Are mutual fund managers heading the way of the Dodo bird?
The latest numbers paint a grim picture for active managers in Canada’s stock market. Data from 2019 compiled by Bloomberg News shows that 85% of Canadian stock pickers lagged the nation’s key stock index in the 12-months through June 30, 2019.
Meanwhile, the Toronto Stock Exchange (TSX), Canada’s benchmark index, is on track to have its best year in a decade in 2019. This is good news for investors who have put their money in Exchange Traded Funds (ETFs) that passively track the TSX. In fact, the same data shows that ETFs are nearing record inflows in Canada as assets under management crossed the $200 billion mark in November.
Competition is strong within the passive investing ETF space, enabling investors to shop around for the best options. ETFs available to investors have more than doubled since 2013 with the number of products currently sitting at just over 830, according to the Canadian ETF Association.
At the same time, mutual funds attracted $10.5 billion of investment funds in Canada in the year through October 31 – the lowest level since 2011, according to the Investment Funds Institute of Canada. Total mutual fund assets of $1.59 trillion still dwarf investments in ETFs. But current trends favor ETFs over the long-term.
Indeed, the conclusion of the Bloomberg report is that the future looks bleak for active fund managers. Half of all Canadian equity funds available 10 years ago remained active as of June 2019, according to the report.
