2023 in Review and a Look Ahead at 2024
As we mark the end of 2023, I am proud to highlight the successes that Horizons ETFs has achieved this year, within our business and for our investors. Through 2024 and beyond, we remain committed to helping Canadians navigate and harness the emerging trends shaping markets while delivering exceptional investment solutions and client experiences.
While global uncertainty and economic pressures have resulted in market volatility, Canada’s ETF industry continues to grow. As at December 31, 2023, Canada’s ETF industry accumulated approximately $40 billion of in-flows during the year.
At Horizons ETFs, our assets under management swelled from approximately $22.9 billion at the end of 2022 to over $30 billion at the end of 2023 – an increase of more than $7.6 billion, the largest year-over-year growth in the firm’s history. We continued to solidify our position as a leading Canadian ETF provider, with more than $5.5 billion in ETF in-flows this year.
We are also committed to our longstanding commitment to bringing innovative ETFs to market. In April, we launched Canada’s first ETFs that provide exclusive exposure to Canadian and U.S. 0-3-month Treasury Bills, respectively the Horizons 0-3 Month T-Bill ETF (“CBIL”) and the Horizons 0-3 Month U.S. T-Bill ETF (“UBIL.U”). In July, we launched 6 ETFs as part of our Equity Essentials suite, including Canada’s lowest-cost Canadian bank ETF, the Horizons Equal Weight Banks Index ETF (“HBNK”). In October, we launched our Premium Yield ETF suite, which provides exposure to actively-managed options programs on U.S. Treasury securities. We also expanded our suite of Asset Allocation ETFs to include first-in-Canada types of exposure in this class of ETFs.
These launches were a significant success: Horizons ETFs recorded more than $1.8 billion in in-flows into these ETFs, making us one of the top providers in Canada for assets raised in new ETFs launched in 2023. In 2024, we intend to launch several new and innovative ETFs, offering investors more opportunities to gain and tailor their exposure to traditional and emerging asset classes. We look forward to sharing more news on these exciting products soon.
Speaking of soon, there are a number of emerging trends in Canada’s investment fund landscape that I believe will become more pronounced throughout 2024. Here are my top three to watch:
1. Canada’s ETF Landscape is Bigger, Busier (and Harder to Navigate) Than Ever
Canada’s ETF industry continued to grow in 2023 and will continue to do so throughout 2024. Not just in assets under management, but in available products, interested investors, and in competition among providers. While competition is a boon for investors, the rapidly growing product and provider landscape can make navigating the ETF marketplace more difficult for investors as well. For context, there are 40 million Canadians and 40 ETF providers with 1,100 ETFs. In the U.S., a country of 330 million, there are about 240 ETF providers with approximately 3,000 ETFs.
My expectation: despite broader ETF asset growth in Canada, I believe the conditions are ripe for consolidation. While some existing ETFs may close and others may open, I believe we will see more product providers merge, be acquired or wind down as a lack of a foothold emerges. Increasingly, we are seeing the majority of funds continue to flow to the top 5 ETF providers in Canada – nearly 80% of assets are held by just the top 5 providers in the Canadian ETF marketplace.
2. With Economic Uncertainty, Canadians Look to Income Producing Investments to Balance Growth and Safety
This was a trend that was in full force in 2023 that I expect will continue as an uncertain economic picture continues to take shape. While markets surged toward the end of December, worries about an impending recession, ongoing disjointedness between financial markets and underlying weaknesses in the Canadian and global economies have convinced many investors to seek a balance between growth and safety. Add to that a rising rate environment, and you have a recipe for a particular investment appetite. The feast of choice: income-producing investments, including fixed income products, money-market funds and options-focused equity strategies.
We’ve seen significant in-flows into these products – by far, fixed income saw the largest in-flows across asset classes, with over $21 billion in 2023. Of that, money market and cash alternative ETFs remained the most popular, with more than $9 billion or 58% of in-flows into the broader fixed income category. And options-based strategies, including covered call ETFs, accumulated a healthy $4 billion in new creations. In 2024, I believe we will see more investors look to take advantage of big yields, monthly income and strategies that can mitigate against some downside risk, while seeking to protect and grow their nest-eggs, whether for retirement or a first-time home purchase.
3. Technology is the Big Disruptor for Investing (and for Bay Street as well) in 2024
There were a lot of important news stories and events in 2023. When we look back a decade from today, which will have had the biggest impact on that future? Across the technology economy, from the incumbents to the emerging pioneers, there is a generational investment opportunity occurring as the full potential of artificial intelligence is understood.
This trend is also changing the way that firms like ours, and Bay Street as a whole, do business. Through technological innovation, we’re achieving greater productivity, greater market insight, gaining more time for creative thinking and ultimately, we’re able to offer investors more than ever before. Like many technological revolutions of the past, I believe that those that adopt and adapt will succeed and those that deter or defer will not, which is why we are undertaking our biggest technological upgrade in the history of our business.
No matter what is next on the horizon, we are confident that our suite of innovative ETFs will be able to help you reach your financial goals.
At Horizons ETFs, we embrace innovation in everything that we do. From our roots as one of Canada’s first ETF providers to our proud legacy of launching first-of-their-kind investment products, we are driven by boldness, vision, and a commitment to exceptional quality and client experience.
Thank you for your continued support as we work toward advancing the asset management industry toward a brighter horizon for all investors.
Sincerely,
Rohit Mehta
President & CEO of Horizons ETFs Management (Canada) Inc.