The following content is excerpted from the BMO Global Asset Management ETF Outlook 2018
According to the report, the global ETF market hit a record high of US$4.6 trillion assets under management (AUM) at year-end, which included over US$649 billion in new assets.
- The Canadian ETF market, once again, had a record year, with total AUM reaching C$145 billion and inflows of C$26 billion - an increase of 56 per cent from 2016.
- The Canadian equity ETF with the most inflows last year was BMO S&P/TSX Capped Composite Index ETF (ticker: ZCN).
- The Canadian fixed income ETF with the highest inflows last year was BMO Aggregate Bond Index ETF (ticker: ZAG).
- The U.S. ETF market ended the year with US$3.4 trillion in AUM and had US$465 billion in new assets.
- The European ETF market had a strong year, with US$762 billion in AUM - a 40 per cent increase from last year - and inflows just over US$102 billion.
- The Asia Pacific market had a record-breaking year as well, with inflows of US$61 billion and the total ETF market surpassing US$437 billion.
Key Trends
The report also looked at themes affecting the ETF industry.
Fixed Income Investing:
There was an increased demand for fixed income investments in 2017, as they provide liquidity, transparency and diversification to an over-the-counter asset class. As a result of the macroeconomic environment, adjusting interest rate risk in portfolios is a top priority for investors.
Valuation Levels and Market Growth:
The extremely popular FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) were fundamental drivers of market growth in 2017 and have pushed indices to new heights. This impact on equity markets has encouraged index providers to consider sector classifications, which will, in turn, affect ETFs that track the Information Technology, Consumer Discretionary and Telecommunications sectors.
Currency:
With ongoing NAFTA discussions, oil prices rebounding and the ongoing central bank activity, CAD/USD currency volatility will likely continue in 2018.
Thematic Investing:
A growing industry trend over the past year has been investing in thematic ETFs; for example, ETFs that cover artificial intelligence or Environmental, Social and Governance (ESG) investing.
The report expects the ETF industry to increase its growth trajectory, backed by greater adoption across institutional, advisor and retail platforms. The report projects the global ETF industry to double to more than US$10 trillion over the next five years, and the Canadian industry to grow even faster to C$400 billion by 2023.
Click here to view full report of BMO Global Asset Management ETF Outlook 2018
