ETF Market Review & Outlook Report (January 2023): ETFs Prove their Worth Amid Turbulent Markets

• Flows reached $35 billion for the year in Canada with BMO ETFs leading the industry with new flows of $8.4 billion for the twelfth consecutive year¹
• Inflation and rising interest rates dominated markets

TORONTO, Jan. 30, 2023 /CNW/ - BMO Global Asset Management (BMO GAM) today released its year end Exchange Traded Funds Outlook Report (ETF Outlook Report) highlighting the continued success of exchange-traded funds (ETFs) in Canada. The report features experts from across BMO GAM's ETF team sharing insights on the Canadian ETF market, and ETF trends in challenging markets.

In 2022, the Canadian ETF industry reached $314 billion in assets and $35 billion in net new flows. The industry saw 153 new ETFs launched over the course of the year. For the twelfth consecutive year, BMO ETFs led the industry with new flows of $8.4 billion.¹

"ETFs have proven their worth once again in 2022, both as effective portfolio building blocks, and as efficient trading tools to help investors make progress towards their financial goals." said Mark Raes, Head of Product, BMO Global Asset Management. "While we endured difficult markets in 2022, ETFs helped investors reposition around inflation, higher interest rates, and market uncertainty. ETFs that focus on areas of the market such as defensive factors, cashflow, and inflation protected bonds proved effective, while specialized equity ETFs are needed for future growth. Furthermore, we are pleased that BMO ETFs continue to lead the industry in new flows for the twelfth consecutive year.¹".

Key Themes

Inflation: Alfred Lee (Portfolio Manager)

• Consumer price index (CPI), while still well above long-term targets, is trending in the right direction.
• ETFs with exposure to certain sectors, such as inflation-protected bonds, energy and infrastructure, can offer investors a hedge against inflation.

Factors: Chris Heakes (Portfolio Manager)

• Low volatility and dividend strategies proved effective in challenging markets.
• Mature cash-flow-generating equities delivered value with rising interest rates and market risk.

Sectors: Chris McHaney (Portfolio Manager)

• BMO Equal Weight Oil & Gas Index ETF (ticker: ZEO) was the highest returning BMO ETF in 2022.¹
• Canadian financial sector ETFs saw inflows of $407 million for the year.¹

Equity Growth: Mark Raes (Head of Product)

• The rise of inflation has heavily impacted growth stocks as companies valued on future cash flows now face a higher discount rate and lower growth estimates.
• Cash on the sidelines could lead to significant opportunities for investors once markets turn positive.
• U.S. Dollar strength helped Canadian investors with unhedged currency exposure.

Listed Real Assets: Vishal Bhatia (Portfolio Manager)

• ETFs based on listed infrastructure equities combine the liquidity and efficiency of ETFs with exposure to infrastructure assets.
• Global infrastructure ETFs provided differentiated returns due to long-term contracts with built-in inflation pass-through mechanisms.

Fixed Income: Matt Montemurro (Portfolio Manager)

• A very difficult year for fixed income for both interest rates and credit may be seeing positive signals as fixed income markets have reset.
• A barbell approach to fixed income ETFs with short term credit ETFs and long-term government ETFs has proven popular with investors.

Balanced ETFs: Erin Allen (VP, Online ETF Distribution)

• The convenience of all-in-one, low-cost balanced ETF solutions appeals across investor types.
• Canadian balanced ETFs saw inflows of $1.8 billion for the year.¹

To view the full ETF Outlook Report, please click here.

Further information about BMO ETFs can be found at www.bmo.com/etfs.

¹ NBF Research and Strategy, Canadian ETF Flows, December 2022

The viewpoints expressed represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice.  Past performance is no guarantee of future results.  This communication is intended for informational purposes only.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.

Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF's prospectus.  BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal. 

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.

®/™Registered trademarks/trademark of Bank of Montreal, used under license.

About BMO Exchange Traded Funds (ETFs)

BMO Exchange Traded Funds has been an ETF provider in Canada for more than 13 years, with over 100 strategies, over 25 per cent market share in Canada¹, and $79.2 billion in assets under management. BMO ETFs are designed to stay ahead of market trends and provide compelling solutions to help advisors and investors. This includes a comprehensive suite of ETFs developed in Canada for Canadians, such as cost effective core equity ETFs following market leading indexes, and a broad range of fixed income ETFs; solution-based ETFs responding to client demand; and innovation with smart beta ETFs, as well as combining active and passive investing with ETF series of active mutual funds.

¹ Morningstar, December 2022

About BMO Financial Group

Serving customers for 200 years and counting, BMO is a highly diversified financial services provider - the 8th largest bank, by assets, in North America. With total assets of $1.14 trillion as of October 31, 2022, and a team of diverse and highly engaged employees, BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services to 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets.

SOURCE BMO Financial Group

Media Contact: Jeff Roman, Toronto, [email protected], [phone]