Ben Kleinberg

The Canadian ETF market added $7.6 billion in new money in December, $5.9 billion of which belonged to the fixed income asset class. Equity ETFs accounted for $1.6 billion of that, with majority of positive flows coming from U.S. broad market equity. Canadian equity, emerging markets equity, as well as financial sector ETFs all had positive flows during the month, according to National Bank Financial Markets. For the full year 2022, broad market equity was the clear favorite among the asset class, representing 50% of the total inflows to equity ETFs. Low volatility and multifactor ETFs were the only two categories that suffered net redemptions in 2022.

The fixed income asset class capped off the year with another month of oversized inflows. The net flow into fixed income ETFs was the highest monthly flow on record. All categories, excluding preferred shares ETFs, had positive inflows during the month of December while Cash alternative and short-term bonds continued to lead the pack with $1.7 billion and $1.5 billion in net flows, respectively. For the full year 2022, fixed income ETFs in Canada finished with $19 billion in new money, the highest yearly inflow ever for the asset class, despite the fact that global bond indices recorded one of their worst years performance-wise. The top three largest single ETF inflows for the calendar year all belonged to the fixed income realm: CI High Interest Savings ETF (CSAV-T), Purpose High Interest Savings ETF (PSA-T) and Horizons Cdn Select Universe Bond ETF (HBB-T).

Five new ETFs were launched in December, bringing the total number of ETFs launched during the year to 152. 72% of these new products were actively managed ETFs that did not track an index. One of the most popular categories among new launches were “lightly levered” ETFs, which provide a relatively low amount of cash leverage (usually between 25% and 33%), to enhance returns (or losses) over holding periods. There were 22 of these enhanced ETFs launched during 2022.

The latest ETFs launched were a first-of-their-kind in Canada. Purpose Investments released a suite of yield focused single stock ETFs, providing exposure to a single US-listed stock, while also aiming to generate a distribution yield well above any dividends payable on the underlying stocks. The five underlying stocks offered are namely Alphabet (YGOG-NE), Amazon (YAMZ-NE), Apple (APLY-NE), Berkshire Hathaway (BRKY-NE) and Tesla (YTSL-NE). The funds seek to generate the elevated yield by implementing covered call strategies on the individual stocks and adding moderate amount of leverage. Yield Shares by Purpose will provide investors with a different risk-return profile compared to investing directly in the underlying stocks with no overlay. The five ETFs are denominated in Canadian dollars and hedge all US dollar exposure. The latest offerings from Purpose Investments charge a management fee of 0.40% and can be traded on the NEO exchange.

Ben Kleinberg, CFA
Product Manager at Inovestor

At Inovestor, we believe that investors deserve access to the best financial information available. Leveraging our suite of award-winning research technologies, we go above and beyond to put that information at your fingertips. For more information, please visit inovestor.com

Canadian ETFs added $4.2 billion in November, the highest monthly inflow since last March, according to National Bank Financial Markets. Both equities and fixed income ETFs had positive net flows during the month. Within the equity asset class, all geographies had positive flows, as Canadian equity led the way with $745 million of inflows. Among the sector-focused ETFs, all sectors had positive flows except for financials, which saw $166 million in redemptions. Dividend/Income focused ETFs continued their streak of positive inflows, adding $343 million in November.

Fixed income products added another $2.3 billion in November, bringing the total year to date inflow to $13 billion and outpacing the equity asset class. Cash alternative ETFs continued their strong run, welcoming another $1.2 billion. High interest savings ETFs from CI Financial and Horizons (CSAV-T, CASH-T and PSA-T) were once again among the top single ETF inflows again this past month. What differed this month was the renewed interest in longer duration fixed income categories. Contrary to previous months, mid term, long term and aggregate bond ETFs had positive inflows, while short term and ultra-short term maturities had strong outflows. Slowing inflation coupled with the growing expectation of smaller rate hikes in the future may have led investors to increase their appetite for duration.

There were eleven new ETF launches in the month of November. BMO Global Asset Management teamed up with Cathie Wood’s ARK Investment Management to make three of ARK’s existing ETF strategies available to Canadian investors. The BMO ARK Innovation fund (ARKK-T), BMO ARK Genomic Revolution Fund (ARKG-T) and BMO ARK Next Generation Fund (ARKW-T) all aim to provide exposure to companies across various sectors that are well positioned to benefit from the theme of disruptive innovation. Cathie Wood and her ARK ETFs became well-known during the pandemic for her bullish bets on tech companies like Tesla, Block and Zoom. The new Canadian-listed BMO ARK ETFs charge a 0.75% management fee.

