Canadian ETFs: The latest launches and where investors are putting their money

Canadian ETFs added $1.4 billion in the month of August, led primarily by the equity asset class. Broad market Canadian equity dominated the inflows, as the iShares S&P/TSX 60 Index ETF (XIU-T) led all ETFs with $683 million in new money. In terms of factor-based equity ETFs, income and low volatility strategies saw the highest inflows, with $199 million and $63 million, respectively. Among the sector equity funds, defensive sectors such as utilities and healthcare had the highest inflows, while energy and financials lost assets.

Cash alternative ETFs continue to be the most popular fixed income category this year. Cash alternative funds added $589 in assets during the month, led by the popular CI High Interest Savings ETF (CSAV-T), and the Purpose High Interest Savings ETF (PSA-T). Canadian corporate bonds had the highest outflow during the month, with $222 million in redemptions. Excluding the cash alternative category, the fixed income asset class would have suffered a net loss in August.

Multi asset ETFs added $121 million during the month, bringing the total year to date inflow to $1.8 billion. Alternative strategies, including NBI Liquid Alternatives ETF (NALT-T) and AGFiQ US Market Neutral Anti Beta ETF (QBTL-T) had the highest inflows among all asset allocation portfolios.

Crypto assets shed $217 million in August. Despite a volatile year for cryptocurrencies, the asset class is near flat in terms of flows year to date. Purpose Ether ETF (ETHH-T) had the largest outflow last month, with $151 million in redemptions.

The Canadian ETF market welcomed two new funds. Horizons launched the Horizons Canadian Utility Services High Dividend ETF (UTIL-T), providing exposure to Canadian dividend-paying utility service companies. The fund goes beyond traditional utilities exposure to also include pipelines and telecom companies – all deemed critical services. Utility services have typically been regarded as a defensive sector of the stock market, providing stability even during periods of volatility and bear markets. While there’s been no shortage of yield-focused strategies released in 2022 to help protect portfolios from rising inflation, UTIL may appeal to investors who are also seeking protection from a broader market decline. The ETF charges an annual management fee of 0.50%.

TD Asset Management has joined fellow providers and launched their own carbon credit product. The TD Carbon Credit Index ETF (TCBN-T) seeks to replicate the performance of an index which measures the investment return of global cap-and-trade carbon emission credits. This alternative asset class exhibits a historically low correlation to traditional asset classes and can also help mitigate the negative portfolio impacts of rising carbon costs and exposure. This ETF charges a management fee of 0.65%, currently the lowest among all the carbon credit ETFs in Canada.

Fidelity Investments Canada terminated their suite of Systematic U.S. High Yield bond ETFs. The ETFs were de-listed from the TSX at the close on August 19th 2022.

Ben Kleinberg, CFA

Product Manager at Inovestor

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