Canadian ETFs: January sets record for new ETF launches

The Canadian ETF industry started the year off strong as Canadian ETFs gathered $5 billion in net flows and a record-breaking number of new launches in the month of January. Equities were the dominant asset class with an inflow of $4.6 billion, representing 90% of the month’s total. Financials and energy sector ETFs saw strong demand during the month, recording inflows over $100 million each, while technology ETFs suffered a rare month of net outflows.  

In the fixed income realm, the Federal Reserve’s hawkish tone led many investors to pour into short term and cash alternative ETFs. Duration-risky categories like aggregate bond ETFs had the largest outflows of fixed income products.  

Among Multi-Asset ETFs, all-equity and growth-oriented allocations had higher inflows relative to balanced and conservative profiles, another indicator of the strong demand for equity products. Cryptocurrency ETFs suffered outflows of $68 million as the prices of Bitcoin and Ethereum fell drastically from their previous highs.   

ESG was a common theme among the latest crop of ETF launches in Canada. Invesco released a new suite of equity and fixed income ESG products, some of which offer an ESG Tilt factor. Rather than excluding poor performers from the index, this strategy actively pursues the best ESG performers. Scotiabank also introduced their newest lineup of Responsible Investing ETFs, offering broad market exposure to Canadian bonds, Canadian equity, US equity and international equity. These ETFs charge favourable management fees relative to other ESG funds, ranging from 0.10%-0.17%, and are listed on the NEO exchange. BMO, Desjardins and Wealthsimple also released new ESG products in January. 

CI Global Asset Management continues to demonstrate their leadership in the crypto-asset space as they launched the CI Galaxy Multi-Crypto ETF, which provides exposure to both Bitcoin and Ether. The ETF is designed to capture the upside of investing in the two largest cryptocurrencies, while reducing volatility by systematically managing the allocation between crypto and cash. The goal is to produce stronger risk-adjusted returns compared to a buy-and-hold strategy. The fund holds units of the CI Galaxy Bitcoin ETF (BTCX-T) and CI Galaxy Ethereum ETF (ETHX-T).  

Fidelity Investments added to their existing suite of asset allocation ETF solutions, with the launch of the Fidelity All-in-One Conservative ETF (FCNS-NE), and the Fidelity All-in-One Equity ETF (FEQT-NE). These products invest in a diversified mix of Fidelity’s own equity factor ETFs and actively managed fixed income ETFs. Earlier in the month, Fidelity announced that they would begin including cryptocurrency in all their multi-asset ETFs. Depending on each fund mandate, these ETFs will have between 1%-10% allocation to cryptocurrency through the Fidelity Advantage Bitcoin ETF (FBTC-T).  

Financial sector ETFs saw two new listings this month. The Evolve European Banks Enhanced Yield ETF (EBNK-T) invests in equity securities of the 20 largest European banks on an equally weighted basis, while writing covered call options on up to 33% of the portfolio securities. Covered call options have the potential to provide extra income and help hedge long stock positions. Hamilton ETFs added to their existing suite of Canadian bank products, with the launch of the Hamilton Enhanced Canadian Financials ETF (HFIN-T). This fund invests in the top 12 largest Canadian financial service companies, while adding a 25% cash leverage to enhance yield and return potential.  

The beginning of the new year is typically a busy time in terms of new product launches, and this January was no exception. There were no ETF terminations in January.