BMO aims to boost ETF market share, outpace rivals

Tue Feb 7, 2012 12:18am EST
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By Andrea Hopkins

TORONTO (Reuters) - Bank of Montreal (BMO.TO: Quote) will gain ground against foreign rivals to capture 10 percent of Canada's exchange traded fund market in 2012 as domestic rivals try to decide whether it is too late to enter the burgeoning ETF space, the bank's head of asset management said in an interview.

Rajiv Silgardo, co-CEO of BMO Global Asset Management, said he expects Canada's C$43 billion ($43 billion) ETF market to continue to grow at a double-digit pace in the next five years as investors look to the low fees and market-matching returns of ETFs to take some of the risk out of their sagging portfolios.

Having set a target of capturing 10 percent of the ETF market within five years of his moving over from Barclays Canada in 2009, Silgardo said BMO - Canada's fourth-largest bank and No. 2 ETF player - is on track to hit that mark two years early.

"As of December, we were at 8.9 percent, and I think we're at 9.3 percent as of end of last month. So we should hit the 10 pct threshold sometime this year," Silgardo said, pointing to BMO's 2009 ETF launch as a success story unmatched by rivals in Canada's small but powerful banking world.

ETFs are funds that track an index, a commodity or a basket of assets but trade like a stock on a stock exchange. That makes them attractive vehicles to profit from the growth of commodity markets, bond indexes or a stock exchange or sector while retaining the liquidity and transparency of an active stock.

Only BMO and Royal Bank of Canada (RY.TO: Quote), the nation's largest bank, have entered the ETF space to compete against behemoth foreign rival BlackRock Inc (BLK.N: Quote), the world's largest money manager, whose iShares unit snapped up privately held Claymore Investments last month. The takeover of the No. 2 ETF player by the No. 1 boosted iShares' share of the Canadian ETF market to about 85 percent.

While RBC has put little effort into promoting its nascent ETF offerings - fearful perhaps of cannibalizing its successful and more lucrative line of mutual funds - BMO has galloped into the ETF space with a lineup of 44 funds.

The bank's ETF business led the industry in growth in 2011, accounting for C$2.3 billion, or 49 percent, of the growth of assets under management, according to figures released by BMO on Tuesday.   Continued...

<p>A Bank of Montreal sign is pictured in downtown Ottawa March 3, 2009. REUTERS/Chris Wattie</p>