Canadian ETFs have net inflows of $1.3B in February

Canadian ETFs had net inflows of $1.3 billion in February, a monthly increase of 0.8% led by international equity and fixed income, says a monthly report from National Bank.

International equity ETFs had flows for the month of $639 million, with both emerging market and developed market equities enjoying sizable inflows, the report says. Fixed income ETFs had flows of $467 million.

In contrast, Canadian equity ETFs suffered large outflows during the month (−$390 million), led by broad-based financial and energy sector ETFs.

U.S. equity ETFs had flows of $361 million, with inflows into low volatility and broad-based U.S. equity somewhat offset by several broad, dividend and financial sector ETF outflows.

In fixed income, the Canadian aggregate bond category attracted inflows across several products with $377 million in flows. However, preferred share and high yield ETFs bled assets for the second month in a row: preferred/convertible ETF flows were −$141 million, and sub-investment grade were −$83 million.

Multi-asset ETFs continue to take in new assets ($181 million), mostly toward low-cost asset allocation ETFs, the report says.

By provider, Franklin Templeton launched four new equity ETFs that each focus on a single country or region, and these received a combined $734 million inflows, almost doubling the firm’s assets, the report says.

RBC iShares had flows of −$924 million. The firm saw redemptions from a limited number of specific products, especially iShares S&P/TSX 60 Index ETF (XIU), which had the top single long ETF outflows for the month.

Canada’s ETF industry had a total of $168.7 billion in assets under management as of the end of February.

New launches and year-to-date stats

For the month of February, seven firms introduced 23 ETFs, bringing the number of ETFs in Canada to 813.

National Bank Investments and Calgary-based Middlefield are the newest ETF providers in Canada. The former entered the space with four non-traditional niche strategies; the latter coverted two closed-end funds into ETFs.

For January and February, a net $1.8 billion has flowed into Canadian ETFs, the report says, with BMO Ultra Short Term Bond ETF (ZST) having the highest inflows during this period.

“Investor preference for shorter duration in fixed income extends [a] trend that took root late last year,” the report says.

Other fixed income themes popular this year include aggregate bonds, government bonds and global bonds.

The report also notes that low volatility and dividend ETFs have seen larger inflows than their market cap-weighted equity ETF peers—a potential indicator of “overall skittishness” toward the wider stock market.

Year-to-date by sector, defensives such as utilities, real estate and healthcare have attracted assets, while cyclicals such as financials have seen withdrawals.

For full details, read the National Bank ETF report.