Canadian ETF inflows in May among the strongest on record

Flows into specific fund categories hint at a skittish attitude among investors

Canadian ETF inflows in May among the strongest on record

With Canada’s ETF industry running on all cylinders, any signs of continued growth within the space are probably not going to raise any eyebrows. That includes the latest report on Canadian ETF flows from National Bank, which found massive inflows within the space last month.

“Canadian ETFs had the largest monthly net inflows of 2019 at $4.3 billion,” the report said, noting that approximately half that amount went to the iShares S&P TSX 60 Index ETF (XIU). After discounting the flows into XIU, which often accommodates large amounts from institutions, the remaining inflows in May were spread among Canadian equity, fixed-income, and multi-asset ETFs.

Canadian equity ETFs, saw $2.6 billion in creations. A look at factor-based ETFs also reveals positive flows across almost all major categories; financial and real-estate ETFs registered inflows while energy ETFs suffered withdrawals stemming from last month’s falling crude prices.

US equity ETFs ended a four-month streak of strong inflows with slight outflows last month; low volatility funds’ leadership as last month’s most popular factor strategy within US equity, with $88 million in net inflows, points to bearish sentiment and trade jitters rattling the US market. While broad market ETFs were the main leaders in inflows last month, flows for the category overall netted flat as investors traded in their CAD-hedged units for non-hedged ones. International equity ETFs shed $24 million in May, with outflows led by emerging market strategies.

On the fixed-income side, aggregate bond ETFs led the way with over $1 billion in inflows. As investment-grade products soaked up new money in May, high-yield ETFs continued to lose assets. “Other fixed income flows reflect the fearful sentiment that appears to be taking hold in the equity market,” the report said. “[I]nvestors are flocking toward cash (in the form of ultra-short term ETFs) and market-uncorrelated long bonds (in the form of ETFs focusing on the longer end of the maturity spectrum).”

While April saw a lull in fund launches, the pace of new ETF introductions started to pick up last month. Five providers came out with 11 products, which ran the gamut from niche sectors/themes to option overlays and long/short equity strategies.

Arguably the most exciting was the entry of Accelerate Financial Technologies. It burst onto the scene with three long-short equity products, promising hedge fund- and private equity-like strategies that come with a 15%-50% performance fee over a specific high-water mark.

Horizons upgraded its lineup with a new uranium-focused index ETF as well as leveraged and inverse ETF strategies covering North American marijuana companies. Evolve, for its part, provided an additional option for investors to access its popular cybersecurity index strategy through a new US dollar series, while Purpose added another yield-focused ETF to its corporate class suite.

Year-to-date, Canadian-listed ETFs experienced a net $10 billion, with fixed income and equity funds nearly splitting the whole amount equally between themselves.


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