The popularity of exchange-traded funds (ETFs) in Canada continues to surge and 31% of domestic investors now report they own ETFs, says BlackRock Canada’s first-ever ETF Pulse Survey, released Friday.
Furthermore, 93% of existing ETF owners and 38% of non-owners are interested in buying ETFs in the next 12 months. The survey suggests education plays a big role in the adoption of ETFs: more than half of Canadian investors plan to learn more about ETFs in 2017 and non ETF investors are more than twice as likely to seek out more ETF knowledge next year.
41% are replacing mutual funds with ETFs
Not surprisingly, the survey found that 41% of investors polled are choosing ETFs largely to replace mutual funds while 45% are doing so to replace individual stocks. Improved diversification was cited by 53% while 43% felt ETFs would help reduce their risk profile. BlackRock added that these findings are consistent with a Greenwich Survey of Canadian institutional ETF users, which pointed to a rise in ETF allocations among institutional investors in the coming year.
Individual ETF owners now allocate 20% of their assets to ETFs on average, compared to 24% for individual stocks and 22% for mutual funds. 71% of ETF owners see them as long-term investments, with average holding period being five years.
62% of non ETF owners expect they will start to use them in the next three years. Once they start using them, 51% of ETF owners said they appreciate the low management fees, 34% cited low transaction costs to buy or sell them, and 34% liked the ability to diversify and reduce risk.
BlackRock says ETFs have “democratized investing” with a solution that is cost-effective, transparent, and easy to use, and this message has started to resonate. “Supported by record growth, it’s encouraging to see that ETFs are coming into their own in Canada, and we believe [they are] well positioned to continue their momentum into 2017,” said Warren Collier, Head of iShares, Black Rock Canada.