In June, Canadian ETFs saw notable inflows totaling $4.4B. Fixed income experienced a continued influx of funds, reaching $2B. With the improvement in market conditions and increased investor confidence, equity also joined the trend with an inflow of $1.8B. International ETFs led the way and brought in about $1B, with Canada in second place at $0.8B and the US in last place with $0.1B. Throughout 2023, Canadian ETFs have managed to attract approximately $19.6B in total. June ranked as the second-highest in terms of monthly inflows, surpassed only by March.
Money market ETFs have demonstrated their enduring appeal by attracting $0.8B in June alone. This impressive performance has remained consistent throughout the year, accumulating a total of $5.6B. These ETFs are delivering yields that surpass the 5 per cent threshold and the Bank of Canada’s rate hike campaign may not be over, as there is a possibility that they will take additional measures to address inflation. Within the fixed Income category, money market ETFs hold a significant share, accounting for 20 per cent of the overall $108B, equivalent to $21B in assets under management.
The most popular ETF this month was the iShare ESG Aware MSCI Emerging Markets Index (XSEM) with inflow of almost $1B. Vanguard’s S&P 500 (VFV) came second with inflow of about $0.6B. On the fixed income side, the Government Bond Index ETF (ZGB) was the most popular with an inflow of $0.4B.
On the other hand, notable outflows were observed in certain ETFs. Vanguard’s VSP experienced a significant outflow of $0.5B, offsetting the positive inflow received by VFV. Additionally, Horizons S&P/TSX 60 Index ETF (HXT) and BMO MSCI Europe High Quality (ZEQ) each experienced outflow of approximately $0.2B.
Among BMO’s new launches, six global ETFs with active strategies covering various areas such as Health Care (BGHC), Innovation (BGIN), REIT (BGRT), Equity (BGEQ) and Infrastructure (BGIF). Due to the active aspect of the ETFs, they may own slightly fewer holdings compared to other ETFs in a similar category, reflecting the convictions of the portfolio managers. All the previous ETFs trades on the NEO exchange.
Continuing with the global allocation, ZWQT is designed for investors looking for higher income from equity portfolios and who seeks diversification. The ETF invests in a basket of BMO covered call ETFs. ZUVE and ZUGE invest in US equities, with ZUVE specializing in value investing and ZUGE centered around growth opportunities.
Hamilton introduced UMAX, an ETF applying a coverall call strategy on utility companies. It is important to notice that the ETF uses its own definition of an utility company which encompasses not only traditional utilities but also includes pipelines, telecommunications, and railways. Based on the first estimated distribution, the strategy has a current annualized yield of 13 per cent.
Brompton launched SPLT, an actively managed portfolio of preferred shares offered by Canadian split share corporations. This ETF is entirely dividend income-focused and provides an alternative to fixed income options.
Anthony Ménard, CFA, is vice-president of data management at Inovestor.
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