Canadian ETFs see largest outflows since 2013

Almost $700 million flowed out of Canadian ETFs in June, the first negative month since before the pandemic and the largest drawdown since 2013, National Bank Financial reported on Tuesday.

Equity ETFs lost $2.2 billion last month and cryptoasset ETFs saw redemptions of $697 million, accounting for 16% of the crypto category’s $1.8 billion in assets, the report said.

Fixed income ETFs were the big winners, pulling in $2 billion.

Cryptoassets have plummeted this year, with Bitcoin hovering around US$20,000 after peaking above US$67,000 in November.

The bulk of crypto redemptions came from the Purpose Bitcoin ETF and the 3iQ Coinshares Bitcoin ETF and occurred on a single day, National Bank said, suggesting the moves came from institutional investors.

Nine other crypto ETFs had “moderate” outflows, the report said, while 17 crypto funds saw money flow in, “suggesting a low-level retail presence of continuously active trading taking place among the activity of institutional ‘whales.'”

In May, crypto ETFs saw their biggest monthly flows for the year — $565 million — even as the prices of Bitcoin and Ethereum declined. The category is flat for the year, the report said.

In the equity category, broad index ETFs bled $2.4 billion last month as the U.S. entered a bear market, National Bank said. The Horizons S&P 500 Index ETF saw outflows of $896 million, while the iShares S&P/TSX 60 Index ETF saw $719 million in redemptions. In total, more than $1 billion flowed out of RBC iShares funds last month, the report said.

Outflows across all Canadian ETFs in June totalled $682 million.

Low-volatility, ESG and sector-specific equity funds gained slightly, but fixed income products saw the biggest monthly flows.

“Bond yields and credit spreads pushed higher in June, a strong headwind that surely caused headaches for fixed income managers,” the report said. “However, investors poured into aggregate bond ETFs, perhaps in expectation of a reversal in trend if central banks would be able to orchestrate a soft landing,’ or to make strategic allocations as the yields on bonds finally start to make sense.”

High-interest savings ETFs performed well as overnight rates moved higher, and asset allocation funds also saw inflows.

Despite a historically bad first half of the year for markets, Canadian ETFs brought in $16.9 billion as of June 30, the report said. That compares to $29.7 billion in the first six months of 2021.

Investors in U.S. ETFs bought into the bear market last month, a separate report from National Bank said.

U.S.-listed ETFs gathered $313 billion in the first half of 2022, far less than last year’s record of more than $900 billion but “still an impressive amount given the backsliding market conditions,” National Bank said.