International equity ETFs led February’s $1.3-bn advance

Canada’s ETF space saw significant inflows amid a barrage of over 20 new product launches

International equity ETFs led February’s $1.3-bn advance

February was a short month, but it was definitely a time of frenzy as the Canadian ETF sector saw healthy inflows and new products.

According to the latest ETF research report from National Bank of Canada, Canadian ETFs saw net inflows of $1.3 billion last month. That included some $600 million in net inflows to equity ETFs, $467 million to fixed income, $181 million for

The healthiest inflows went to international equities, which collected $639 million. Mirroring that trend, Franklin Templeton’s new single-country/region ETFs all made an appearance in the bank’s ETF flow leaderboard, with the Franklin FTSE US Index ETF (FLAM) taking the top spot with $270 million. In contrast, the iShares S&P/TSX 60 ETF (XIU) bled heavily with $681 million in net redemptions, though that only represented 7% of the mammoth fund’s AUM.

In a recent report, the Globe and Mail attributed the outflows from XIU to two major factors. Within the ETF space, there’s the presence of lower-fee alternatives from BMO and Vanguard. At a broader market level is investors’ souring sentiment toward Canada in light of its pipeline woes, household indebtedness, and slowing housing markets.

Looking at equity ETF flows by geography, the report found the most investor interest in US ETFs, which netted $358 million in inflows, followed by emerging markets with $253 million. Canada-focused ETFs, meanwhile, saw a massive exodus that amounted to $390 million in net outflows.

Reflecting investor appetite for defense, low-volatility factor ETFs took in $216 million in net inflows, and dividend/income ETFs saw $107 million. Sector ETFs, meanwhile, saw a net gathering of $120 million.

Among sector ETFs, financials led with $97 million in net inflows. Real estate ETFs were a distant second with $52 million, followed closely by technology ETFs with $49 million. Energy ETFs, on the other hand, saw net outflows of $57 million.

As for the fixed-income category, the majority of inflows came from a net $377 million infusion into Canada aggregate bond ETFs, as well as a $390 million net inflow into foreign bond ETFs. Those flows, however, were offset by $141 million in net redemptions from preferred/convertible fixed-income ETFs, as well as $83 million and $33 million in net outflows from sub-investment grade and Canada government bond ETFs, respectively.

Focusing on product launches, the report noted 23 new additions to Canada’s ETF space from seven firms; in January, six firms introduced 20 new products. Those include offerings from CIBC and National Bank, which were the last two of Canada’s Big Six to enter the burgeoning industry.

“[T]he number of regular class ETFs in Canada is now 813, surpassing the 800 product milestone,” National Bank noted.


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