The exchange-traded fund market has huge growth potential in Canada, and product offerings are set to evolve continuously as investor demands change, according to Rajiv Silgardo, the head of BMO Financial Group’s new ETF unit.

BMO is currently the only Canadian bank to offer ETFs, after launching four funds in early June: BMO Canadian Government Bond Index ETF, BMO Dow Jones Canada Titans 60 Index ETF, BMO US Equity Index ETF and BMO Dow Jones Diamonds Index ETF.

The bank is set to launch three more in late July: BMO International Equity Index ETF, BMO Emerging Markets Equity Index ETF and BMO Global Infrastructure Index ETF. More ETFs are set to be introduced in the next 12 to 18 months as the bank assesses investor demands, Silgardo said in an interview on Monday. Eventually, he said the bank could have a family of 25 to 30 ETFs.

“It depends on how we see the needs of the marketplace evolving,” he said.

Silgardo came on board at BMO a few weeks ago to head the new exchange-traded fund unit and to explore other potential new markets for BMO in the asset management area. Silgardo’s new role follows 14 years at Barclays Global Investors Canada Ltd. He played a large role in establishing the company’s investment businesses, including the exchange-traded fund unit that Barclays launched in 1999. He was most recently president and CEO for more than four years.

A shift of much of Barclays’ operations from Toronto to San Francisco prompted Silgardo to explore other opportunities in Toronto. A team of seven to eight staff members also transferred from Barclays to BMO, and are now working closely with Silgardo on the development of the new ETFs.

All of the Canadian banks have been monitoring the ETF space since Barclays began offering the funds, according to Silgardo. TD Asset Management Inc. launched four ETFs earlier this decade, but terminated the funds in 2006 due to a lack of investor interest and low trading volumes.

Silgardo said BMO decided to enter the market this year after witnessing growing demand among clients.

“There is a segment of the marketplace that wants this kind of solution,” he said. “There is a need for something that gives you the ability to get exposure to an asset class in a very cost-effective and transparent way.”

A key aspect making BMO’s fund offering unique is the fact that they’re domestically developed, designed to meet the needs of Canadian investors, according to Silgardo.

“This is a home-grown solution for the Canadian marketplace,” he said. “We’ve been manufacturing these ETFs right here. We understand the needs of our investors, we understand the needs of our marketplace, we know what works here, what doesn’t work here, so we’re able to tailor these ETFs much more effectively.”

BMO is in the early stages of developing new types of ETFs as expands its new product line. While Silgardo is vague on what’s in store, he said the bank would continue to focus on allowing investors to tailor the products to their specific needs.

“We do intend to bring new solutions to the marketplace that will help our clients, help investment advisors more generally, to craft these investment solutions that are much more tailored than they are today,” he said. “The idea is to meet investors’ evolving needs.”

Another part of the bank’s ETF strategy is to provide plenty of investor education and sales support, both directly to investors and to investment advisors. This includes online tools for investors and advisors and road shows that will offer advisors one-on-one support and training. Advisors will be a key aspect of BMO’s distribution model, Silgardo said.

“What we’ve found in all of the work that we’ve done is that there is always a place for good advice, so we do want to work with the investment advisor community,” he said.

Going forward, Silgardo sees hefty growth potential for the ETF market in Canada. He noted that last year, ETFs gained roughly $7.3 billion in assets in Canada, in a period that was extremely challenging for most investment products. By 2016, he expects the size of the market to grow from its current level of roughly $20 billion to well over $100 billion.

“There seems to be a huge need and a huge demand out there, and the growth prospects for the overall ETF market are very strong and exciting,” he said.

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