From October 1 to October 27, spanning a four-week period, Canadian ETFs saw an inflow of $2.9B according to Scotia ETF EDGE reports, a notable rise from the $1.9B inflow seen in the previous month. Investors predominantly favored fixed-income and cash ETFs, which accounted for a substantial $2.2B of the month’s total inflows while equity accounted for $0.5B.
Over the last 10 months, Canadian ETFs accumulated about $30.2B in assets. Fixed-income ETFs (including cash ETFs) led the way with $19.1B in investments, followed by equity with $8.7B in inflows.
Cryptocurrency ETFs experienced an inflow of $0.3B, a significant one considering the asset under management of only $2.3B at the end of September. This increase aligns with a notable surge in Bitcoin of 28.5 per cent in October. Though the connection between the two events remains uncertain, there is a possibility that the FTX trial might have influenced the level of attention directed towards cryptocurrencies.
The iShares Core Canadian Universe Bond ETF (XBB-T) garnered the largest inflows at $0.9B, followed by the Horizons High Interest Savings ETF (CASH-T) at $0.4B. This suggests a keen investor interest in low-to-no duration exposure, emphasizing the ongoing appetite for fixed income.
Additions
In October, the Canadian market experienced a notable surge in new ETFs, reaching a total of 37 new products.
Traditional Equity
ETFs focusing on global equity include IA Clarington Loomis Global Equity Opportunities (IGEO-T), Global Dividend Opportunities Fund (BGDV-N) and Dynamic Active Global Equity Income ETF(DXGE-T), the last two with an additional focus on dividend-paying companies.
AGF Emerging Markets ex-China Fund (AEMX-N) and S&P/TSX 60 Index ETF (ZIU-T) target markets explicitly mentioned in their respective names.
Purpose Tactical Thematic Fund (RTT-N) focuses on innovative industries with a momentum approach. Dynamic Active U.S. Equity ETF(DXUS-T) is a portfolio of 25 to 50 U.S. large cap securities.
Traditional Fixed Income
Multiple active corporate bond strategies were introduced. The Dynamic Active U.S. Investment Grade Corporate Bond (DXBU-T) is tailored for U.S. corporate bonds, while the IA Clarington Strategic Corporate Bond Fund (ISCB-T) concentrates on high yield corporate bonds. For those interested in Canadian bonds, the Dynamic Active Canadian Bond (DXBC-T) is an enticing choice, whereas the IA Wealth Enhanced Bond Pool (IWEB-T) provides a more extensive array of fixed income securities.
On another note, the BMO USD CASH Management ETF (ZUCM-T) presents a fresh avenue for generating interest on cash.
Multi-Assets
For the undecided between equity and fixed income, Purpose Active Conservative Fund (PACF-T), Balanced Fund (PABF-T), Growth Fund (PAGF-T), and Horizons Growth Asset Allocation ETF (HGRW-T), invest in both equity and fixed income and cater to different risk profiles as indicated by their names.
Covered Call
Covered call ETFs, which constitute over one-third of the October launches, are available in diverse shapes.
Horizons introduced covered call strategies on U.S. Fixed income: SPAY-T (short-term), MPAY-T (mid-term), and LPAY-T (long-term). Similarly, the Evolve Enhanced Yield Bond (BOND-T) focuses on long-term fixed income securities. Horizons also launched Horizons Growth Asset Allocation Covered Call ETF (GRCC-T) which is designed to invest in various covered call ETFs.
The Hamilton Technology Yield Maximizer ETF (QMAX-T) and the Evolve NASDAQ Technology Enhanced Yield Index (QQQY-T) concentrate on the technology sector, whereas the Hamilton U.S. Equity Yield Maximizer ETF (SMAX-T) centers its focus on U.S. equities.
in this group, leveraged covered call strategies are employed. Horizons Enhanced NASDAQ-100 Covered Call ETF (QQCL-T) and Horizons Enhanced Canadian Oil and Gas Equity Covered Call ETF (ENCL-T) target the technology and the oil & gas sectors, respectively. Horizons Enhanced All-Equity Asset Allocation Covered Call ETF (EQCL-T) is similar to GRCC by investing in multiple ETFs, while employing leverage at approximately 1.25x.
Alternative
BMO Canadian Banks Accelerator (ZEBA-N) and BMO US Equity Accelerator Hedged to CAD (ZUEA-N) use 2x leverage on an equally weighted bank strategy and hedged S&P 500, respectively. The Horizons Enhanced All-Equity Asset Allocation ETF (HEQL-T) applies a leverage of 1.25x on a diversified portfolio of Horizons ETFs.
To mitigate beta exposure, the BMO Long Short Canadian Equity (ZLSC-T), and its American counterpart, the BMO Long Short US Equity (ZLSU-T) are sensible options. An alternative is the BMO US Equity Buffer Hedged to CAD – October (ZOCT-N) which uses hedging to act as a market downturn buffer.
Anthony Ménard, CFA, is vice-president of data management at Inovestor.
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