Industry Spotlight: Toronto’s Finance Sector
When looking at metros with bustling financial sectors and companies, New York is often is the first to come to mind. But how about our neighbors to the north? Toronto, Canada is also considered one of the world’s fast-growing financial hubs.
An article on the Huffington Post explains how Toronto has risen into the top 10 of the world’s most important financial centers. According to the latest Global Financial Centres Index from Z/Yen Group and Qatar Financial Centre, Toronto has surpassed Chicago and Boston to become the second-most important financial centre in North America, and eighth in the world.
The Global Financial Centres Index was formed based on a survey that combined data from various other surveys to come up with five criteria for a financial center: Business environment, financial sector development, infrastructure, human capital and reputation. Toronto scores highest on reputation. Its worst score is on human capital, coming in at 11th.
According to one unidentified New York banker quoted in the survey,
“Toronto seems to get stronger and stronger. A number of our rivals have opened up subsidiaries there.”
As the business and financial capital of the country, Toronto is home to the Toronto Stock Exchange (TSX), which is the third largest stock exchange in the Americas by market capitalization. It was the first North American exchange to employ decimal pricing and one of the first in the world to use a fully computerized system. TSX, the world’s first exchange-traded fund (ETF), was listed in the exchange in 1990.
TSX calls Toronto’s Financial District its home. The district can be found on Bay Street, which is essentially Toronto’s version of Wall Street. It is the most densely built-up area of the city and home to Canada’s five largest banks, as well as numerous other corporate headquarters, legal and accounting firms, insurance companies, stockbrokers, advertising agencies and marketing companies.
According to The Conference Board of Canada, Toronto’s financial services sector directly accounted for 780,000 jobs and 6.8 percent of Canada’s gross domestic product in 2014. Michael Burt, Director, Industrial Trends, The Conference Board of Canada, said that,
“The financial services sector has been a strong source of growth for the Canadian economy over the past decade. The sector’s employment, financial results, and international trade and investment performance, have outpaced the average for all other sectors.”
Some highlights about Toronto’s financial sector put forth by The Conference Board of Canada include:
- Canada’s financial services sector is innovative. According to Statistics Canada’s Survey of Innovation and Business Strategy, 73.6 per cent of financial services firms had undertaken some form of innovation in the previous year versus 63.5 per cent for all sectors.
- Compared with their international peers, Canadian deposit-taking institutions have healthy levels of capital adequacy and liquidity, with high rates of return and low levels of non-performing loans. This contributes to Canada consistently being listed as having the soundest financial system in the world.
- Toronto is Canada’s largest financial services hub; more than 30 per cent of all financial services headquarters are located in Toronto. Also, the sector directly employed over 250,000 people in the Toronto in 2014.
According to the report, An Engine for Growth: 2015 Report Card on Canada’s and Toronto’s Financial Services Sector, Canada’s financial services sector is heavily concentrated in Toronto, with more than 30 percent of all financial services headquarters are located in Toronto. The sector is important to Toronto’s economy, directly accounting for 13.3 percent of the metro’s GDP. Only the public services sector is larger than the financial services sector.
The City of Toronto has also released a list of interesting facts about the metro’s financial services sector, such as:
- The majority of pension funds, including four of the country’s largest Public Pension Plans with combined assets exceeding $450 billion, are located in Toronto’s Financial Services Sector.
- Toronto’s Financial Services Sector is home to a startup scene and the vast majority of Canada’s venture capital and private equity firms. In 2014 venture capital and private equity disbursements in Canada totaled over $40 billion.
- More than 55 percent of Canada’s registered investment dealers are in Toronto
- Almost 80 percent of Canada’s mutual fund industry, representing over C$1.22 trillion in Assets Under Management (AUM), as well as $77 billion in Exchange Traded Funds (ETFs), and the majority of the $35 billion hedge fund industry (Source: IFIC, AIMA and CETFA, 2014) is located in Toronto.
- The leading asset servicing companies have a Toronto presence, including Citco, CIBC Mellon, Commonwealth, Harmonic, IFDS, RBC Investor Services, SGGG, and State Street
No financial center is complete without a slew of top business schools to educate the next generation of financial sector employees and leaders. The Financial District is home to Wilfrid Laurier University – Toronto Campus, while Downtown Toronto is home to Ted Rogers School of Management – Ryerson University and Rotman School of Management – University of Toronto.
For a complete rundown of the best business schools in the Toronto metro has to offer, check out our Toronto MBA program page.
About the Author
Max Pulcini
Max Pulcini is a Philadelphia-based writer and reporter. He has an affinity for Philly sports teams, Super Smash Bros. and cured meats and cheeses. Max has written for Philadelphia-based publications such as Spirit News, Philadelphia City Paper, and Billy Penn, as well as national news outlets like The Daily Beast.
