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ETFs: Past, Present and Future The growth of ETFs and how
In a tumultuous year for markets, exchange-traded funds (“ETFs”) have proven their resiliency and continued popularity as effective
they fit into client portfolios
solutions for investors to achieve their financial goals and for advisors to build their practices. Recently, TD Asset Management (“TDAM”) hosted a roundtable discussion on the growth of ETFs, where they might be headed, and how advisors can use ETFs alongside mutual funds and other investments to serve their
clients better an
d grow their practices.
This panel of TDAM specialists and external industry experts consisted of: (Clockwise)
● Trevor Cummings, CIMA, Vice President, ETF Distribution, TD Asset Management
● Deborah A. Fuhr, MBA, Managing Partner, Founder, ETFGI
● Jason McIntyre, CFA, Vice President, TD Wealth, Head of Advisor Distribution, TD Asset Management
● Benjamin Gossack, CFA, MBA, Vice President and Director, TD Asset Management, Lead Portfolio Manager, TD Active Global Enhanced Dividend ETF (TGED) and TD Active U.S. Enhanced Dividend ETF (TUED), and Co-Portfolio Manager on TD’s North American and global equity funds
■ How has the ETF market performed during the uncertain times investors have faced in 2020?
Fuhr: ETFs busted a number of myths. During the depths of the COVID-19 pandemic, we witnessed trading days with significant inflows and outflows.
For the first four months of 2020, we saw net inflows globally for ETFs, which
I think are also a good barometer of investor sentiment. For example, in April we saw that US$58 billion of net new money went into ETFs. More recently, we saw US$48 billion of net new money in May.1
ETFs: Global Total Net New Assets (US$ millions)
The majority of those investments went into fixed income ETFs, with investors searching for income and yield. We’ve also seen some of that investment go into commodity ETFs. For April, we saw some net outflows from equities, but if you went back to March, most of the money was going into equities. It’s inter- esting to watch how various investors are using ETFs, but I think the important thing is that people have continued to use them. It demonstrates the resilience of the ETF market. We’ve seen more money go into ETFs in the first four months of 2020 than at the same time last year.
■ Given these recent developments, how have fund manufacturers like TD evolved with the ETF industry?
McIntyre: If you look back just over 10 years ago, almost 100% of the inflows into the ETF business were going to passive solutions. Nowadays, this is a much different story, and we are seeing a large allocation going toward active solutions, especially in Canada. When you think about the capabilities of a firm like TDAM, with our core expertise in fixed income, equities and quantitative and factor strategies, the popularity of active ETFs is supported by the firm’s strengths. We’re expanding our ETF network in Canada, serving institutional in- vestors, retail investors and advisors. In each of these categories, not only have investors been increasing ETF exposure consistently year over year, we believe that, based on conversations with advisors and clients, they plan on further increasing exposure to ETFs.
May 20
Apr 20
Mar 20 $20,097 Feb 20
Jan 20
$31,584
$48,016 $58,013
$67,701
Source: ETFGI data sourced from ETF/ETP sponsors, exchanges, regulatory filings, Thomson Reuters/Lipper, Bloomberg Finance L.P., publicly available sources and data generated by ETFGI’s in-house team.
% of Active ETFs in Canada
Last 10 Years 25%
20% 15% 10% 5% 0%
Canadian Active vs.
Passive ETF Flows 2009 vs. 2019
“If you look at Canada,
about 22% of ETF assets are in actively managed solutions. Globally, the number is 2.8%.2 That’s a very big difference, and part of that comes down to how ETFs are regulated.”
–Deborah A. Fuhr, MBA,
Managing Partner, Founder, ETFGI s
100%
80%
60%
40%
20%
0%
■ Active ■ Passive
May 10
May 11
May 12
May 13
May 14
May 15
May 16
May 17
May 18
May 19
May 20