Canadian ETFs had an inflow of $1.3 billion in July, bringing total assets under management (AUM) to more than $160 billion, according to the latest monthly report from Toronto-based National Bank Financial Inc. (NBF).
Fixed-income inflows led the rise in July, which was a banner month for the category, increasing by $759 million, or 1.5%, to $51.8 billion in AUM. Floating-rate and short-term ETFs re-emerged as the market darlings in the rising rate environment.
Floating-rate ETFs that attracted the most money range in category from Canada government, to investment-grade corporate, to high-yield. July was the first month in 2018 when fixed-income ETFs from across the credit spectrum all had inflows, as various investment-grade corporate and high-yield bond ETFs have suffered redemptions since February, the NBF report states.
In contrast, inflows into equity ETFs rose by only 0.4%, or $364 million, to $95.9 billion in AUM as Canadian equity ETFs experienced outflows of $165 million to $37.9 billion in AUM. This drop was led by iShares S&P/TSX 60 Index ETF, which had outflows of $230 million, and several interest rate-sensitive sector ETFs.
Meanwhile, inflows into U.S. equity ETFs rose by $441 million, or 1.4%, to $31.8 billion in AUM. These were led almost entirely by broad-based ETFs. Within U.S. equity ETFs, smaller creations crept into low-volatility strategies and Nasdaq 100 ETFs, the latter probably due to the index’s technology overweighting, the NBF report states.
Investors remain skittish about investing outside of the U.S., judging by the meagre inflows of $57 million, or 0.2%, into international equity ETFs, to $26.1 billion. Outflows from this category were spread between broad-based Europe, Australasia and the Far East and emerging-market index products, offset by inflows into global infrastructure, environmental, social and governance and-low volatility ETFs.
For 2018 thus far, fixed-income, international equity and U.S. equity ETF categories contributed most to asset gathering, at $3.3 billion for the first two categories and $2.5 billion for the last category.
Canadian ETFs have attracted $11 billion year-to-date as of July 31, or 7.5% of AUM at the start of the year. This is far behind 2017’s blockbuster inflows which reached $15.8 billion and 14% growth by the same point last year.
On a firm-specific level, Toronto-based BlackRock Canada Asset Management Ltd.’s iShares division still is in top spot, with $59.6 billion in AUM, although that’s down by $689 million from the beginning on the year.
BMO Asset Management Inc. (BMOAM), Vanguard Investments Canada Inc. and Horizons ETFs Management (Canada) Inc., all based in Toronto, continued to round out the top four as all experienced strong inflows for 2018 thus far.
BMOAM has added almost $2.8 billion in AUM to $50 billion in total AUM; Vanguard added $2.9 billion in AUM to $17.1 billion in total AUM and Horizons added $1.2 billion to $10.2 billion in total AUM.
From a product perspective, floating-rate and senior loan ETFs occupied the leaderboard for the month — led by iShares Floating Rate Index ETF, followed by Horizons Active Floating Rate Bond ETF and Mackenzie Floating Rate Income ETF
The iShares ETF tracks an index passively, while Horizons and Mackenzie ETFs are active products with portfolio manager discretion. In addition, the Horizons and Mackenzie ETFs invest directly in floating-rate securities while the iShares ETF invests in traditional corporate bond and enters into fixed-for-floating swaps to convert payments to floating rate.
Although the three floating-rate ETFs have sharply different credit profiles, they have minimal interest-rate risk, a feature that’s growing in demand.
AGF Investment Inc.’s actively managed global infrastructure ETF — AGFiQ Enhanced Global Infrastructure ETF — had another good month of inflows in July, making it the ETF with the largest year-to-date inflows in AGF’s suite of ETFs.