Industry Statistics

2012 Year End Commentary

Canadian-listed exchange-traded funds (ETFs)enjoyed a record year in 2012 with both sales and assets setting new highs.Assets expanded over 30% to end the year at $56.4 billion, due to a combinationof strong new sales and positive market effect. At the end of 2012, there was$15 in mutual funds per $1 dollar in ETFs, down from a ratio of 18:1 in 2011.

 Based on an industry sample compiled by InvestorEconomics, approximately 65% of Canadian-listed ETF assets are held by retailinvestors, with the difference accounted for by institutional clients. Withinretail channels, 60% is held in full-service brokerage accounts, while 35% isheld by do-it-yourself investors in online/discount brokerage accounts.

Demand for ETFs proved robust in 2012, with Q4sales of $2.0 billion and full-year net creations of $12.0 billion. This is thehighest yearly intake on record, well above the previous high water mark of$6.9 billion which was generated in 2011.

 In line with the broader funds industry, thefixed income category was responsible for the bulk of ETF sales during 2012. Fixedincome ETFs finished the year with $12.5 billion in assets, growing by nearly50% over the period. Fixed income net creations amounted to $6.2 billion—morethan one half of all 2012 net creations. A breakdown of this category reveals mostof the new money ended in investment-grade bond funds (80%). High yield bond fund2012 net creations represented 125% of December 2011 assets.

Boosted by $1.6 billion in December netcreations, equity fund sales of $5.5 billion were markedly higher in 2012relative to the previous year. On the backdrop of improving global equitymarkets, assets rebounded over 22% after a flat 2011. High yielding equitycategories such as utilities and infrastructure funds witnessed assets morethan double in the year.

All major ETF sponsors ended 2012 in positive netcreation territory. Six of the seven firms that offer ETFs in Canada postednew records in terms of both asset growth and net creations. BMO led allsponsors with $5.0 billion in net creations, closely followed by BlackRock with$4.9 billion.

Launch activity was widespread in the fourthquarter as firms prepare their shelves for the upcoming RRSP season—six of the sevenCanadian ETF sponsors released new funds. Vanguard and BMO launched their firstnew funds in over a year during the month of November. Horizons ETFs was alsobusy with a mixture of launches, closures and name changes. A rebranding oftheir lineup of active ETFs included the release of actively-managed Canadianbond and emerging market funds.

Fund closures were an emerging trend in 2012.Eleven funds were terminated in the year along with three mergers. This spikein termination activity is largely connected to sponsors ending smaller,thinly-traded ETFs that failed to resonate with investors.