Canadian ETF investors change lane for safety of fixed income

Equity outflows were more than compensated for by inflows to fixed income led by government bonds

Canadian ETF investors change lane for safety of fixed income
Steve Randall

Canadian exchange -traded fund (ETF) investors were heading for safety last month with a clear preference for fixed income over equities.

New data from National Bank of Canada reveals that more than $1 billion was withdrawn from Canadian equity ETFs in July, with another $190 million in outflows from US equity funds.

The overall equity ETF outflows were eased slightly by purchases of international equities ($481 million) which gave a net $717 million outflow for the overall equity category, although this was lower than the previous month’s figure.

Outflows were dominated by broad market cap-weighted index ETFs (of almost $800m) while sector ETFs dropped $180m including a first outflow this year for energy, perhaps as crude oil prices eased on recession and demand concerns.

There were inflows for dividend and low-volatility ETFs.

Bonds gain

While equities were being offloaded, cautious investors favoured fixed income ETFs to the tune of $1.7 billion net inflows.

As for the previous month, it was Canadian government bond and cash alternative/high interest savings that saw the largest inflows. Meanwhile, there were outflows for sub-investment grade bond and preferred share ETFs.

There were also net gains for multi-asset ($306m), inverse/levered ($136m) ETFs. Crypto-asset ($198m) ETFs also posted gains following the previous month’s losses.

Commodities were largely ignored with muted inflows and outflows resulting in a net $2 million inflows.

Overall, Canadian ETFs saw a net $1.7 billion inflows with a year-to-date total of $18 billion and total assets under management at $305 billion.

July was a light month for ETF launches with Purpose introducing one new ESG product.

Read more news about fixed income here.

Top 5 ETF providers

The top 5 Canadian ETF providers by AUM in 2022 (to the end of July)

  1. RBC iShares $90,655 (29.8% market share)
  2. BMO $78,310 (25.7%)
  3. Vanguard $39,144 (12.8%)
  4. Horizons $21,140 (6.9%)
  5. CI First Asset $13,625 (4.5%)