What to launch next? An ETF provider's biggest dilemma!

Ahmed Farooq, CIMA®, CFP

Ahmed Farooq, CIMA®, CFP
Vice President - ETF Business Development at Franklin Templeton Canada

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Making Room in a Crowded ETF Space

While I have been in the ETF business for 11 years, the last few years have been particularly unique as the Canadian market experienced explosive growth. Every month, new ETFs have been hitting the market and new ETF providers have emerged. With so many new products fueling competition and innovation, it has become more and more challenging to bring a product to market that stands out from the pack.

This timeline of ETF providers in Canada demonstrates how many players have entered the ETF space in recent years, and just how much the market has changed since iShares launched in 1999.

With so many products flooding the market, advisors often ask me how we decide what type of ETF to launch next. As a firm, we are always trying to develop the next best idea that will meet the needs of investors and advisors alike. There is always the risk that our next great idea is already being developed by one of our competitors, so getting our products to market quickly is key. However, being ‘first to market’ isn’t worth much if the products don’t fit the needs of our clients. To ensure that we are factoring in these perspectives, we start the product development process by reaching out to our community of advisors and ETF analysts for their insights.

We continue to hear a similar story from many of them—specifically that our clients are looking for fixed income solutions to help them manage risk and diversify their portfolios. I understand why this has been such a common sentiment. Influenced by many variables including interest rates, credit quality and the overall health of the economy, fixed income is a complex asset class. Even a savvy investor can find fixed income confusing and difficult to manage without specific expertise. And now with the hint of rising interest rates around the corner, the fixed income investment landscape could become even more unpredictable.

To help our clients address their exposure to fixed income in targeted and strategic ways, we recently launched three new actively managed fixed income ETFs, each with its own mandate and investment objective:

As the Canadian ETF landscape grows and evolves, I look forward to continuing the conversation with advisors and investors to deepen our firm’s understanding of the types of products, investment solutions and platforms that are best positioned to help them achieve their unique goals and objectives.  

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What to launch next? An ETF provider's biggest dilemma!

Making Room in a Crowded ETF Space.

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What Are the Risks?

Commissions, management fees and expenses may all be associated with investments in ETFs. Investors should carefully consider an ETF’s investment objectives and strategies, risks, fees and expenses before investing. The prospectus and ETF facts contain this and other information. Please read the prospectus and ETF facts carefully before investing. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and ETF expenses will reduce returns. Performance of an ETF may vary significantly from the performance of an index, as a result of transaction costs, expenses and other factors. The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

Ahmed Farooq’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

All investments involve risks, including the possible loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.