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Evolution of Content Favors ETF Adoption

Last week I was back in Toronto for the 20th TMX Equities Trading Conference. This well-attended event brought the community together to talk about global trading and liquidity dynamics as well as the Canadian economy. On behalf of TMX VettaFi, I was part of a panel on the evolution of equity content and distribution.  

What was the head of ETF research doing on a panel at an equities trading conference, you might ask? In short, providing insights about how advisors and investors are consuming content before accessing equity markets in a diversified manner. In Canada, as well as in the U.S., ETFs have become a strong alternative to owning individual stocks.  

Canadian ETF Growth 

As of early May, Canadian-listed equity ETFs had approximately $260 billion in assets, according to TD Securities. ETFs with a U.S. focus, such as the BMO S&P 500 ETF (ZSP) and the Vanguard S&P 500 ETF (VFV) were particularly popular this year. These have gained traction, as has the first ETF to ever trade globally, the iShares S&P/TSX 60 ETF (XIU). 

Rather than buy shares of Apple, Canadian National Railway, Microsoft, or Royal Bank of Canada, investors are turning to ETFs. Investors benefit from an ETF’s ease of use and the ability to spread company-specific risk around. 

My fellow conference panelists shared how traditional equity research has shifted over the years in part to support the corporate issuers with investment recommendations. In addition, the role of a sell-side analyst has become more about helping asset management buyers obtain corporate access. Meanwhile, long-form research reports go mostly unread. 

What We’re Doing to Help Investors 

TMX VettaFi is focused on providing advisors and end investors with digestible insights as well as access to experts. On this platform and others, we seek to provide commentary on the latest ETF developments and help investors understand what matters when considering ETFs.

 

For example, both VFV and ZSP charge 0.09% expense ratios and own large-cap U.S. stocks. While information technology represents the largest sector (30% of assets), consumer discretionary, financials, and healthcare were all recently 10% or more of assets. 

In the U.S., we also regularly host webcasts and other virtual events to allow education and engagement directly with asset managers. Advisors benefit from the deep dive on topics such as covered calls, emerging market equities, fixed income, and gold. We also share our commentary on Linkedin and other social media platforms. 

Evolution Continues  

We believe content providers need to meet investors where they are. I started as a stock analyst 24 years ago in the U.S. While ETFs existed then, they were far from the go-to vehicle they are today. ETFs represented approximately 30% of secondary trading volume in the fourth quarter of 2023, and investors have benefited from tight trading spreads. This trend is likely to persist. I’m excited for the journey. 

For more news, information, and strategy, visit the ETFs in Canada Channel.

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