Investors are increasingly favouring exchange traded funds (ETFs) in favour of other investment vehicles such as mutual funds as well as direct stocks and bonds, according to one expert.
Carlos Cardone, a managing director at ISS Market Intelligence Canada, said in an interview with BNN Bloomberg Thursday that ETF growth is occurring across the “entire market.” He said Canadian retail investors primarily hold ETFs either in full-service brokerages with advisors or in online discount brokerage accounts that are self directed.
“There’s approximately $190 billion in ETFs in both channels, a little bit more on the self-directed side, and ETFs in both channels have been growing tremendously over the last several years, and this is connected, of course, to more products becoming available,” Cardone said.
“ETFs are not only replacing mutual funds in some cases…but also direct securities. We see ETFs gaining ground to pretty much everything that is in these channels’, direct securities, direct bonds and so in many cases our assets are increasingly going toward ETFs in both channels.”
ETFs have been growing at around 30 per cent over the last year for the full-service brokerage segment and over 50 per cent in the self-directed segment, Cardone said.
He added that asset managers from “every corner” are trying to cover their bases in terms of ETF options available.
“This is not a newer phenomenon. It’s something that has been developing over the last several years. It’s very global,” Cardone said.
“We have seen the immersion of active strategies in ETFs several years ago, something that started actually in Canada for the most part and then became more of a global trend.”
Cardone’s comments come amid broad enthusiasm for ETFs among Canadian investors. In January, Bloomberg News reported that assets in ETFs surpassed $500 billion for the first time last year, during a year that beat records for inflows and new funds being launched.