Focus on Mutual Funds Special Report

Canadians put less money into ETFs last month amid selloffs in both equities and bond markets, a report from National Bank Financial says.

Just over $1.5 billion flowed into Canadian ETFs in April, a sharp decline after inflows of $13.5 billion over the first three months of the year.

Equity ETFs still attracted the lion’s share — $917 million — but that was down from $2.5 billion in March.

Investors were understandably reticent after a volatile start to the year got worse in April. The S&P 500 dropped by 8.8% for its worst month since the start of the pandemic, while the tech-heavy Nasdaq composite had its biggest monthly drop since the 2008 financial crisis. The S&P/TSX composite ended its fifth straight month of declines with a 5.4% drop in April.

Bonds offered little solace, with aggregate bond indexes for the U.S. and Canada posting double-digit losses for the year to date.

Bond ETFs attracted $645 million “even as the broad fixed-income market has rarely seemed more challenging,” the report said. Despite the declines, Canadian aggregate bond indexes led the way with $678 million in new money.

Cryptoasset ETFs had their worst month since the first funds were launched in February 2021, the report said: “$338 million flowed out from Bitcoin and Ethereum ETFs in April, a figure that represents 5.5% of the category’s starting assets.”

Inverse and levered funds, on the other hand, had another solid month, gaining $102 million — 4.6% of the category’s assets.

ESG funds dominated the equity ETF inflows — $642 million, or 70% — thanks to large institutional purchases, the report said. Roughly $600 million came from institutional subscriptions to two National Bank Investments funds.

Perhaps surprisingly in a month of market turmoil, low-volatility ETFs saw outflows. Despite positive returns this year and beating their benchmarks, BMO’s low volatility Canadian and U.S. equities funds bled $411 million, the report said.