In November, Arrow Capital Management released another liquid alternative ETF to its product lineup. The Arrow Canadian Advantage Alternative ETF (ACAA-T) is managed using a proprietary macro investment process to tactically allocate the portfolio to the different asset classes using both long and short positions. The mutual fund series of this strategy has existed since 2008, providing investors with the potential for low volatility and diversification benefits. The ETF series trades on the TSX and charges a management fee of 0.65%.

Manulife Investment Management introduced new additions to their factor-based Smart ETF lineup. The Manulife Smart International Defensive Equity ETF (IDEF-B-T) invests in a diversified portfolio of international equity securities while seeking to reduce overall market sensitivity. Meanwhile, the Manulife Smart International Dividend ETF (IDIV-B-T) invests in a diversified portfolio of international dividend-paying securities. Both these ETFs charge a management fee of 0.35%. The USD units of Manulife’s existing US Smart ETFs were also launched during the month, for investors who wish to own Canadian-listed ETFs in US dollars.

Ben Kleinberg, CFA
Product Manager at Inovestor

At Inovestor, we believe that investors deserve access to the best financial information available. Leveraging our suite of award-winning research technologies, we go above and beyond to put that information at your fingertips. For more information, please visit inovestor.com.

Canadian ETFs added $2.6 billion in October, once again led by cash alternative ETFs. Equity ETFs welcomed $676 million of inflows, majority of which belonged to U.S. broad market equity. Among the sector equity ETFs, Technology, Utilities and Materials sectors had net inflows, while Financials, Energy and Healthcare suffered redemptions.

Cash alternative ETFs continued to dominate the fixed income category, representing 63% of the total inflow. Canadian corporate bond ETFs had the second highest inflow among the category, adding $680 million of new money. Ultra-short term bond ETFs, which have minimal duration risk, also had significant inflows during the month.

There were 15 new products launched during the month of October. Among the latest offerings was a new liquid alternative strategy from Desjardins. The Desjardins Alt Long/Short Global Equity Markets ETF (DAMG-T) targets absolute positive returns regardless of whether the markets are up or down. Alternative strategies typically display low volatility and low correlation with traditional asset classes, making them popular choices during periods of uncertainty in the markets. The ETF will enter both long and short positions in futures contracts and index ETFs in order to achieve its goal. DAMG charges a 1% management fee and is also offered as a US dollar series.

Harvest ETFs released a suite of enhanced income ETFs, applying 1.25x leverage on some of their most popular covered call strategies. Harvest ETFs has already seen over $1 billion in assets flow into these equity income ETFs in 2022, as the demand for higher yields has been steadfast all year. The new ETFs aim to provide even greater yields, by applying a 25% leverage component to existing Harvest equity income ETFs. The leverage component increases the monthly cash flow paid to unitholders, but at the same time elevates the risk profile of the strategy. The initial target yield of the five new products range between 9.6%-12.8%. These ETFs do not charge an explicit management fee, however they are subject to the fees of the underlying ETFs in the portfolio.

RBC Global Asset Management expanded its lineup with the launch of two new Target Maturity Corporate Bond ETFs (maturing in 2028 and 2029). Each ETF tracks a unique index that represents the performance of a held-to-maturity portfolio consisting of primarily Canadian investment grade corporate bonds with effective maturities in 2028 and 2029, respectively. The funds will provide income for a limited period of time, until their termination date when the final net asset value is returned to the unitholders. These solutions allow investors to earn passive income and own a liquid investment, while also knowing the date at which their principal will be returned to them. RBC’s target maturity bond lineup now includes all maturity dates between 2022-2029, and they charge a management fee of 0.25%.

There were no ETF terminations in October.

Ben Kleinberg, CFA
Product Manager at Inovestor

At Inovestor, we believe that investors deserve access to the best financial information available. Leveraging our suite of award-winning research technologies, we go above and beyond to put that information at your fingertips. For more information, please visit inovestor.com.

Canadian ETFs added $1.9 billion in new money in September, led by creations in the fixed income category. Equity ETFs saw $436 million in outflows, primarily due to redemptions in broad Canadian equity. Among the equity asset class, dividend/income strategies had $156 million of inflows. Sectors ETFS, such as health care, utilities, energy and financials also had net positive flows during the month.

Cash continues to be king, as cash alternative ETFs saw the highest inflows among the fixed income categories, with $1.6 billion in net inflows during the month of September – the highest monthly inflow ever for this category. CI High Interest Savings ETF (CSAV-T) and Purpose High Interest Savings ETF (PSA-T) remain the most popular ETFs in the category. Ultra-short-term bonds, which also exhibit minimal duration risk, recorded inflows during the month.

Cryptocurrency ETFs faced $81 million in outflows in September, led by 3iQ Coinshares Ether ETF (ETHQ-T).

