Jin Li covers the ETF sector for BMO Capital Markets where his area of focus includes ETF investment strategies and factor research. Jin provides a top-down ETF-based portfolio construction screen and conducts ETF investor sentiment analysis for the purpose of highlighting investment themes and ETF products relevant to those themes.

Jobs in ETFs sat down with Jin in advance of the upcoming ETFGI Global ETFs Insights Summit at the St. Regis in Toronto to discuss his role at BMO, how Canadian institutional investors are using ETFs and where he sees future ETF growth coming from in Canada.

“ETF investors are increasingly utilizing fund-of-funds ETFs and mutual funds that can hold ETFs. This adds new distribution capabilities to the ETF industry and opens avenues for growth.”

Jobs in ETFs: Tell us about yourself and your experience. How did you become VP, ETF & Quantitative Research Analyst at BMO?

Jin Li: I went to the University of Waterloo for computer science and was part of the co-op program. After six internships ranging from pharmaceutical startups to investment banks, I realized that I wanted a career in financial services. I joined BMO Capital Markets as a quantitative and technical research associate. My analyst was very patient with me and taught me the importance of a disciplined approach to investment research. After four years, I was promoted to an analyst role covering the ETF sector focusing on portfolio construction.

JiE: Are there particular elements of culture at BMO that drew you to the business and keep you there?

JL: BMO’s entrepreneurial and diverse culture is highly attractive to me. At present, computer scientists are usually good candidates for many front office roles but when I started in the industry not many front office MDs were willing to hire an unconventional candidate. I believe that my hiring and promotion is a testament to the entrepreneurial and diverse culture at BMO.

JiE: Biggest challenge of your career to date and how did you navigate?

JL: I’m the first ETF research analyst at BMO Capital Markets, so it was a steep learning curve for me. The biggest challenge was the need to create an entirely new research platform from the ground up. I had to develop a thorough understanding of the ETF eco-system and determine how my research would fit within it and provide value to all stakeholders. I received invaluable mentorship and support internally while building up my research practice. While developing the platform, I combined my quantitative and technical capital markets experience with the strengths originating from my academic background in mathematics and computer science. Utilizing this combined skill-set and experiences allowed me to generate a unique data-driven approach to portfolio construction and industry analysis.

JiE: What is the best bit of advice you’ve received in your career and what advice would you give to those who are just starting out in the industry?

JL: The best career advice I have received came from my analyst. He stressed the importance of staying disciplined in my approach to research and leveraging my strengths. This advice has been instrumental to the development and growth of my career. My advice to industry newcomers is to always seek to develop an understanding of the ecosystem of the businesses that you work with and what their main value drivers are. This will allow you to properly understand their needs and deliver differentiated solutions to them that add real value.

JiE: What are the things you work on, what are some of the challenges that you face in your role and what do you enjoy the most?

JL: The key differentiated aspect of my research platform is its focus on portfolio construction. My platform utilizes ETF portfolio construction and sentiment screens to analyze the ETF market environment, track changes in investor sentiment, and come up with thematic trade ideas for ETF investors. One of the challenges I have encountered in my role is getting people to understand the changing landscape of the investment world with regard to systematic and discretionary funds. ETFs are a portion of the systematic fund universe, and systematic funds tend to create market distortions through their basket buying and selling behaviours. As a result of these behaviours, discretionary investors may get exposed to the steamroller effect that will affect their performance on a short- or medium-term time horizon. As an avid student of the markets, the thing that I enjoy the most about my role is the opportunity to constantly learn about the ever-changing ETF landscape. I also enjoy the intellectual challenge of identifying investment themes that underpin my portfolio construction ideas and analysis.

JiE: How are Canadian institutional investors using ETFs?

JL: Fee compression and performance put pressure on portfolio managers to expand their mandate and differentiate their offerings. Utilizing ETFs allows portfolio managers to broaden their exposure and execute their view at a macro level through the transparent and easy-to-use ETF structure.

JiE: Where do you see future ETF growth coming from in Canada?

JL: ETF investors are increasingly utilizing fund-of-funds ETFs and mutual funds that can hold ETFs. This adds new distribution capabilities to the ETF industry and opens avenues for growth.

JiE: What trends do you think are going to define the next few years in the ETF industry?

JL: Since the return of market volatility in 2018, ETF investors turned to single-factor ETFs to navigate through market volatility. As ETF AUM and volumes increase, we believe they represent a valuable indicator of investor positions. In the U.S. listed ETF space, top 30 factor ETFs by AUM attracted ~$128 billion of assets since the start of 2018, compared to ~$74 billion that went into top 30 broad equity ETFs during the same time. In the Canadian ETF space, factor ETFs outpaced broad equity ETFs in terms of net inflows on a percentage growth basis.

JiE: If you had a super-power, what one thing would you change in the ETF industry?

JL: ETF investors often perceive funds with higher AUM as more liquid, whereas the primary driver of ETF liquidity is the liquidity of the underlying securities. It is this perception that I would like to change.

JiE: You will be speaking at the upcoming ETFGI Global ETFs Insights Summit Toronto December 2 at the St. Regis. Tell us a bit about that without giving away the session.

JL: To help investors navigate the market dominated by systematic funds, of which ETFs represent just a portion, we will highlight our ETF-based framework for identifying investment themes. Our framework aids portfolio construction through active selection of passive ETF exposures.

JiE: Staying happy and positive at work – any secrets you can share?

JL: Performing well in this role requires a focused disciplined commitment to my research approach. Such commitment is important during times of market volatility when emotional drivers could undermine one’s conviction about prior decisions. Maintaining a disciplined approach to investment research has allowed me to preserve the necessary rigour of decision-making that ultimately has a positive impact on my time as an ETF research analyst.

JiE: What is work-life balance for you and how do you achieve it?

JL: I think it’s necessary to carve out pieces of downtime to detach from the pressures of work. Spending quality personal-time with my wife and daughter helps do that, allowing me to unwind and keep my mind fresh. I believe that the breaks from work, during which I focus on my family, help me see things from a different perspective and ultimately allow me to produce better investment research.