Equity ETFs suffered a rare month of outflows in the month of July, while the ETF market as a whole rebounded from June with over $1.6 billion of net inflows. The outflows from equities were dominated by the broad market Canadian equity category. iShares S&P/TSX 60 Index ETF (XIU-T), the largest ETF in Canada by assets under management, faced the largest single outflow with over $800 million withdrawn. Sector-specific equities also had net outflows during the month, led primarily by the energy sector. Energy ETFs shed $158 million in assets during July, its first month of outflows in 2022.
The majority of new assets were committed to fixed income ETFs, with long-term government bonds and cash alternatives leading the pack. TD Canadian Long Term Federal Bond ETF (TCLB-T) had the largest single ETF inflow for the month, while three of the top five largest single inflows belonged to cash alternative ETFs. Both sub-investment grade and preferred share ETFs continued to suffer outflows. As pointed out by National Bank Financial Markets, the sub-investment grade and preferred share categories have shed close to $1 billion in assets year to date – a sign that fixed income investors have a lower appetite for risk during these volatile market conditions.
ESG ETFs continued to gather new assets in July, with $259 billion in positive net flows across all asset classes. The fixed income ESG category, which has added several new launches in the past year, represented over 70% of the new money.
Cryptocurrency ETFs rebounded after a painful June, with close to $200 million in net flows during the month of July. Year to date, the asset class has achieved positive net flows, with $256 million in new money added, despite extreme volatility in cryptocurrency markets throughout the first half of 2022. Purpose Bitcoin ETF (BTCC-T) and Purpose Ether ETF (ETHH-T) accounted for the majority of inflows among the crypto-asset category.
It was a quiet month in terms of new ETF launches, with only one new product listed in Canada. Purpose Investments Inc. launched the Black Diamond Impact Core Equity Fund (BDIC-T). The Fund offers diverse exposure across equity securities of companies all around the world that demonstrate a forward-looking sensitivity to Environmental, Social, and Governance factors. The subadvisor for this fund is Black Diamond Asset Management Inc., and the ETF series charges a management fee of 0.95%.
Harvest ETFs terminated two of their thematic equity funds after less than 16 months of trading, Harvest Digital Sports & Entertainment Index ETF (HSPN-T) and Harvest Space Innovation Index ETF (ORBT-T) - proof that certain speculative themes that gathered a lot of investor interest a year ago have begun to fall out of favour.
As previously announced, CIBC Asset Management terminated their suite of Multifactor ETFs during the month of July.
Ben Kleinberg, CFA, is Product Manager at Inovestor