A primer on ETFs

17%

10-year annual average growth in ETF assets globally1

55

Consecutive months of ETF net asset inflows globally1

30+

Years since launch of the world’s first ETF—in Canada2

41%

Proportion of millennials' portfolios in ETFs3

Foreword

Exchange-traded funds (ETFs) are one of the most popular—and disruptive—investment phenomena to have emerged over the past 30 years. ETFs have been stress tested during particularly volatile global market conditions, including COVID-19, inflation and the recent bear market. Throughout this turmoil, ETFs have thrived, largely driven by their ability to adapt and innovate.

Canada has been at the forefront of ETF innovation, launching the first equity fund in 1990, followed by the first bond and Bitcoin ETFs in 2000 and 2021 respectively. It is, therefore, fitting for RBC to publish this report, which is intended to provide an explanation of how ETFs work, why they are so popular and where this important investment tool might be headed.

New global challenges are destined to rear their heads going forward and changing macroeconomic factors will likely spark demand for even more innovative ETF strategies. Think commodity and fixed income ETFs as investors respond to equity market volatility and the industry continues to innovate. So, grab onto the reins as managers continue to reimagine the ETF space during what will undoubtedly be tumultuous—and exciting—times. Enjoy the ride!

Understanding ETFs
 

It can be challenging to understand how ETFs work.

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Creating, redeeming & servicing ETFs

The ETF process requires a three-way partnership.

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Adapting through
innovation

The ongoing success of ETFs is due to their resilience.

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Key terms


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1 ETFGI reports that assets invested in the global ETFs industry reached a new milestone at the end of 2023, ETFGI, January 16, 2024
2 25th Anniversary of the first ETF in Canada, ETFGI, March 9, 2015
3 ETFs and Beyond, Charles Schwab, September 2022

Currencies are in USD unless otherwise specified. This document was updated in April 2024.