ETF flows in Canada were $3.9 billion in February, “a continuation of the strong start to the new year,” National Bank Financial said in a monthly report. The result compared to flows of $5 billion in January, and largely reflected momentum within equities.
The equities category accounted for 80% of the monthly total ($3.13 billion). By fund focus, market cap–weighted passive ETFs continued to lead ($2.59 billion).
The month also saw a continued rotation to value amid poor market performance so far this year. Energy, real estate, utilities and heath care all had net flows, while tech, financials and materials had net redemptions. For the second consecutive month, the TD Global Technology Leaders Index ETF experienced redemptions (−$208 million).
Within the equities category, Canadian funds ruled, with $2.28 billion in flows, relative to U.S. ($213 million) and international funds ($637 million).
“Canadian equity is finally making a comeback, possibly as a play on inflation, energy or value,” the report said. “Alternatively, we could be witnessing a global rotation to a source of resource-based returns with relative geopolitical stability.”
With Russia’s invasion of Ukraine and the resulting economic uncertainty, bond yields in Canada and the U.S. have moved lower, the report noted. Reflecting that development, long-term government bond ETFs and cash alternative ETFs led the fixed-income category, with $361 million and $358 million in flows, respectively.
Year-to-date, cash alternative ETFs easily lead the category, with $591 million, followed by long-term government bond ETFs with $206 million. Overall, net fixed-income ETF flows were $163 million in February.
Multi-asset ETFs had flows of $241 million in the month, led by all-equity and growth funds, while the commodities category had $49 million in redemptions. Cryptoasset ETFs gathered $221 million as Bitcoin and Ethereum prices rose.
Year-to-date, Canadian ETFs have reached $8.9 billion in flows, with commodities being the only asset class to experience outflows (−$236 million), the report said.
Noting the potential for losses arising from the conflict in Ukraine, the report said Canadian ETFs had an estimated 1% of total assets ($312 million) exposed to Russian securities at the end of February. MSCI and FTSE Russell will remove Russian securities from their indexes next week, at an effective price of zero.