For the first time in three years, inflows into Canadian ETFs were outweighed by redemptions, resulting in a net monthly outflow of $682 million. Equities bore the brunt of the withdrawals, with over $2.2 billion exiting broad market Canadian and US equity funds, according to National Bank Financial Markets. Sector specific equity ETFs saw net inflows for the month, $442 million of which poured into the financials sector.
Despite the difficulties that bonds have faced this year, fixed income investors sang a different tune this past month, as fixed income ETFs saw outsized inflows. Majority of the new money was directed to Canadian aggregate bond and cash alternative products. Horizons Canadian Select Universe Bond ETF (HBB-T) and CI High Interest Savings ETF (CSAV-T) had the first and third highest inflows of all ETFs during the month, respectively.
Cryptocurrency ETFs saw nearly $700 million in outflows during the month of June, representing 16% of the asset class’s AUM. Purpose Bitcoin ETF (BTCC-T) and 3iQ CoinShares Bitcoin ETF (BTCQ-T) had the largest outflows among the crypto asset lineup, shedding $455 million and $197 million, respectively. National Bank Financial Markets explains that “the outflows from these two ETFs were unusually large and took place on a single day, suggesting institutional activities were present in the outflows”. The price of Bitcoin also fell to its lowest level since December 2020 during the month.
Only two new funds were launched in June, both providing income-based strategies. Harvest Portfolios Group launched the Harvest Canadian Equity Income Leaders ETF (HLIF-T), designed to provide investors with access to large cap, dividend paying Canadian equities. The ETF will also write covered call options on up to 33% of the holdings in order to lower the volatility of returns and deliver steady monthly income. The fund has a target yield of 7% and charges a management fee 0.65%.
Ninepoint Partners listed their newest ETF offering on the NEO exchange. The Ninepoint Target Income Fund (TIF-T) aims to provide stable monthly distributions and moderate market volatility by incorporating derivative strategies. The fund will invest in a diversified portfolio of income generating equity investments, and the active risk management overlay will be supported by RBC Quantitative Investment Solution’s put selling strategy. The ETF offers a 6% target income distribution and charges a management fee of 0.60%.
There has been no shortage of income-based funds launched during this period of rising interest rates and market volatility. Hamilton and BMO are among the other providers who released similar strategies in 2022. Providers are typically quick to respond to investor needs, and it seems that many investors are looking for enhanced income solutions amid uncertainty in the financial markets.
During the month, Franklin Templeton completed their previously announced delisting of two active equity ETFs, as described below.