ETF flows flat in June as investors get defensive

Canadian ETF investment was flat in June, with strong flows into actively managed fixed income products cancelled out by redemptions in iShares’ S&P/TSX 60 Index ETF (XIU), a report from National Bank says.

Outflows last month totalled $133 million, driven by $1.45 billion in redemptions from Canadian equity funds. Redemptions in iShare’s XIU totalled $1.96 billion in June.

Fixed income ETFs drew $885 million, bringing total inflows this year for the asset class to $6 billion. Investors moved money into low-cost aggregate bond funds as well as actively managed global fixed income funds with higher fees, the report said, reflecting a “fearful sentiment” in the equity market.

On the equity side, low volatility and low-cost benchmark products were in demand.

“Canadian ETF investors still seem rather defensively positioned, with low-volatility and income-themed equity ETFs winning the popularity contest in June, despite the fact that strong market action worked more favourably for plain cap-weighted indices,” the report said.

For the first six months of 2019, Canadian ETFs saw inflows of $10.36 billion, bringing total assets to more than $181 billion.

The report noted the defensive theme for the year, with fixed income ETF flows double those of equity in the first half. Within equities, low-volatility products and those focused on real estate, healthcare and utilities gained from January to June, while financial sector ETFs bled.

The volatility in equities hasn’t deterred new entrants, the report said, with five new providers entering the market this year. Six providers launched new products in June.

Read the full report here.

U.S. market sees big gains

The U.S. market saw the largest monthly inflow of the year in June, with US$50 billion flowing into ETFs, a separate National Bank report said.

Fixed income ETFs accounted for US$26 billion, the highest monthly inflow ever recorded, the report said, reflecting “a continued defensive stance.” For the first half of 2019, fixed income ETFs saw US$74 billion in net inflows, accounting for 63% of the US$118 billion total.

ESG products have had a “blockbuster” first half, the report said, with the US$4.2 billion in flows already topping any previous total for a full year.

Read the full U.S. report here.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.