs.
The two mutual-fund companies will now join the existing 22 investment firms that currently operate ETF products in Canada.
Seven of those companies just launched within the past 12 months, including mutual-fund giant AGF Management Ltd., which entered the market in early 2017, and Manulife Financial Corp. and Desjardins Global Asset Management, which both launched ETF products this past April.
The growth of ETF assets under management in Canada was slow at first, but over the past year this growth has been steadily gaining speed as existing players continue to increase assets and new entrants introduce more offerings.
Today, Canadian ETF assets now stand at $126-billion, compared with $97-billion in assets in April, 2016, according to a recent report by National Bank Financial.
The growth of the industry – and recent surge in competitors – doesn't come as a surprise to Steve Hawkins, president and co-CEO of Horizons ETFs Management (Canada) Inc.
"It was only a matter of time before we saw many of the mutual-fund providers join the space, and we are happy to see them bring more credibility to the ETF space," Mr. Hawkins says. "It makes sense that they are looking to protect their asset management business. Where they may be seeing investment outflows, this provides an option to get investors to put more money back into the firm – and ETFs are the hot product."
The timing of both Franklin Templeton and Excel Funds entering the ETF market comes on the heels of a pretty busy month of growth for the industry. Last month, Canadian ETFs had net inflows of $2-billion and a total of 17 new ETFs were brought to market from five different ETF providers – including newcomers Manulife and Desjardins.
Last year, Franklin Templeton launched its U.S.-based ETF platform "Franklin LibertyShares" and announced a Canadian platform will now be offered to Canadian investors. The platform will consist of two actively managed ETFs and two strategic beta ETFs.
"The industry is changing and the needs of financial advisers and investors are changing," says Duane Green, president and CEO of Franklin Templeton. "We want to be able to offer them a range of solutions that will meet all their investment needs."
The firm's actively managed ETFs, Franklin Liberty Risk Managed Canadian Equity ETF and Franklin Liberty Canadian Investment Grade Corporate ETF, are expected to be listed on the Toronto Stock Exchange on May 30, while the firm's two strategic beta ETFs – Franklin LibertyQT U.S. Equity Index ETF and Franklin LibertyQT International Equity Index ETF – are expected to launch on June 5.
Excel Funds' ETF product is expected to hit the street later this month with two new global offerings: Excel Global Balanced Asset Allocation ETF and Excel Global Growth Asset Allocation ETF.
"Adding global ETFs to our successful emerging markets mutual fund line up will provide our investors with access to diversified investment strategies to enhance their returns and reduce their risks," Bhim Asdhir, president and CEO of Excel Funds Management, said in an e-mail to The Globe and Mail. "In emerging markets stock picking is key to generating alpha, whereas in global markets effective asset allocation is critical for maximizing returns."
Clare O’Hara