ETF investors go long on bonds in November

Canadian ETFs gathered $4.2 billion in November, the strongest inflows since March in another “gangbuster” month for fixed income funds, a report from National Bank Financial says.

Cash alternative and aggregate bond ETFs led the way as fixed income ETFs saw $2.3 billion in creations last month, compared to $1.6 billion for equity funds.

Cash funds’ $1.2-billion haul last month brought assets in the category above $13 billion, more than double the value at the beginning of the year. The CI High Interest Savings ETF led all products with $468 million flowing in last month.

Bond funds also performed well again in November but investor interest shifted from the previous month, National Bank noted, as inflation slowed and fears of rate hikes decreased.

“Ultra short-term ETFs lost $1.1 billion while broad maturity products gained $2.1 billion, reflecting investor preference for longer-duration fixed income ETFs as the yield curve goes into deep inversion in both Canada and the U.S,” the report said.

The Vanguard Canadian Aggregate Bond Index ETF was second in flows, bringing in $420 million in November, and the Horizons Canadian Select Universe Bond Index ETF and the BMO Aggregate Bond Index ETF were third and fourth.

In October, the BMO Ultra Short-Term Bond ETF had topped the leaderboard.

On the equity side, Canadian funds accounted for almost half ($745 million) of the $1.6 billion in creations. Low-volatility funds also drew funds after outperforming this year, the report said, while financial sector funds saw withdrawals.

Despite all the drama in the crypto space following the collapse of the FTX exchange, cryptoasset ETFs only saw outflows of $29 million. However, crypto ETF assets dropped to $1.8 billion last month due to the underlying assets’ plummeting value, the report said, down from a peak of $7.5 billion in November 2021.

“This suggests that cryptoasset ETF users are sticking to their allocations, possibly hoping for the market to recoup these losses in the long term,” the report said.

ESG funds had net inflows of $105 million, mostly from insitutional-sized creations in the NBI Sustainable Canadian Equity ETF, the report said.

Year to date, $28 billion has flowed into Canadian ETFs, led by $13 billion to fixed income funds.

Mark Burgess

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