Total assets under management (AUM) in exchange-traded funds (ETFs) recently surpassed the milestone $200-billion mark.
The figure is remarkable for a variety of reasons. Not only is it more than double the $89.5-billion in client assets held in ETFs at year-end 2015, it’s more than 10 times the $19.4-billion in AUM held in ETFs at year-end 2008.
Inflows in ETFs were on pace to surpass those of mutual funds for the second year in a row at year-end. While the $1.6-trillion of client AUM in mutual funds still dwarfs those of ETFs, the trend for the latter is upward. In one year, client assets in ETFs have gone from one-tenth to one-eighth of those in mutual funds.
There is no denying that ETFs have become the go-to investment vehicle for many Canadian financial advisors and investors.
Here are 10 articles on investing strategies using ETFs that were published on Globe Advisor this past year:
Investors seeking the benefits of an income property without the hassles of being a landlord might want to check out real estate investment trusts (REITs). But investors can become even lazier landlords if they own ETFs that hold a basket of REITs. These investments have attractive yields because they distribute most of their taxable income to unit holders.
With central banks putting the brakes on interest rates, income-seeking investors are taking a fresh look at strong dividend-paying stocks. Picking high-yielding stocks can be difficult – as some companies may not be able to continue juicy payouts – so ETFs offer a more diversified way to invest in these securities.
Water is all around us, yet it has tended to flow underground as an investment. That is, until recently, as global attention turns toward changing weather patterns. ETFs with water-related holdings have risen in value by as much as 20 per cent since the beginning of 2019. It’s hard to know exactly why, but some suggest it could be linked to growing interest in the impact of climate change.
It may be wise for investors to take some risk off the table. ETFs, with their diversified exposure to markets, can be one way for investors to hedge their bets. We asked three ETF experts for their top defensive picks.
Canadian investors love their ETFs. As their uptake continues to increase, where can financial advisors expect ETFs to go into 2020? And how can they meet the needs of ETF investors in a changing market?
The ETF death toll is rising as a record number have closed in recent years. Although investors may be dismayed to find out an ETF in their portfolio is scheduled to close, those who follow the industry closely say it hardly comes as a surprise as fund issuers look for spaces that haven’t already been covered by competitors.
For yield-thirsty investors, there’s nothing like a steady pay cheque. Although it’s common for ETFs to pay quarterly distributions, more dividend-oriented funds now offer monthly payouts. These regular payments can help investors manage their cash flow better, provide faster compounding if reinvested and offset losses during market volatility.
Investors seeking a safe haven from recession or market swoons can often find solace in consumer staples stocks. That’s because products such as groceries, toiletries and cleaning supplies are always in demand – even during a difficult economy. Companies in this space often pay healthy dividends and their shares are typically less volatile. However, the risks range from rising interest rates to company-specific challenges. As ETFs offer an easy alternative to choosing stocks, we asked three ETF experts for their top picks in this sector.
When gold glitters, it can take investors by surprise. But while the price of gold is unpredictable, owning it can help diversify a portfolio because it can move in the opposite direction of stock markets. Instead of buying bullion or gold-mining stocks – which can have some weak correlation to the market – ETFs offer easier exposure to the asset.
ETFs have evolved significantly from investments that track broad indexes to a plethora of theme-based plays such as clean energy, currency hedging and social media. ETF providers regularly introduce products that reflect market trends, such as the cannabis ETFs launched in the run-up to Canada’s legalization of recreational marijuana, or the new gender-diversity products focused on companies that show a commitment to putting women on their boards and in top leadership positions.
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CBRE predicts record $50 billion investment for commercial real estate this year – Times Colonist
TORONTO — Canada could see a record-breaking $50-billion worth of investment in commercial real estate this year as economic tailwinds and immigration policies support the booming sector, according to a report by CBRE, but it says the strong economy is also creating challenges of affordability and supply.
The commercial real estate services firm said Tuesday that total investment would be about $5 billion higher than 2019 and about a billion dollars higher than the record set in 2018.
Growth comes even amid low vacancies in major markets as tech companies in particular continue to prize downtown locations. Other strong areas include investments in rental apartments as home affordability gets out of reach for many Canadians, and industrial growth driven by e-commerce demand for logistics centres.
“Canada has so many advantages, and so many underlying fundamentals that are positives over the long-term, that we certainly think that growth in the Canadian commercial real estate market is going to continue,” said CBRE Canada vice-chairman Paul Morassutti.
Those trends, along with strong population growth and stable banking and governance, would help steer the sector if a recession hits, said Morassutti.
“The wild card is a recession. My feeling is we’re very well positioned to weather a recession, and I think we’ll continue to flourish after that because of those attributes.”
Heightened interest in the market is also creating challenges, including rising rents and limited office and industrial space, while climate change is creating its own issues.
CBRE says prime office rents jumped 20.9 per cent in Vancouver between 2018 and 2019, 14.2 per cent in Montreal, and 10.1 per cent in Toronto, while national industrial rents rose by 12.3 per cent between the two years for the largest increase on record.
Rents still form a small portion of company budgets and don’t seem to be a major constraint on growth yet, said Morassutti. He noted that in the industrial sector, costs savings in transportation from better locations more than offset costs from higher rents.
Rental rates for apartments are also climbing in major centres as home ownership becomes more expensive, which has helped drive investment in the multifamily. The sector could see about $11.9 billion in investment this year, up from $8.3 billion in 2018, to see the most of any commercial sector, CBRE expects.
The upward trend in residential rental rates is however putting pressure on income inequality, said Morassutti.
“Partially because of that lack of home affordability, you have all these people becoming renters, so on the one hand that’s a good thing. On the other hand, it’s not great for society that our two major cities are becoming unaffordable, it’s not great for the income divide, which is already a large social issue.”
Along with affordability, CBRE says the lack of investment in transit infrastructure, and increasing pressures of climate change on the construction sector and land values are also structural issues of concern for the year ahead.
More immediately, the impacts of the coronavirus outbreak also loom as a big unknown, but could be short-lived if it is contained, said Richard Barkham, global chief economist at CBRE said in a statement.
“If the coronavirus outbreak is relatively contained sometime in March, impacts on the Canadian economy and most commercial real estate sectors will be noticeable in the near term but less substantive over the year.”
He noted that short-term impacts would largely hit the hotel and retail sectors. He said the global property market should be able to weather the effects of the virus as anticipated today, but that a clearer picture of the epidemic should materialize sometime in March.
This report by The Canadian Press was first published Feb. 25, 2020.
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