The market for exchange-traded funds is quickly filling up. Today, Barclays Global Investors added two small-cap and a socially responsible ETF to its lineup.

That follows the introduction of a new bond ETF, as well as value and growth ETFs in the fall and a dividend and real-return bond ETF at the end of 2005.

While the market leader, at $16 billion in assets under management, Barclays is not alone in Canada. Claymore Investments, which favours fundamental-weighted indexes over capitalization-weighted ones, launched its international and Japanese products earlier this year, adding to a lineup that includes dividend and income, BRIC, U.S. and Canadian fundamental ETFs. More recently, it has launched a preferred share index.

There is also competition from Horizons Beta Pro, which, over the past two years, has introduced a suite of bear and bull funds that allow investors to take 200% exposure to the upside or downside of Canadian and U.S. indexes, gold, the dollar and bonds, among other things.

At a press conference at a “green” refurbished Toronto building, the Barclays launch today emphasized the growing interest in socially responsible investing.

Scotia McLeod senior investment advisor Alan Harman, who has been interested in socially responsible investing since he began in the business in 1987, recalls that investor uptake was quite slow at first. But he persevered, thinking, “At very least, it wouldn’t hurt a client’s bottom line.”

Today, clients in their mid-40s have a very definite affinity for environmental concerns compared to older Canadians, and he finds that SRI resonates with this group. He also thinks that foundations, among others, will use the ETF since building a custom SRI portfolio can be expensive.

“We realized we had a unique opportunity to provide even more degrees of freedom and more degrees of opportunity,” adds Heather Pelant, head of business development at Barclays. “This new fund is really designed for socially responsible investors who are interested in lining up their investments with their values.”

She adds that the Jantzi Canadian Social Index, which underlies the new ETF, has outpaced the S&P TSX 60 by 47 basis points and the S&P TSX Composite by 86 basis points. “This should allay fears that by embarking on SRI investments that you are going to underperform.”

Michael Jantzi, with whom Harman started working in the early 1990s, explains that his index is updated annually. More than that, it is representative of all economic sectors, using a best-of-sector approach.

“Our message is not that oil and gas or forestry or mining are bad industries. We all understand that they have an adverse environmental impact. But we also understand through our research that there are companies in those sectors that are doing a better job than their counterparts.”

Filed by Scot Blythe, Advisor.ca, scot.blythe@advisor.rogers.com

(05/15/07)