According to Scotiabank ETF EDGE reports, for the 4 weeks between September 4 to September 29, Canadian ETFs experienced an inflow of approximately $2B, lower than the $2.9B inflow from the previous month and the third decrease in three months. Fixed income and cash ETFs continued to be the preferred choice among investors, contributing a substantial $1.5B to the overall monthly total of $2B.
Over the last 9 months*, Canadian ETFs accumulated about $27.3B in assets. Fixed income ETFs (including cash ETFs) led the way with $16.9B in investments, followed closely by equity with $8.2B in inflows.
The BMO Equal Weight Banks Index (ZEB-T) secured the top position among all ETFs 2 weeks out of 4, attracting $0.3B in inflows and consistently appearing on the weekly top list. From the start of the year until October 13, the five constituents, Royal Bank (-7.3 per cent), TD (-5.1 per cent), CIBC (-2.4 per cent), National Bank (-0.7 per cent) and Bank of Nova Scotia (-6.2 per cent), underperformed the TSX (3 per cent). It appears that investors may be gravitating towards traditional banks, perceiving them as undervalued in light of their recent underperformance.
The CI High Interest Savings ETF (CSAV-T) and Horizons High Interest Savings ETF (CASH-T) maintained positions in the third to sixth ranks for all four weeks, except for the fourth week when CASH-T did not make the list. Cash ETFs continue to be a favored choice due to their attractive yield-to-maturity of 5.4 per cent, all while avoiding any duration risk.
Additions to our database
Blackrock has unveiled a diverse range of ETFs designed to mirror various indices. Among these, three are dedicated to U.S. securities within specific sectors or industries. These are the iShares U.S. Aerospace & Defense Index ETF (XAD-T), the iShares S&P U.S. Financials Index ETF (XUSF-T), and the iShares Semiconductor Index ETF (XCHP-T).
The iShares S&P/TSX Energy Transition Materials Index ETF (XETM-T) replicates the S&P/TSX Energy Transition Materials Index, with a notable focus on investments in Canadian and international equity securities.
In addition, the iShares NASDAQ 100 Index ETF (XQQU-T) intensifies competition against the unhedged NASDAQ 100 index offered in Canada by Horizons (HXQ-T) and BMO (ZNQ-T).
Hamilton and Harvest had a similar idea by launching the Hamilton U.S. Bond Yield Maximizer ETF (HBND-T) and the Harvest Premium Yield Treasury ETF (HPYT-T). Both portfolios are designed for investors looking to maximize their monthly income above that is typically offered by bonds. The ETFs invests in U.S. treasuries combined with an active covered call strategy. HBND-T offers a target yield of 10 per cent for a duration of 13.7 while HPYT-T offers a target yield of 15 per cent with a duration of 16.8. The meaningful difference in yield seems to be from the covered call strategy. HBND-T sells call options on roughly 50 per cent of the portfolio while HPYT-T generally write options on up to 100 per cent of the portfolio securities.
Investors should bear in mind that yield, essentially the distributions, does not equate to expected return, which includes the latter plus the capital gains or losses. For fixed income, yield-to-maturity is a more accurate approximation for expected return.
*Values are calculated from 8 months of data reported by National Bank of Canada Financial Markets and one month from Scotiabank EDGE Reports.
Anthony Ménard, CFA, is vice-president of data management at Inovestor.
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