In April, Canadian Fixed Income ETFs experienced a substantial inflow of $2 billion, with approximately $1.1 billion directed towards Money Market ETFs, according to National Bank Financial Markets. Given the current financial climate and prevailing uncertainty, it is not surprising that around $300-million flowed out of equity ETFs in the U.S. and Canada, primarily moving towards Fixed Income investments, particularly in money market ETFs and Canadian government bonds. This shift in investment strategy reflects an effort to navigate through these challenging times.
Overall, Canadian ETFs in April experienced a significant decline in inflows compared to the previous month, dropping from $7 billion to $2 billion, while Canadian equity ETFs saw the largest outflow, totaling $800 million.
On the other hand, international equity markets continued to witness demand, resulting in a net inflow of nearly $1 billion, half of the month’s inflow.
Investors remain cautious due to ongoing analysis of the repercussions of bank failures in the United States. Consequently, they favoured international and emerging market stocks, perceiving them as posing lower risk and/or offering better value.
April witnessed the introduction of ten new ETFs:
HRIF-T, TBNK-T, and TUEX-T focus on stable companies that pay dividends, with HRIF additionally employing a covered call strategy to enhance monthly yields. TUEX is a hedged structure of the TD Active U.S. Enhanced Dividend ETF (TUED-T)
UBIL-U-T, CBIL-T, and MNU-U-T ETFs concentrate on short-term investments in money market instruments, such as treasury bills with maturities of less than three months, backed by their respective governments. Providers may have been motivated to launch these ETFs due to the bank runs experienced by some US banks. Investors may have opted to invest in money market funds rather than keeping their funds in bank deposits.
HEB-T, TECX-T, and TRVI-T ETFs specialize in equity investments within specific sectors or thematic areas. TRVI, in addition to its focus on a particular sector, implements a covered call strategy to enhance income yield. TECX is a hedged structure of the TD Global Technology Leaders Index ETF (TEC-T). On the other hand, MCKG-T aims to capture the potential of global stocks with sustainable business models.
Several Invesco ETFs were delisted in April. According to Invesco, “the objective of this initiative is to simplify the firm’s product offerings to enable it to sharpen the focus on areas of highest client demand.”
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Anthony Ménard, CFA, is vice-president of data management at Inovestor.