After a relatively quiet few months, Canadian ETF providers ended the third quarter by introducing 30 new products. The lnewest offerings include the CI Auspice Brod Commodity ETF (CCOM-T). The fund provides exposure to a portfolio of commodity futures contracts across the energy, metals and agricultural sectors. Commodities historically exhibit low correlation to other asset classes and can provide diversification to a typical stock/bond portfolio. In order to minimize volatility and drawdowns, the ETF combines tactical exposure to 12 different commodities that can be long or flat, dynamic risk management and contract roll optimization. The ETF has a Low to Medium risk level, and charges a management fee of 0.52%.

Purpose Investments expanded their cash solutions lineup with the launch of the Purpose Cash Management Fund (MNY-T). The fund is designed to provide investors with a way to capitalize off rising interest rates, while also maintaining daily liquidity. The fund will invest in a diversified portfolio of high-quality Canadian money market instruments and has an anticipated yield of 3.30%. Cash alternative ETFs can be a great way to maximize the return on your cash balance without the lock-up features of guaranteed investment certificates. The ETF series of the fund trades on the TSX and charges a management fee of 0.20%.

Emerge Canada Inc. launched a new suite of actively managed sustainable equity ETFs. The Emerge EMPWR funds are structured as multi-manager funds and aim to showcase the talent of an all-women portfolio management team. Lisa Langley, President and CEO of Emerge, explains that they launched the EMPWR program to “support and advocate for female managers and inspire new women portfolio managers to join the industry”. These new funds invest primarily in global equities with a focus on ESG and sustainability. The EMPWR program uses a proprietary sustainability ranking system to evaluate the portfolios of their sub-advisors, both at the aggregate level, as well as on an individual security basis. The five new ETFs (as well as their identical USD versions) trade on the NEO exchange and charge a management fee of 0.80%.

Building on the success of the Fidelity Advantage Bitcoin ETF, Fidelity Investments Canada completed the launch of the Fidelity Advantage Ether ETF (FETH-T), providing investors with exposure to ether. Fidelity Clearing Canada will serve as the custodian of the fund, offering the ETF access to the trading and custody of ether in a secure way. The ETF charges a management fee of 0.40%, and an MER capped at 0.95%.

The other releases this month included covered call sector strategies, leveraged Canadian bank products, short-term active fixed income and a target date fund. Twelve different providers participated in launching new ETFs this month, and there were no terminations in September.

Equity ETFs suffered a rare month of outflows in the month of July, while the ETF market as a whole rebounded from last month with over $1.6 billion of net inflows. The outflows from equities were dominated by the broad market Canadian equity category. iShares S&P/TSX 60 Index ETF (XIU-T), the largest ETF in Canada by assets under management, faced the largest single outflow with over $800 million withdrawn. Sector-specific equities also had net outflows during the month, led primarily by the energy sector. Energy ETFs shed $158 million in assets during July, it’s first month of outflows in 2022.

The majority of new assets were committed to fixed income ETFs, with long term government bonds and cash alternatives leading the pack. TD Canadian Long Term Federal Bond ETF (TCLB-T) had the largest single ETF inflow for the month, while three of the top five largest single inflows belonged to cash alternative ETFs. Both sub-investment grade and preferred share ETFs continued to suffer outflows. As pointed out by National Bank Financial Markets, the sub-investment grade and preferred share categories have shed close to $1 billion in assets year to date – a sign that fixed income investors have a lower appetite for risk during these volatile market conditions.

ESG ETFs continued to gather new assets in July, with $259 billion in positive net flows across all asset classes. The fixed income ESG category, which has added several new launches in the past year, represented over 70% of the new money.

Cryptocurrency ETFs rebounded after a painful June, with close to $200 million in net flows during the month of July. Year to date, the asset class has achieved positive net flows, with $256 million in new money added, despite extreme volatility in cryptocurrency markets throughout the first half of 2022. Purpose Bitcoin ETF (BTCC-T) and Purpose Ether ETF (ETHH-T) accounted for the majority of inflows among the crypto-asset category.

It was a quiet month in terms of new ETF launches, with only one new product listed in Canada. Purpose Investments Inc. launched the Black Diamond Impact Core Equity Fund (BDIC-T). The Fund offers diverse exposure across equity securities of companies all around the world that demonstrate a forward-looking sensitivity to Environmental, Social, and Governance factors. The subadvisor for this fund is Black Diamond Asset Management Inc., and the ETF series charges a management fee of 0.95%.

Harvest ETFs terminated two of their thematic equity funds after less than 16 months of trading, Harvest Digital Sports & Entertainment Index ETF (HSPN-T) and Harvest Space Innovation Index ETF (ORBT-T) – proof that certain speculative themes that gathered a lot of investor interest a year ago have begun to fall out of favour.

