By: Larry MacDonald
Rajiv Silgardo led the development of Barclays Canada’s family of exchange-traded funds (ETFs) and is now leading the development of BMO Financial Group’s family of ETFs (launched recently). In the following Q&A, he discusses why he left Barclays, why there is room for another ETF family in Canada, how BMO will avoid the fate of TD Bank, and where the growth areas are in ETFs.
Q. Can you give readers a bit of a background on yourself?
A. I have approximately 25 years of experience in asset management – all of it in the realm of indexed and quantitative investing, including ETFs. I was with Barclays Global Investors Canada Limited for 14 years, joining them in their very early days to establish the investment side of the business. For the last four and a half years I served as President and CEO….
When BGI decided to move its investment management operations to San Francisco I elected to remain in Canada. I am extremely proud to be with BMO – the only bank that is taking a leadership role in Canada by offering ETFs to Canadian investors.
Q. Why another family of ETFs?
A. BMO has a long and strong tradition in providing investment solutions for all of the client segments that we serve … we see BMO ETFs as another means of ensuring that our customers have access to an even broader range of solutions that meet their evolving investment and savings needs.
ETFs are consistent and resonate with BMO’s vision to “make money make sense” by providing products that are very transparent and simple to understand for the retail investor. At the same time ETFs can be the building blocks for comprehensive portfolio construction for sophisticated HNW and institutional customers ….
Competition is good for the industry – it will increase awareness and education regarding ETFs among clients and ultimately works to their benefit.
Q. How can BMO succeed in the ETF space in light of TD Bank’s experience a few years ago?
A. We will follow a two pronged strategy to ensure success:
Firstly, we intend to give investors comprehensive and efficient home-grown solutions for their ever evolving investment needs. With our four BMO ETFs that are already launched and the three more that are coming in July we are providing investors with a broad and robust initial offering. And we plan to add to these significantly in the coming months so that as investors need change we are always there for them. (TD only had four before it decided to pull back from market).
Secondly, BMO will put significant educational and sales support in ensuring that the marketplace and investors are fully aware of all the benefits that BMO ETFs bring to their portfolios. In this we will work to support investment advisors and end-clients alike.
Q. Where are the growth areas in the ETF industry?
A. ETFs are experiencing broad based growth – across asset classes and across geographies.
• World wide the growth has been incredible with assets increasing by 65% over the last three years.
• In Canada, the growth was 8% in 2008 to over $19B, which is remarkable given that the majority of market indexes plummeted more than 30% and ETF AUM was up $7.3B compared to net redemptions of $10.5B for mutual funds.
• This is a market that is forecasted to grow to $105B by 2016 in Canada and a product that our clients have expressed a need and desire for.
4 Responses to “ Q&A with Mr. ETF ”
Clearly the reason for the boom for ETF trading is the availability of diverse asset class as well as the ability to use leverage (200/300%) and go short (inverse, bear ETFs). In Canada in particular, since the demise of Richardsons and Midland Walwyn, there are few reliable brokers offering commodity and currency futures transactions. Leveraged Bull/Bear ETFs in commodities fill this void somewhat, though they are different products. I doubt BMO ETFs will be successful if it’s plain vanilla ETF. They need to be innovative, developing new ETFs to track different index.
I would be interested if they have an ETF that tracking the housing sector, VIX, mortgage and inflation rates.
By John Gan on Jun 23, 2009
I think there might be room for a few currency ETFs (USD, Euro, maybe JPY) designed to allow investors to hedge part of their foreign exchange exposure, or maybe to get FX exposure instead of buying foreign equity funds – with international correlations on the rise, most of the diversification benefit is increasingly due to the FX component not the under-lying equity.
Also there could be space for some foreign (non-US) bond ETFs.
By CanadianInvestor on Jun 26, 2009
I think this is more of a question than a comment – I am 1 year from retirement and am wondering what % interest I could expect to get from putting my retirement nest egg into ETF’S. I will have about $ 300,000.00 available in the next year !
Thank you
By Don Jane on Aug 28, 2009
Don
The bond ETFs are around 4%. But also look at creating a ladder of individual bonds and/or GICs. Or even annuities.
By Larry MacDonald on Aug 30, 2009