Canada's ETF Assets Will Hit $325 Billion by 2023, BMO Says

  • Forecast represents a 172% increase from 2017 levels
  • Sector added 11 new providers and 169 new funds in 2017

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Canada’s exchange-traded fund industry will nearly triple over the next five years to C$400 billion ($325 billion) as more institutional investors are drawn to the low-cost funds, according to a forecast by Bank of Montreal.

The sector has been on a tear, attracting a record C$26 billion of inflows in 2017, up 56 percent from the year before, according to data from Canada’s fourth-biggest lender. This brought total assets to C$147 billion, still a tiny slice of the $4.6 trillion global industry.

“The market penetration in Canada has been a little slower relative to the U.S., so if you use that as a leading indicator, there’s clearly some ground to pick up there," said Mark Raes, head of ETF business development at BMO Asset Management, the second-largest ETF provider in Canada after BlackRock Inc.’s iShares.

Raes said the growth will come primarily from institutional investors, who are showing renewed interest in ETFs as an asset class, and from rising demand for fixed-income products.

BMO sees the global ETF industry doubling to $10 trillion over the next five years.

Equity ETFs in Canada added C$13.1 billion in 2017, led by the BMO S&P/TSX Capped Composite Index ETF, while fixed-income funds added C$10.7 billion.

Canada’s ETF sector saw the addition of 11 new providers and 169 new funds in 2017, a 70 percent increase in fund launches, according to National Bank Financial. One of the most popular new funds was the Horizons Marijuana Life Sciences Index ETF, which launched in April and crossed C$500 million in assets before the end of the year.

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