Based on the Scotia ETF EDGE reports from April 1 to April 26, spanning a four-week period, Canadian ETFs saw an inflow of $5.9 billion, a $0.9 billion increase from the previous month. The bulk of the inflows in April came from equity with nearly $4.6 billion in net creation during those four weeks while fixed income accounted for $2.1 billion and mixed allocation for $0.34 billion. Cash saw redemptions of nearly $0.98 billion.
The Federal Reserve may have made a mistake in signally rate cuts as investors continue to await the first rate change. The Fed kept its target interest rate since July 2023, making it the nineth straight time acknowledging a lack of further progress on cooling inflation. Chair Powell confirmed the Fed is not going to cut interest rates as soon as it previously signalled stating “it is likely that gaining greater confidence will take longer than previously expected.”
April also marked the start of earnings season for most public companies in the market with banking giants like BlackRock (BLK), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) leading the way in the first two weeks of April. Overall, the aforementioned banks beat expectations, setting the tone for the rest of the market as earnings reports begin its first quarter filings. Investors appear to feel more optimistic yet cautious with a little lean towards banks as evidenced by the flows.
The BMO equal weight banks Index ETF (ZEB-T) experienced the largest inflows at $0.66 billion, followed by the Vanguard S&P 500 Index ETF (VFV-T) at $0.50 billion. In April, investors moved towards Canada’s big banks and large-cap US equities. Concurrently, investors redeemed their cash allocations as the risk of uncertainty seems to be going down through macroeconomic factors meeting investors’ expectations. Purpose High Interest Savings Fund (PSA-T), iShares Core S&P/TSX Capped Comp (XIC -T)
and CI High Interest Savings ETF (CSAV-T) were the highest outflows for the month.
Additions
In April, the Canadian market witnessed the introduction of twenty-nine new ETFs, predominantly brought forth by two leading providers: RBC Global Asset Management and TD Asset Management.
RBC Global Asset Management
RBC Global Asset Management added fourteen new Fixed Income ETFs this month, twelve of which are part of a series that provide income, for a limited period of time and ending on the ETF’s termination date. This offering invests primarily in a portfolio of investment grade U.S. corporate fixed income securities. The RBC Target 2025-2030 U.S. Corporate Bond ETF have terminating years in their names (RUQN-T, RUQO-T, RUQP-T, RUQQ-T, RUQR-T, RUQS-T). The remaining six are U.S. versions of their Canadian counterparts (RUQN.U-T, RUQO.U-T, RUQP.U-T, RUQQ.U-T, RUQR.U-T, RUQS.U-T).
The RBC Target 2030 Canadian Government Bond ETF (RGQS-T) invests in Canadian government fixed income securities for a limited period and terminating in 2030.
Lastly, the RBC Target 2030 Canadian Corporate Bond ETF (RQS-T) invests in Canadian corporate fixed income securities for a limited period and terminating in 2030.
TD Asset Management
TD Asset Management added six new ETFs this month. These ETFs follows a similar strategy of limited time-period investing in portfolio of investment grade fixed income securities. TD Target 2025-2027 Investment grade Bond ETF invests in Canadian corporate bond securities. These ETFs will terminate when it reaches its target year. (TBCE-T,TBCF-T, TBCG-T). The next three ETFs are US versions of their Canadian counterpart following a similar strategy but
invests in investment grade US corporate bonds (TBUE.U-T, TBUF.U-T, TBUG.U-T).
Desjardins Investments Inc.
Desjardins launched three new equity ETFs and a fixed income ETF in the month of April. These ETFs seeks to replicate the performance of their respective index.
Desjardins International Equity Index ETF (DMEI-T) will track the performance of an international equity index (Solactive GBS Developed Markets ex North America Large & Mid Cap CAD Index) and will primarily invest in Large and mid-cap securities of international companies.
Desjardins American Equity Index ETF (DMEU-T) will follow an American equity index (Solactive GBS United States 500 CAD Index ) and will primarily invest in Large and mid-cap securities of American companies.
Desjardins Canadian Equity Index ETF (DMEC-T) will follow a Canadian equity index (Solactive Canada Broad Market Index) and will primarily invest in Large and mid-cap securities of Canadian companies.
Desjardins Canadian Corporate Bond Index ETF (DCBC-T) will follow a Canadian bond index (Solactive Canadian Bond Universe Corporate) and will primarily invest in corporate bonds issued in the Canadian Market.
Harvest Portfolios Group Inc.
Harvest launched 3 equity ETFs. Harvest Balanced Income & Growth ETF (HBIG-T) invests in other ETFs that have exposure in large cap equity, investment grade bonds or money market instruments. It utilizes covered call strategies to deliver high monthly cash distributions.
Harvest Balanced Income & Growth Enhanced ETF (HBIE-T) replicates the HBIG ETF with around 25% leverage leading to enhanced cashflows.
Harvest Industrial Leaders Income ETF (HIND-T) seeks to invest in industrial companies. It also deploys a covered call writing strategy to provide steady monthly cash distributions.
Other ETF Launched
Franklin Templeton Investments Corp. launched the Franklin Canadian Government Bond Fund ETF (FGOV-T) which aims to generate income, and have capital appreciation by investing in Canadian federal, provincial, and municipal governments and other government agencies.
Finally, the Guardian Investment Grade Corporate ETF (GIGC-T) provides exposure to high quality intermediate term corporate bond securities.
Amy Mak, is senior financial analyst at Inovestor.
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