Those “independents” believe they can thrive simply by taking a small percentage of a large pool of assets, said Hamilton’s Wessel, whose firm manages C$1.4 billion.
With Canada’s ETF market posting record annual growth since 2019, some of the biggest U.S. fund managers have seen their market share remain static or shrink. ETFs offered by Fidelity Investments, Invesco and Franklin Templeton attracted minimal or negative flows last year, raising questions about their competitiveness in Canada.
Invesco, with less than C$100 million of flows last year, is stepping up its game. The Atlanta-based company recently hired Chiefalo, the former head of BlackRock Inc.’s iShares Canada, and it started 2022 by launching eight ETFs focused on environmental, social and governance investing principles.
“We are refocusing, reinventing and reinvigorating our product” for the Canadian market, said Chiefalo, whose firm plans to introduce more offerings in coming months.
For a passive-fund strategy to succeed, it needs scale and liquidity, an arduous task for smaller providers seeking to compete with global financial firms.
Canada’s largest banks, which all provide ETFs, control the distribution of wealth-management products. Today, with so many asset managers offering ETFs, the crowded Canadian market may be ripe for consolidation.
It may not be imminent, Wessel said, but it’s “inevitable.”
There was a hint of that in early 2019, when Royal Bank of Canada vaulted to No. 1 in the nation after forging an alliance with BlackRock, the world’s largest ETF provider.
“We have the most competitive offering for advisers in the Canadian market,” Armando Senra, head of iShares Americas, said in an interview, adding that the alliance combines iShares’ product offerings with RBC’s distribution.
Still, Wessel said there’s room for smaller firms to prosper.
“The challenge for us,” he said, “is to get people to look at our funds more favorably than some of these incumbent strategies, which have been around for a very long time.”
This article was provided by Bloomberg News.