In Perspective: Income Funds Come of Age
|Area||REITs and Income Securities|
On January 26, 2005, Standard & Poor's announced that income funds will be included in the S&P/TSX Composite Index, the broad benchmark index for the Toronto Stock Exchange and Canada's premier equity index, by mid-2005. With this long-awaited development, the income fund sector, the fastest growing segment of the Canadian capital markets, has come of age.
Inclusion in the Composite Index follows a year of significant activity in the sector. In 2004, the market capitalization of TSX-listed income funds increased almost 50% to $121 billion, representing a total of 175 income funds. The net increase of 40 income funds included 26 created by initial public offerings (IPOs). Publicly traded income funds now represent approximately 8% of the market capitalization of issuers traded on the Toronto Stock Exchange. The inclusion in the Composite Index of income funds, once viewed primarily as a retail investment, is expected to attract increasing numbers of institutional investors to the sector, thereby increasing liquidity and demand for income fund units.