This article explores the growing popularity of actively managed exchange-traded funds (ETFs) in Canada. It traces the history of ETFs from their passive beginnings to the current trend towards active management, highlighting the key differences between the two approaches. The article also discusses the potential benefits and drawbacks of active ETFs for Canadian investors, emphasizing the importance of due diligence before investing.
Much like basketball, the walkie-talkie and Drake , exchange-traded funds are among the innovations that originated in Canada before proliferating globally. The first ETF, known as the Toronto 35 Index Participation Units , was launched on the Toronto Stock Exchange in 1990. This pioneering financial product paved the way for the introduction of the first U.S. ETF, the SPDR S&P 500 ETF Trust , in 1993.
However, assets have not yet caught up. Less than one-third of Canadian-listed ETF assets are housed within actively managed products, leaving a large swath of active ETFs sharing a small slice of a growing pie. This contrasts directly with our neighbours south of the border, where passively managed assets now make up more than half of that invested across both mutual funds and ETFs, according to
All this said, switching to an ETF isn’t always a straightforward decision. Most mutual fund assets in Canada are still held in commission-based share classes, meaning that annual fees paid include costs associated with advice and distribution. Advisers who are compensated in this manner might be motivated to keep investor assets status quo. Investors who value the advice provided and the adviser relationship might also be more comfortable with staying the course.
Etfs ACTIVE MANAGEMENT PASSIVE INVESTING FINANCIAL PRODUCTS INVESTMENT STRATEGY
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