Canadian ETFs march higher to top $172 billion

Last month was marked by large inflows, led by fixed-income products, as well as a rising investment theme

Canadian ETFs march higher to top $172 billion

After its $1.3-billion advance in February, Canada’s ETF industry did one better in March.

In its latest ETF Research & Strategy note, National Bank of Canada Financial Markets reported another strong month for Canadian ETFs, which saw $1.9 billion in inflows. The lion’s share went to fixed-income ETFs, which lured $1.35 billion in new assets; over half of that ($791 million) was won by those in the Canada Aggregate bond category. Equity ETFs saw $384 million; in that space, US-focused ETFs dominated, with the most dollars feeding into low-cost, broad-based offerings or low-volatility/quality factor-based ETFs.

A peek at the list of top ETFs in terms of inflows highlights a particularly remarkable growth story: the BMO Core Plus Bond Fund ETF (ZCPB), which gained $125 million in investor assets. In terms of raw inflows, it fell behind five other ETFs with inflows ranging from $127 million to $268 million. But that $125 million infusion reportedly represented 4096% of the fund’s AUM at the beginning of the month.

“Percentage inflows were also high within the mid-term and long-term maturity buckets, some of which might be knock-on effects from creations in fund-of-fund aggregate bonds products, particularly ZAG [BMO Aggregate Bond Index ETF],” the report said.

Looking at flows by provider, RBC iShares posted slightly negative flows in March with $117 million in net outflows, which the report attributed to the second month of large outflows from XIU. “Excluding XIU, RBC iShares’s product suite had more than $600 million of inflows, with top creations going to the low-cost core suite of portfolio building block ETFs,” the report said.

Among all Canadian ETF providers, BMO garnered the largest net inflows last month with $763 million; Vanguard followed with $482 million. First Asset, Fidelity, and PIMCO also saw sizeable net inflows with $187 million, $111 million, and $108 million, respectively; the influxes into First Asset and PIMCO were concentrated in a few select products.

“In the foreign fixed income ETF space, PMIF [PIMCO Monthly Income Fund] had its largest monthly net inflows since 2018, bringing PIMCO’s total assets over $1 billion milestone,” the report said.

National Bank also noted a slight slowdown in the pace of product launches. March saw only eight new ETFs from two providers, all of which fell into the ESG investing category. “ESG has long been a potential growth area in the wider investment community, and with the launch of these new products, ETF providers in Canada are signalling their commitment to seeing the space grow,” the report said.

RBC iShares launched six products: four ESG ETFs that covered various geographic equity exposures, as well as two ESG ETFs that focused on the Canadian fixed-income space. Meanwhile, Desjardins expanded its lineup of responsible investing (RI) ETFs with two products that focus on environmental impact.

The report also looked at total net flows for Q1 2019. Of the $3.8 billion seen by Canadian-listed ETFs during the period, $2.1 billion went into fixed-income ETFs, while just over $1 billion went into equities; the balance was split among Commodities, Multi-Asset, and Inverse/Levered ETFs.


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