New IFIC report shows trends of Canadian ETFs and mutual funds, as well as current state of RI and liquid-alt funds
The Investment Funds Institute of Canada (IFIC) has released its second edition of its annual Investment Funds Report, which has been expanded to include information on responsible investment (RI) and alternative investment funds.
In line with results previously reported by National Bank, the IFIC report showed ETF assets stood at $205 billion by the end of 2019, with net sales of $27.9 billion for the year. Mutual funds, on the other hand, grew to hold $1.63 trillion in assets following $16.9 billion in net sales — a marked improvement compared to just $0.1 billion in mutual fund net sales in 2018.
A breakdown of net asset growth in mutual funds showed that in 2018, a combination of market events and meager net sales led to a net loss of $54 billion in assets. 2019 was much kinder, as market effects and net sales combined to provide a gain of $207.3 billion in assets. In contrast, ETF assets grew by $9.5 billion overall in 2018 and swelled by $48.5 billion the following year.
Looking at industry fund assets by broad asset class as of December 31, the report showed that 50% of mutual-fund net assets were held in balanced funds, while 13% were in bond funds and 33% were in equity funds. In the ETF space, balanced strategies appeared much rarer as they represented only 2% of ETF net assets; 32% were in bond ETFs, and 62% in equity ETFs.
Canada’s RI space, according to the IFIC, consists of $2.1 trillion in AUM spread across strategies that fall within a broad definition of RI; the IFIC looks for an explicit RI or ESG mandate in a fund’s prospectus before it considers it as an RI fund. The vast majority of Canada’s RI assets are owned and managed by large institutional investors.
At the end of 2019, the Canadian RI fund space included $12 billion in net mutual fund assets and $654 million in net ETF assets; there were 69 RI mutual funds offered by 16 firms, and 23 RI ETFs offered by 10 firms. Over the previous five-year period (2014-2018), RI mutual fund net assets had gone from $6.8 billion to $10 billion, while RI ETF net assets hovered between $0.1 billion and $0.4 billion.
Turning to liquid alternative funds, the IFIC report showed a total of $5.9 billion in total assets held by alternative mutual funds, compared to $2.5 billion in alternative ETFs. Out of 31 firms offering alternative mutual funds, six were said to have been reclassified from being commodity pools; among seven alternative ETF providers, only one underwent a similar reclassification.
The report’s census of Canadian alternative funds included 68 alternative mutual funds and 47 alternative ETFs.
