ETFs Take the Lead: Will Mutual Funds Fade Away?

by: Larry MacDonald

A report released by Barclays Global Investors Monday shows exchange-traded funds (ETFs) have hit an all-time high in terms of assets under administration (AUM), of nearly $900 billion (U.S.). So has Canada: the ETF industry grew by 49% in 2009 to an all-time high of C$28.8 billion, as of the end of September 2009.

Of the ETF asset categories in Canada, fixed-income ETFs experienced the highest growth in 2009, doubling AUM to C$5 billion. Coming in second were inverse/leveraged commodity ETFs, which jumped from C$0.2 billion to C$1.5 billion.

ETF company iShares “remains the undisputed leader” with 80.4% of total AUM in Canada. Claymore and Horizon BetaPro roughly split the remaining market share.

Contrasting with ETF growth were net redemptions of mutual funds, amounting to C$800 million in Canada. The downward trend is similar at the global level, as can be seen from the chart below. Could we finally be seeing the turning point for mutual funds?

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