Mackenzie Investments has published its annual Mackenzie Investments Year-End ETF Report which reveals that Canadians invested a record-breaking CAD53 billion dollars into the space in 2021.
The report finds that in 2021 ETFs benefited from uncertain market conditions and strong market gains, with the marketplace in Canada growing to a record-breaking 1,177 Canadian-listed ETFs, up from 1,010 at the end of 2020.
“Investors are increasingly viewing ETFs as a great way to build their investment portfolios,” says Michael Cooke, Head of ETFs, Mackenzie Investments. “With a growing amount of specialised ETF products, offering efficient exposure to categories such as cryptocurrency and sustainable investing, ETFs are proving to be a cost-effective and versatile way to create a portfolio that meets specific investor needs.”
The report also identifies key trends that have emerged in 2021 and will continue to shape the industry in the year ahead, including:
• A Focus on Sustainable Investing: In 2021 a record high CAD309 billion flowed into SI-focused ETFs globally as the pandemic helped to spotlight environmental, social and governance issues. This trend was reflected in Canada with significant AUM growth in domestically listed SI ETFs. As the trend of active management of SI ETFs grows, investors can expect that many new ETF issuances in the coming months will likely focus on environmental issues.
• Protecting Against Inflation: As inflation persists, investors are increasingly looking towards inflation-protection funds to help safeguard their portfolios. ETFs are making diversification among inflation-hedging asset classes easier than ever before.
• New Cryptocurrency Opportunities: Cryptocurrency ETFs are rising in popularity after first being introduced in 2021. Canada is an innovator in this field, as the first cryptocurrency ETFs were listed by Canadian companies. These assets are attractive to investors who want access to the growth of the cryptocurrency market or to add diversification to their portfolios.
• International Opportunities: Developed and emerging market ETF categories have grown greatly in popularity among Canadians, with more than CAD8 billion in net flows in the past year, versus about CAD6 billion for Canadian and US-focused ETFs.
• Asset Allocation ETFs: These all-in-one portfolios offer different combinations of core equity and fixed income ETF exposures to align with investor goals. Asset allocation ETFs are gaining popularity among Canadians and accounted for 11 per cent of net flows in Canadian ETFs.
The report notes that Canadian ETF industry growth is expected to continue in 2022 and beyond as Canadian investors complement their core holdings with more specialised and thematic ETFs, especially among key groups such as millennials, women and financial advisers.
“We’ve seen huge year-over-year momentum in the Canadian ETF space. Product offerings continue to grow across the industry with core and satellite ETFs that support virtually any investment strategy,” says Cooke. “In 2022, investors will likely continue to incorporate ETFs into their portfolios at a record pace thanks to their increasing prevalence and their ability to provide precise exposures and cost efficiencies.”