Two decades of rapid growth in Canada’s mutual fund industry have made a measurable impact on the nation’s economy, as employment in the mutual fund sector led to an increase of at least CA$17 billion, or 1%, to Canada’ s GDP in 2012.
In a report by the non-profit research group The Conference Board of Canada (funded by financial industry advocate Investment Funds Institute of Canada), the group found that before 1993, assets under management (AUM) in Canadian mutual funds sat at less than CA$100 billion, but as of May 2013, AUM has grown to CA$920 billion. This growth has come as result of a few factors that include the shift from defined benefit pension plans to defined contribution ones, as well as the makeup of Canada’s population with baby boomers entering their prime saving years.
“Part of the reason we published this report was that we don’t know a whole lot about the mutual fund industry (due to a lack of data), and the financial sector is an area where Canada can compete. We’re struggling with the manufacturing sector and there’s a high currency…so the financial sector is one with more importance,” says Pedro Antunes, manager of the research project and director of The Conference Board of Canada’s national and provincial forecast group.
While the report did not examine the savings and investment impact from mutual funds, the Board found that as a result of over 63,000 jobs directly created in the mutual fund industry, the sector had the direct addition of CA$5.8 billion to Canada’s economy last year.
Compared to other industries’ direct impact on GDP, the mutual fund sector comes in behind aerospace manufacturing but ahead of industries such as air transportation, scientific research and development services, and retail gas stations.
Plus, every dollar created from sales, jobs and taxes in the mutual fund industry leads to an additional 1.9 dollars from the effect on other industries. For example, more mutual funds lead to more legal and accounting jobs.
“We get a big multiplier effect,” says Antunes. “We think of supply chain with manufacturing and other goods-producing services, but it’s interesting and important that the mutual fund industry leads to a lot of well-paid jobs.”
Total employment stemming from the mutual fund industry comes in at over 192,000, and because many of these are high-paying jobs, the industry lifts the entire average weekly wage in Canada by 0.1%.
As Canada’s baby boomers continue to save, the mutual fund industry could expand even more in the near future.
“Generally speaking there’s good potential,” says Antunes. “I don’t know if the structural changes are over…so we may see a little bit of a pickup in the next five years.”
However, once these Canadians begin to retire, “we may see a push away” from mutual funds, he says.
The report did not examine the impact of other investment vehicles such as hedge funds or ETFs.
Growth in Canadian Mutual Fund Industry Leads to 1% GDP Gain
Two decades of rapid growth in Canada’s mutual fund industry have made a measurable impact on the nation’s economy, as employment in the mutual fund sector led to an increase of at least CA$17 billion, or 1%, to Canada’ s GDP in 2012.