In July, Canadian ETFs saw moderate inflows totaling $3-billion. Fixed Income experienced a continued influx of funds, reaching $1.9-billion. On the equity side, $0.9-billion was added, mostly split between Canada at $0.5-billion and international at $0.7-billion, while the U.S. market continued to see a modest outflow of $0.2-billion.
Throughout 2023, Canadian ETFs surpassed the $20-billion milestone, reaching a total of $22.6-billion. Fixed Income saw a dominant inflow of $13-billion, while equity garnered $7.5-billion in inflow. Most of the equity inflow was directed towards international equities, amounting to $6.4B, followed by $2.9-billion for Canada, and an outflow of $1.8-billion for the United States.
For a second consecutive month, the most popular ETF was the iShares ESG Aware MSCI Emerging Markets Index (XSEM-T) with an inflow of $0.6-billion. The BMO Ultra Short-Term Bond ETF (ZST-T) also distinguished itself from the competition with an inflow of $0.4-billion.
For a second month, a S&P 500 ETF has the largest outflow: the BMO S&P 500 Index ETF (ZSP-T) recorded an outflow of $0.4-billion. The BMO MSCI EAFE Index ETF (ZEA-T) also faced a setback, recording an outflow of $0.2-billion.
The most significant flows among individual ETFs are consistent with the prevailing trend this year: firstly, a consistent flow into ultra-short-term and broad Fixed Income ETFs, and secondly, a shift away from US equities, redirected towards other regions.
CI and Guardian have enthusiastically embraced the money market trend. The CI ETFs (CMNY-T/UMNY-U-T) invest in T-bills with a maturity of less than one year, while the Guardian ETFs (GCTB-T/GUTB-U-T) restrict the maturity to less than six months and preferably less than 3 months.
Evolve introduced the Evolve Nasdaq Technology Index Fund (QQQT-T, QQQT-U-T, QQQT-F-T) which, as we could deduce from its name, invests in Information Technology companies in the Nasdaq-100. Evolve also added a USD series to its covered call ETF on the S&P 500 (ESPX-U-T).
Horizons launched five intriguing lightly leveraged strategies. These ETFs use leverage to replicate an exposure of 125 percent of the strategy by borrowing funds. Three of these ETFs also combine the leverage with a covered call strategy (CNCL-T, BKCL-T, USCL-T). One applies leverage to the S&P/TSX 60 Index (CANL-T) and another one focuses on an equally weighted Canadian bank strategy (BNKL-T). They also launched an unlevered ETF of the latter (HBNK-T). The Financial sector is by far the most popular among the sector ETFs in Canada with a year-to-date inflow of $1.4-billion and Horizons may think this trend could continue.
Invesco proposes a new multifactor strategy applied to international markets (IIMF-T, IIMF-F-T) and the Russell 1000 (IUMF-T, IUMF-F-T). The strategy seeks to optimize its exposure to factors such as low volatility, momentum, quality, size, and value across the business cycle and is reweighted monthly based on the Invesco signal. They also offer a thematic ETF focusing on the energy transition (IGET-T, IGET-F-T) with an emphasis on industrials and materials companies, which account for more than 55 per cent of the ETF.
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Anthony Ménard, CFA, is vice-president of data management at Inovestor.