ETF investors looked for bank bargains in volatile March

While the U.S. banking sector wobbled last month after the collapses of Silicon Valley Bank and Signature Bank, Canadian ETF investors were looking for buying opportunities.

According to a report from National Bank Financial, financial-sector ETFs in Canada brought in $1.4 billion last month.

“We noticed most of the flows for these ETFs came after March 8, when news of Silicon Valley Bank’s sudden collapse dominated headlines,” the report said.

“Canadian financial-sector ETFs surged in demand as investors either sought buying opportunities or financial exposure with minimal regional banks in the mix.”

After plunging initially, the S&P/TSX Composite Banks index bottomed out on March 24 and is roughly back to where it started the year.

In the U.S., where the S&P 500 Financials index is still down almost 6% for the year after dropping nearly 10% in March, investors pulled out US$0.8 billion from financial-sector ETFs last month, according to a separate National Bank report.

However, despite the net outflow for the financial-sector as a whole, US$1.7 billion flowed into regional bank ETFs, which fell by almost 30% in March, National Bank said.

The $1.4 billion that flowed into Canadian financial-sector ETFs contributed to nearly $7 billion in total ETF inflows last month. More than half ($3.7 billion) went into equity ETFs, while fixed-income funds brought in $3.3 billion.

Canadian government bond ETFs accounted for $1.2 billion of the fixed-income inflows, while money market ETFs had another strong month bringing in $854 million.

Crypto funds saw $287 million in redemptions.

March was the best month this year for Canadian ETFs, after net redemptions in January and inflows of $4 billion in February. Canadian ETFs have taken in $10.7 billion for the year to date.

ETF assets in Canada totalled $337.6 billion at the end of March.

Mark Burgess

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