The Canadian ETF industry has seen staggering growth over the past few years. Assets under management (AUM) rose by nearly 25% to $150-billion for the one-year ending February 28, 2018, according to reports from the Canadian ETF Association (CETFA). The rapid expansion attracted thirteen new providers since the beginning of 2017, the latest to join the ranks in March being Brompton Funds.
Most of the new market players consists of mutual fund providers wanting a share of the booming industry. The shift to exchange-traded funds can be rewarding, as shown by the success of Harvest Portfolios, PIMCO Canada and AGF Management Limited in the ETF industry. The asset managers each have over $300-million in AUM in less than 2 years of launching their first ETF suites.
However, venturing in ETFs is not always lucrative and some ETF issuers are forced out of the industry. For instance, Sun Life Global Investment, which recently finalized the acquisition of Excel Funds, will terminate its ETFs and hereby, exit the ETF market on May 30, 2018. The exit arises from a lack of alignment with Sun Life’s strategy.
MARCH ETF LAUNCHES & TERMINATIONS:
BMO launched 3 Canadian bond ETFs, tracking Bloomberg indices. The BMO Corporate Bond Index ETF (“ZCB”) and the BMO Government Bond Index ETF (“ZGB”) each charges a management fee of 0.15%, making them the cheapest ETF, in terms of management fee, to provide exposure to Canadian corporate bonds and Canadian government bonds.
As the end of the stock bull market is speculated to be near, more investors are seeking refuge in the fixed income space despite rising interest rates. ETF sponsors are competing to offer the best fixed income solutions in the current environment. Franklin Templeton recently announced that it is reducing the management fee of the Franklin Liberty Canadian Investment Grade Corporate ETF (“FLCI”) from 0.40% to 0.35%. Back in February, Vanguard reduced the management fee on its most popular ETF, the Vanguard Canadian Aggregate Bond Index ETF (“VAB”).
