Share this article and your comments with peers on social media Companies BMO Global Asset Management “While still in its infancy, Canada’s ETF industry has shown impressive growth, with a compounded annual asset growth rate of 18.5% over the last five years, and 28.6% over the last 10,” said Rajiv Silgardo, co-CEO of BMO Global Asset Management. “In 2012, we expect the industry will continue to grow, although competition will be stiffer and market conditions more volatile.” The outlook report suggests that the emergence of new ETF providers will contribute to increased competition this year. “All providers will seek to capture share,” the report says. “There will definitely be more ETFs introduced in 2012, in particular from the newer participants in the industry.” New ETFs are likely to include actively managed ones, according to BMO. While these products are currently only offered by one provider – and comprise a small fraction of industry assets – BMO notes that some “large and well-known” firms are looking to enter this segment of the market. BMO also expects the launch of more hybrid structures in 2012, such as mutual funds that invest explicitly – or partially – in ETFs. As new products emerge and providers compete for market share, BMO expects that prices will come under pressure. “We believe the plain vanilla market capitalization-based ETFs will be cannibalized by cheaper or better constructed alternatives, unless providers can find a new class of investors for those,” the report says. Another theme advisors can expect to see this year is further industry consolidation. Last week, BlackRock Inc. announced a deal to acquire Claymore Investments, Inc., and BMO says this development represents a trend that’s likely to continue, which could lead to the termination of some of the ETFs currently trading on the market. Lastly, BMO’s outlook says advisors should anticipate that ETFs will attract the attention of regulators this year. It notes that in 2011, regulatory concerns emerged in Europe in connection to synthetic ETFs that use asset-based swaps to create desired investment exposures. In particular, regulators expressed concerns around a lack of transparency into the underlying investments of these ETFs, and the potential for conflicts of interest. “While we did not have similar issues in Canada, we believe that regulators globally will be more focused on this industry in 2012. In particular, they will want to educate themselves more as ETFs continue to multiply,” the report says. Megan Harman Facebook LinkedIn Twitter The Canadian exchange traded fund business will continue to grow and evolve in 2012, and advisors are likely to see greater price competition and the emergence of more sophisticated ETFs, according to a new report from BMO Asset Management Inc. In the Canadian ETF Outlook 2012, released on Tuesday, BMO suggests that the industry is set for dramatic change and further growth in the year ahead. Statistics released by the Canadian ETF Association on Monday showed that in 2011, industry assets grew by nearly 13% to $43.1 billion.