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)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
