There was a time when ETFs were regarded by the mutual fund industry as an existential threat, but we’re well past that now.
Today, several mutual fund companies have their own lineups of exchange traded funds. And, mutual fund managers hold a lot of ETFs in their portfolios. A recent report from CIBC World Markets said that mutual funds held $65-billion in Canadian- and U.S.-listed ETFs at the end of last year. Use of ETFs by mutual fund managers has quintupled in the past five years, and the number of ETFs used has more than doubled over that same period.
Here’s the list of the Top 10 ETFs, ranked by assets held by mutual funds, excluding ETFs bought for mutual funds in the same corporate family. For example, Bank of Montreal has used a lot of BMO ETFs in its mutual fund products.
- iShares Gold Trust (IAU-A)
- SPDR S&P 500 ETF Trust (SPY-A)
- iShares 20+ Year Treasury Bond ETF (TLT-Q)
- iShares TIPS Bond ETF (TIP-A)
- SPDR Gold Shares (GLD-A)
- Horizons Cdn. Select Universe Bond ETF (HBB-T)
- iShares Core S&P 500 ETF (IVV-A)
- iShares Core MSCI EAFE ETF (IEFA-A)
- Horizons S&P/TSX Capped Composite Index ETF (HXCN-T)
- iShares iBoxx High Yield Corporate Bond ETF (HYG-A)
U.S.-listed ETFs dominate this list, but Canadian products have a strong and growing overall presence in mutual funds. Canadian-listed ETFs account for 72 per cent of the total ETFs used by mutual funds at the end of 2020, compared with 63 per cent at the end of 2015. U.S. ETFs may, in some cases, offer lower fees or more liquidity.
The CIBC report notes that pension plans, insurers and the accounts of high-net-worth investors likely also use ETFs extensively. If so, the report suggests about half of all Canadian-listed ETF assets are held by institutional investors.
Mutual fund industry execs initially saw a threat in ETFs, not an opportunity. As we know today, ETFs can be a nice little sideline for mutual fund companies, and an effective holding in professionally managed portfolios.
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