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Bank of Montreal (Fernando Morales/The Globe and Mail)
Bank of Montreal (Fernando Morales/The Globe and Mail)

BMO sees more ETF consolidation Add to ...

After a year in which the number of exchange-traded fund providers in Canada doubled, expect to see more consolidation as the growth rate in the business slows.

That's the conclusion from Bank of Montreal in its 2012 outlook for ETFs. The number of firms offering ETFs in Canada went from four to eight last year, but don't expect that to remain stable. Already, Claymore has been sold to BlackRock, owner of iShares.

"One Canadian ETF provider has been acquired in 2012, and the consolidation trend will likely continue. Currently, the top three providers account for more than 90 per cent of market share in Canada. This trend could lead to the closing of some of today’s existing ETFs," BMO said.

Despite the new entrants, growth in assets cooled from its pace in recent years. BMO estimates that assets in ETFs in Canada grew 13 per cent last year, down from a compound annual growth rate of 18.5 per cent in the past five years and 28.6 per cent in the past 10 years. ETFs now make up only about 7 per cent of all mutual fund assets in Canada, and while there are about 4,500 mutual funds, there are fewer than 250 ETFs, according to BMO.

With more providers in a market that's cooling cooling (though still fast growing by asset management standards) expect to see competition intensify with new products and price battles.

"All providers will seek to capture share, and one way of doing this is through the launch of new products," BMO said in the report. "There will definitely be more ETFs introduced in 2012, in particular from the newer participants in the industry."

  • Bank of Montreal
  • Updated May 2 4:15 PM EDT. Delayed by at least 15 minutes.

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