Canada leads the way in ETFs
May 10, 2018

Canadian institutions that use ETFs allocate an average 18.8 percent of total assets to exchange-traded funds (ETFs), the highest average allocation found in any institutional market in the world.

The 52 institutions participating in the Greenwich Associates 2017 Canadian ETF Study are at the forefront of a growing move by institutions around the world to integrate ETFs into their portfolios and ETF versatility is the primary driver of this proliferation. At the strategic level, Canadian institutions are increasingly using ETFs to obtain "core" investment exposures and diversification benefits. Use of ETFs increased last year in each of the 10 primary portfolio functions covered in the study

"Canadian institutions are using ETFs because they are easy to use, fast to execute, liquid, simple, relatively cheap to trade, and provide diversification in a single trade," says Andrew McCollum, Greenwich Associates Managing Director and author of a new report presenting the research findings entitled, Canadian Institutions Lead the Way in ETF Investing.

Says Pat Chiefalo, Head of iShares Canada at BlackRock: "This study provides the entire industry with important insights into the evolution of institutional investors' approach to ETFs, and it confirms the trends we're seeing on the ground. Institutional investors' use of ETFs is not only growing but broadening, as they deploy the funds in increasingly diverse ways to implement a range of strategies and realize new benefits." 

Greenwich Associates says the steadily expanding use of ETFs reflects institutions' embrace of the funds as an effective source of beta exposures that they are using alongside - and at times in place of - derivatives. Although ETFs are frequently employed as part of a switch from active to passive investment strategies, Canadian institutions are also using index ETFs to obtain exposures used to generate alpha at the asset allocation level in actively managed strategies.

Increasing demand for non-market cap-weighted ETFs is providing a major lift to overall investment. Almost half (46 percent) of study participants invest in non-market-cap-weighted ETFs, with demand last year focused largely on minimum-volatility ETFs, designed to protect investors from a spike in volatility like the one seen in February 2018.

Greenwich Associates projects a continuation of this growth trajectory. In equities, the share of current investors planning to increase ETF allocations tops that planning reductions by a ratio of 3:1. In fixed income, planned increases outpace planned cuts by nearly a 2:1 margin. In both cases, sizable shares of institutions expect to increase ETF allocations by more than 10 percent.

"In the meantime, new institutional investors will continue entering the ETF market in fixed income, commodities, real estate, and other asset classes," Andrew McCollum says.

 





This site, like many others, uses small files called cookies to customize your experience. Cookies appear to be blocked on this browser. Please consider allowing cookies so that you can enjoy more content across globalcustody.net.

How do I enable cookies in my browser?

Internet Explorer
1. Click the Tools button (or press ALT and T on the keyboard), and then click Internet Options.
2. Click the Privacy tab
3. Move the slider away from 'Block all cookies' to a setting you're comfortable with.

Firefox
1. At the top of the Firefox window, click on the Tools menu and select Options...
2. Select the Privacy panel.
3. Set Firefox will: to Use custom settings for history.
4. Make sure Accept cookies from sites is selected.

Safari Browser
1. Click Safari icon in Menu Bar
2. Click Preferences (gear icon)
3. Click Security icon
4. Accept cookies: select Radio button "only from sites I visit"

Chrome
1. Click the menu icon to the right of the address bar (looks like 3 lines)
2. Click Settings
3. Click the "Show advanced settings" tab at the bottom
4. Click the "Content settings..." button in the Privacy section
5. At the top under Cookies make sure it is set to "Allow local data to be set (recommended)"

Opera
1. Click the red O button in the upper left hand corner
2. Select Settings -> Preferences
3. Select the Advanced Tab
4. Select Cookies in the list on the left side
5. Set it to "Accept cookies" or "Accept cookies only from the sites I visit"
6. Click OK

Canadian institutions that use ETFs allocate an average 18.8 percent of total assets to exchange-traded funds (ETFs), the highest average allocation found in any institutional market in the world.

The 52 institutions participating in the Greenwich Associates 2017 Canadian ETF Study are at the forefront of a growing move by institutions around the world to integrate ETFs into their portfolios and ETF versatility is the primary driver of this proliferation. At the strategic level, Canadian institutions are increasingly using ETFs to obtain "core" investment exposures and diversification benefits. Use of ETFs increased last year in each of the 10 primary portfolio functions covered in the study

"Canadian institutions are using ETFs because they are easy to use, fast to execute, liquid, simple, relatively cheap to trade, and provide diversification in a single trade," says Andrew McCollum, Greenwich Associates Managing Director and author of a new report presenting the research findings entitled, Canadian Institutions Lead the Way in ETF Investing.

Says Pat Chiefalo, Head of iShares Canada at BlackRock: "This study provides the entire industry with important insights into the evolution of institutional investors' approach to ETFs, and it confirms the trends we're seeing on the ground. Institutional investors' use of ETFs is not only growing but broadening, as they deploy the funds in increasingly diverse ways to implement a range of strategies and realize new benefits." 

Greenwich Associates says the steadily expanding use of ETFs reflects institutions' embrace of the funds as an effective source of beta exposures that they are using alongside - and at times in place of - derivatives. Although ETFs are frequently employed as part of a switch from active to passive investment strategies, Canadian institutions are also using index ETFs to obtain exposures used to generate alpha at the asset allocation level in actively managed strategies.

Increasing demand for non-market cap-weighted ETFs is providing a major lift to overall investment. Almost half (46 percent) of study participants invest in non-market-cap-weighted ETFs, with demand last year focused largely on minimum-volatility ETFs, designed to protect investors from a spike in volatility like the one seen in February 2018.

Greenwich Associates projects a continuation of this growth trajectory. In equities, the share of current investors planning to increase ETF allocations tops that planning reductions by a ratio of 3:1. In fixed income, planned increases outpace planned cuts by nearly a 2:1 margin. In both cases, sizable shares of institutions expect to increase ETF allocations by more than 10 percent.

"In the meantime, new institutional investors will continue entering the ETF market in fixed income, commodities, real estate, and other asset classes," Andrew McCollum says.

 



Free subscription - selected news and optional newsletter
Premium subscription
  • All latest news
  • Latest special reports
  • Your choice of newsletter timing and topics
Full-access magazine subscription
  • 7-year archive of news
  • All past special reports
  • Newsletter with your choice of timing and topics
  • Access to more content across the site