Growth in Canada outpaced both the U.S. and the global industry, with AUM rising 14% during the year to US$3.6 trillion.
Retail investment is gaining share in Canada, and the rising share of the market and the increasing sophistication of retail investors present asset managers with an opportunity worth monitoring. This trend is expected to continue over the next five years, with growth forecast at 9% annually.
Certain active categories also generated strong asset growth in 2020, it noted, including large-cap equity funds, government-focused fixed-income funds, money market funds and specialized products. Even with a global pandemic, a lockdown-induced recession, and the specters of economic malaise and growing inequality, the total AUM in Canada’s investment fund industry grew by more than $2 billion.
From a sales perspective, mutual funds saw net sales of $31 billion, an increase of 83% over the previous year, while ETF net sales reached $41.5 billion on the back of 48% year-on-year growth. Gross sales for mutual funds amounted to $300 billion, a historic record.
Canadian investment managers have been investing in alternatives much before the counterpart countries hopped onto the bandwagon due to low-interest rates and volatile public markets.
The fintech market in Canada is also growing at a fast pace, aiding the overall growth of the Asset management industry. The year 2020 was a transformative year for the Canadian asset management industry, through shifting consumer attitudes, a growing competitive landscape, and, ultimately, the COVID-19 global pandemic.
Events of 2020 put Canadian asset managers on alert. Additionally, though the industry has shown its trademark resilience, homegrown leaders continue to feel the pressure of mounting competition, consumer shifts, and rippling impacts of the global pandemic.
Big asset managers are looking at expanding into alternatives and low-cost beta products to the point where many players have gone down the route of partnering with a hedge fund or private equity managers on the alpha side and looking into ETF-style platforms on the beta site.
The industry’s relationship with technology has also brightened, even if familiar uncertainties linger. While organizations are becoming more confident and adept in adopting the likes of blockchain, bots, data analytics, and artificial intelligence (AI), reservations persist as to how these resources will pay back their investments and how organizations can mitigate their potential risks.
Moreover, considering that there is always a new competitor willing to look beyond these reservations, organizations are feeling the pressure to make a decision or fall behind.
Key Market Trends
The Growth Of Responsible Investment Fund in Canada
Responsible investment fund assets grew by 55% in 2020, compared to 11% growth for the fund industry overall. Responsible investment (RI) has taken its place as the predominant investment approach among Canadian investors.
Assets in Canada being managed using at least one RI strategy increased to $3.2 trillion, compared to $2.1 trillion at the end of 2017. This corresponds to growth of 48.5% for RI AUM over a two-year period-equivalent to 21.9% annualized growth over two years.
Responsible investing comprises a majority of Canada’s professionally managed assets, accounting for 61.8% of all Canadian AUM. This is a larger share of the overall market than the previous years when RI assets attained a milestone of 50.6% of the Canadian investment industry.
The rising demand for RI among individual investors is being met with greater availability and diversity of retail RI products, as longer-standing RI firms expand their product offerings and newer entrants to the space launch RI products. Assets in designated RI retail mutual funds have increased to $15.1 billion from $11.1 billion two years prior, representing growth of 36% over two years. Meanwhile, assets in exchange-traded funds (ETFs) managed under RI strategies have more than doubled over the last two years, from $240.6 million to $654.9 million.
Exchange-Traded Funds and MF in Canada
Canada’s exchange-traded fund industry reached quite the milestone last week, with net sales surpassing mutual fund sales for the first time in the country’s history. In 2019, ETFs were brought in $18.7 billion compared to $7.8 billion for mutual funds.
Canadian ETF assets have climbed by 74% since 2015, but with only five banks and a handful of investment firms holding most Canadian assets. Also, since 2015, mutual fund assets have also increased by about 74%, a huge number considering the size of the industry.
Companies Mentioned
RBC Group
TD Asset Management Inc.
BlackRock Asset Management Canada Ltd.
CIBC Asset Management Inc.
Fidelity Canada Institutional
CI Investments Inc. (including CI Institutional Asset Management)
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
