Exchange Traded Funds: Performance Expectations

Exchange-traded funds are taking on new forms to bring new investment opportunities to the fingertips of investors. 

ETFs are on the rise in Canada. These efficient investment vehicles are picking up steam with digital investor platforms continuing to innovate and the integration of new technologies.

While ETFs still trail mutual funds by about $15.3 trillion in total assets under management, the growth and performance of this space has been rapid and relentless. Last year also saw the debut of 269 new ETFs and related products, while 151 funds closed down.

The ETF space is enormous, with thousands of different funds. 2019 is likely to bring about hundreds of new options for investors. As this happens, expect many funds to suffer from relatively low investor interest, which may translate to low asset bases.

What Should Investors Be Expecting?

Thematic ETFs continue to Grow A record number of thematic or niche ETFs were launched during 2018. Investors are jumping on the potential to put their money into highly specialized theme with niche investing. The trend is likely to continue this year as well. 

Global real estate and global infrastructure should deliver returns in the 8 to 12 percent range over the long term. But in any one year, it could be significantly above that or unfortunately significantly below that.

Moreover, a price war has been an ongoing theme in the ETF space over the past couple of years. It is now on high gear with most of the ETFs having an expense ratio below 0.10%. This war is likely to continue among asset managers in order to attract investors’ money and gain market share.

All in all, the ETF industry performance is predicted to continue its rapid growth trajectory in 2019, driven by investor demand, product innovation and the evolving requirements of advice models used by financial planners.