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ETFs on course for another record-breaking year

Michael Cooke

Senior Vice President, Head of Exchange Traded Funds

Mackenzie has just released its 2021 mid-year ETF report, entitled, “Top ETF trends for a post-pandemic world”.

In the report we discuss ETFs’ performance year to date and share insights into how ETFs are positioned for the near future.  

 

ETFs stay strong in the first half of the year

Investments into ETFs (as of May 31) have put these most sought-after investment products on the path to beat 2020’s total of $41 billion, which was itself a record-breaking year. Some other key ETF stats include:

  • 31.2% – the year-over-year change in ETF assets under management (National Bank)
  • $25 billion – year to date inflows into Canadian -listed ETFs (of which $10.2 billion was in equity ETFs) (National Bank)
  • 917 – Canadian-listed ETFs available for purchase (Canadian ETF Association)
  • 125 – the increase in choice of Canadian-listed ETFs year-over-year (Canadian ETF Association)

 

ETFs that can help protect against inflation

As countries start to reopen, some investors are concerned that the economy could overheat, bringing with it higher inflation and the potential for rising bond yields. ETFs that invest in Treasury Inflation Protected Securities (TIPS), can generally increase in value as inflation rises, or senior loan-based ETFs that help protect investors from rising interest rates.

 

Greater options in the search for yield 

With the Bank of Canada expected to keep rates low until at least 2023, investors will need to look elsewhere for fixed income that generates decent yields without additional risk. ETFs offer the opportunity to create a globally diversified portfolio with a broad range of yields, including sector, real estate, and infrastructure ETFs.

 

Sustainable Investing takes flight  

Between January and May, a record-breaking $3.3 billion was invested in Canadian-listed Environment Social Governance (ESG) focused ETFs, up from about $1.8 billion in 2020. These trends are expected to continue as the pandemic has highlighted ESG issues that include climate change, treatment of employees and disparities between the wealthy and the poor.

 

A wider choice of Canadian-grown funds

It’s now easier than ever for individual investors to buy and sell Canadian-listed ETFs, with 917 available as of the end of May (an increase of 117 funds from the year prior). Canadian-grown ETFs offer a number of advantages, including not having to worry about currency fluctuations with currency-hedged ETFs.

 

ETFs continue to innovate and bring growing choice

The Canadian ETF industry is growing and expanding along with Canadian investors’ evolving needs. Canada has long been a hotbed of ETF innovation, introducing the world’s first equity, fixed income, currency-hedged and cannabis ETFs, among others. The first bitcoin ETF in the world launched in Canada this year, continuing that tradition.

 

Allowing for a more tactical portfolio

Having the ability to easily move in and out of ETFs as the new normal takes shape is going to be crucial for investors. As we start to open up the economy, investors are going to need both tactical and strategic investment options, which ETFs provide. Increasingly, investors and advisors are using ETFs to create long-term portfolios that help them reach their financial goals.

 

These are just the highlights from the mid-year ETF report. To get even more insights into ETFs’ evolution and growth, read the full report here.

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