Top crypto analyst predicts explosive growth in ETFs 🚀

TMX Group CEO on ETF growth, commodities and crypto

Welcome to ETF Ed, your go-to place for everything exchange-traded funds. I’m your host Bob Pani. The ETF business is bigger than ever and it’s getting more global. Let’s talk with John McKenzie, the CEO of TMX Group, which owns the Toronto Stock Exchange and just made a major acquisition in the ETF space.

The Verify Acquisition

John, thanks for joining us. TMX Group has more than 900 ETFs listed on the Toronto Stock Exchange, and you recently acquired ETF education site Verify. Tell us about this acquisition and what TMX and the Toronto Stock Exchange gain from it. What is the significance of ETFs right now?

The ETF business is a significant innovation in retail investing in the last 20-30 years.
The Toronto Stock Exchange was the original pioneer of ETFs more than 30 years ago.
The Verify acquisition aims to provide more support, capabilities, and resources to ETF providers.
Verify excels in index creation, allowing for the development of new products and solutions.
TMX Group’s objective is to become more global, reaching a broader investing audience.

Growth Prospects for ETF Business

Global reach seems to be the key focus here. The ETF business, totaling $8 trillion in the United States, primarily sees most money going into index funds. Where do you see the growth prospects for the ETF business in the coming years?

ETF inflows are on the rise compared to outflows from mutual funds, indicating underlying growth potential.
Global development opportunities exist as other parts of the retail trading universe are not as mature as Canada and the US.
Manufacturers are exploring more thematic indices to create the next alpha for investors.
Increased investor awareness and creativity may lead to the introduction of actively managed ETFs in the future.

Canadian Approach to Crypto

Bitcoin has been surging, with the Toronto Exchange listing the first spot Bitcoin ETF in 2021. How does the Canadian approach to crypto differ from that of the US, and what potential do you see for ETFs based on various cryptocurrencies?

Canada’s close-knit community allows for collaborative product development and faster market entry.
ETFs provide retail investors with better tools and regulatory frameworks for engaging in crypto assets.
More product variety, including multiple cryptocurrency ETFs, is possible based on scale and demand.
Indices of multiple assets could become benchmarks for future ETFs, enhancing product offerings.

Commodities in Canada

Canada’s economy heavily relies on commodities, particularly in the energy and mining sectors. Despite this, commodities in Canada have underperformed compared to the US market due to tech dominance. How do you view the role of commodities in a portfolio?

The upcoming Prospectors and Developers Association conference highlights the potential for new investments in commodities.
Slow investment growth is attributed to uncertainties in demand, permitting, and transitioning to new economy mining.
Canada’s significant presence in the mining sector and global financing capabilities position it well for future deal flows.

The Alliance MLP Index Acquisition

TMX Group’s acquisitions, including the Alliance MLP Index from Verify, reflect a focus on energy-related indices. What are the objectives behind this acquisition and how does it align with TMX’s broader strategy in the energy sector?

The Alliance MLP Index acquisition complements TMX’s energy market capabilities and furthers the creation of energy-related indices.
TMX’s treport business in London serves as a leading European energy market aggregator, expanding the company’s global footprint.
Investing in base metals, rare earth metals, and energy markets showcases TMX’s diversified portfolio and expertise in these sectors.

TSX Venture Exchange Incubator

TMX Group’s incubation program at the TSX Venture Exchange aims to facilitate the public listing of small companies. Can you provide a brief overview of this program and its impact on the Canadian market?

The TSX Venture Exchange serves as a platform for early-stage companies to raise public capital and grow their businesses.
Graduating companies from the junior market to the senior market enhances their visibility and access to capital.
The unique structure of the Canadian market supports the listing of global companies and fosters growth in diverse sectors like technology and resources.

Hot Take

John McKenzie, CEO of TMX Group, shares insights on ETF growth, commodities, and crypto, highlighting the company’s strategic acquisitions and global expansion efforts in these sectors. The Verify acquisition and TMX’s focus on energy-related indices underscore its commitment to innovation and market leadership.