Cash ETFs still reign in October

Investor sentiment rebounded last month from “extreme defensiveness” as flows into Canadian ETFs increased, but cash funds were still king, a report from National Bank Financial says.

Canadian ETFs gathered $2.6 billion in October, an improvement from $1.9 billion in September and $1.4 billion in August, making October the best month for inflows since March.

And after seeing redemptions in September, equity ETFs were back in favour last month with inflows of $676 million.

However, the trend toward fixed income — and cash alternative ETFs in particular — continued in October as flows “continue to show clear signs of flight to safety,” the report said.

“Overall, ETF flow patterns in October show that investor sentiment has improved relative to the extreme defensiveness in September, but investors are still playing defense using cash alternative and ultra-short-term fixed-income products,” the report said.

Cash ETFs were once again the dominant category with $1.1 billion flowing in, following a record $1.7 billion in September. That brings the category’s assets under management to $12 billion, the report said, almost double the AUM from a year ago.

Fixed-income ETFs (including cash alternatives) accounted for $1.75 billion of inflows, as products with minimal duration and credit risk were popular. The BMO Ultra Short-Term Bond ETF topped the leaderboard last month, bringing in $556 million. Cash alternative funds from CI, Purpose and BMO were also near the top.

Year-to-date, the CI and Purpose cash ETFs top the board.

On the equity side, broad index funds from iShares and Vanguard were the leaders. Demand for previously popular Canadian equities and energy exposure faded, the report said, as did interest in dividend and income strategies.

ESG funds brought in $166 million in October after two months of “muted” flows. National Bank attributed the gain primarily to “institutional-sized creations” to the NBI Sustainable Canadian Equity ETF.

Multi-asset funds brought in $107 million in October, while cryptoasset funds gained $9 million. Crypto ETFs are almost flat for the year, with $31 million in redemptions, the report said.

Eleven funds launched last month, National Bank said, six of them in the “burgeoning lightly levered” category applying cash leverage of 25% to 33%. Inverse and levered products brought in $126 million in October.

Total ETF assets once again topped the $300 billion threshold, finishing the month with $301.5 billion, the report said. This year, ETFs have gathered $23.8 billion.

Mark Burgess

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Mark was the managing editor of Advisor.ca from 2017 to 2024.