Canada breaks 2020 ETF sales record – and it’s not even Christmas yet

Industry smashes last year's total inflows with equity ETFs leading the pack

Canada breaks 2020 ETF sales record – and it’s not even Christmas yet

The Canadian ETF space has already topped its full-year 2020 sales record as it gathered $3.9 billion in net inflows last month, according to a new report from National Bank Financial.

In its latest Canadian ETF Flows report, the Big Six bank said Canadian ETFs have gathered $43 billion year-to-date, compared to $41 billion during the whole of 2020. With that, total assets held in Canadian ETFs have passed the $300-billion mark.

Equity ETFs saw inflows of $2.6 billion in October, including $1.02 billion going to U.S. equity strategies and $754 million to Canadian equity ETFs. Creations were widely distributed across all categories, with the highest inflows going to market cap-weighted ETFs ($1.5 billion in inflows). Within that category, the BMO S&P 500 Index ETF (ZSP) led with $409 million in inflows, while the iShares S&P/TSX 60 Index ETF (XIU) continued to see net outflows, shedding $266 billion.

Financial ETFs were the clear leader among sector strategies, raking in $170 million in fund inflows for the month. At the other extreme, energy emerged as the sole sector with outflows, in spite of its recent performance.

“The price of spot crude oil topped new highs at over $80 a barrel, and energy producers have come along for the ride, although ETF investors have to signal conviction in the sector’s recovery,” the report said. “However, given the relatively long history on the scene for related ETFs, we occasionally observe contrarian flows in the energy sector as traders either take profits or try to buy the dip.”

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Fixed-income ETFs attracted $457 million, a deceleration compared to September, which the report said might have been driven by short-term selling pressure sparked by a sudden rise in Canadian short-term rates. Amid that trend, Canadian aggregate bond ETFs and U.S./North America fixed-income ETFs saw net outflows of $76 million and $74 million, respectively.

Commodity ETFs saw net outflows of $93 million driven by redemptions from gold bullion ETFs, despite the historical effectiveness of gold in hedging against inflation.

“It seems that investors … are choosing a variety of other instruments such as broad commodities, base metals, TIPs, value factor ETFs, and even Crypto-Asset ETFs instead of gold to protect their portfolios from inflation,” the report said.

Inflows into crypto-asset ETFs reached $534 million in October, their highest inflow in four months, as the asset class drew momentum from the Securities and Exchange Commission’s (SEC) recent approval of the first futures-based bitcoin ETF in the U.S.