As previously announced, CIBC Asset Management terminated their suite of Multifactor ETFs during the month of July.

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.

Flows into the Canadian ETF market continue to slow throughout the second quarter of 2022, compared to the meteoric growth rate seen months ago. Nevertheless, new products continue to be launched as investors search for access to more investment opportunities. Broad market Canadian equity ETFs have seen some of the largest inflows this year. Canadian equity funds have fared much better than their US counterparts in 2022, given their larger exposure to energy, financials and materials sectors.  

New ETF launches in May were dominated by thematic equity. Blackrock released a new suite of megatrend ETFs, giving investors easy access to companies that are driving innovation and shaping the global economic future. Among the new offerings is the iShares Cybersecurity and Tech Index ETF (XHAK-T), which provides exposure to global stocks along the full value chain of the cybersecurity industry. The iShares Global Clean Energy Index ETF (XCLN-T) was another one of the new launches, providing diversified exposure to companies in the renewable energy sector. The ETFs charge a management of 0.39% and 0.35%, respectively. 

CI Global Asset Management continues to launch new funds focused on investment opportunities in digital megatrends. The CI Galaxy Blockchain ETF (CBCX-T) invests in companies that are, either directly or indirectly, involved in the development and adoption of blockchain and digital assets. The ETF charges a management fee of 0.50% and hedges all currency risk. The CI Galaxy Metaverse ETF (CMVX-T) provides exposure to companies that are materially engaged in the interaction, enablement, and connectivity of the metaverse. Fidelity also released their own Metaverse ETF in May.  

During the month, Horizons ETFs launched Canada’s first ETF providing exposure to the performance of companies active in copper-ore mining. The Horizons Copper Producers Index ETF (COPP-T) invests in both pure-play copper mining companies, as well as companies that have copper production as a significant business line. Although it is one of the world’s oldest industrial metals, copper has become increasingly important as an essential material component in electric vehicles. The ETF invests in small, mid and large cap companies listed on North American exchanges, and charges a management fee of 0.65%.  

As previously announced, Evolve ETFs de-listed their suite of CleanBeta ETFs, including the Evolve S&P/TSX 60 CleanBeta Fund (SIX-T) and the Evolve S&P500 CleanBeta Fund (FIVE-T), after just 12 months of trading.  

Canadian ETFs added $1.5 billion in April, led by inflows to Canadian equity, thematic equity and Canadian aggregate bonds, bringing the total year-to-date inflow to $15 billion. Inflows slowed down in April, but remained positive despite the wide selloff in equity markets.

Canadian equity ETFs once again saw the largest inflow among the equity asset class, representing 86% of the total equity flows for month. $666 million of this demand belonged to ESG focused ETFs. National Bank’s NBI Sustainable Canadian Equity ETF (“NSCE-T”) amassed $522 million in April, the largest single ETF inflow for the month, led by apparent institutional subscriptions.

Fixed income ETFs gathered $645 million in new money, most of which went to Canadian aggregate bond products, despite major aggregate bond indices having suffered significant losses year-to-date. iShares Core Canadian Universe Bond Index (“XBB-T”) led the group with $220 million in net flows.

Cryptocurrency ETFs suffered their biggest outflow since their initial launch in February of last year. The Purpose Bitcoin ETF (“BTCC-T”) recorded $318 million of outflows throughout April, as the price of Bitcoin dropped to its lowest level in two years. 3iQ, a notable issuer of crypto focused products, saw $87 million in outflows, representing over 5% of their total AUM.

The velocity of new ETF launches relaxed this month, with only 3 new issues, all from CI Global Asset Management. The CI Floating Rate Income Fund (“CFRT-T”) invests in floating rate securities, which help mitigate the impact of rising interest rates. Floating rate securities have fared much better than other fixed income categories year-to-date, due to inflationary pressures and hawkish central banks taking a toll on bond prices. The fund is actively managed and has the lowest management fee of any floating rate ETF in Canada at 0.35%. CI also launched the ETF series of the CI Global High Yield Credit Private Pool (“CGHY-T”). This fund invests in non-investment grade corporate bonds and aims to generate income and potential capital appreciation. The ETF charges a management fee of 0.55% and is also offered in US dollar units.

During the month, CI Global Asset Management completed their previously announced merger of several ETFs as part of its continuing strategy to modernize its product lineup. Notably, three of their factor-based Canadian equity products were terminated and converted to units of the CI WisdomTree Canada Quality Dividend Growth Index ETF (“DGRC-T”). Recall that CI Financial purchased WisdomTree Investment Inc.’s Canadian business back in 2020, including their 14 TSX-listed ETF products. The move should also benefit unitholders as the continuing funds have larger asset bases, thereby increasing trading efficiencies.