Sustainable fund flows lagged industry in Q1

Sustainable investment fund flows rebounded in the first quarter, generating $193.3 million in net flows, according to new data from Morningstar.

The positive net flow activity in the first three months of 2024 marked a turnaround from negative flows in the fourth quarter of 2023.

However, the quarterly inflows in Q1 were well below historical trends for sustainable mutual funds and ETFs, and they lagged the overall Canadian fund industry, Morningstar said.

“During the first quarter, sustainable funds grew by 0.4%, better than its 0.1% fourth quarter 2023 contraction but slower than the 0.8% growth rate of the wider Canadian fund universe,” the report noted.

All of the net new money went into fixed-income funds, which generated $407.6 million of positive net flows for the first quarter. Equity, alternative and asset allocation funds all saw modest outflows.

Notably, sustainable equity funds saw $186.9 million in negative net flows in Q1, marking a second consecutive quarter of outflows.

Both active and passive sustainable funds generated positive net flows in the first quarter, with net flows of $76.3 million and $116.3 million, respectively.

The top fund company in the first quarter was National Bank Investments, which captured 55.6% of the quarterly net flow activity.

Conversely, other bank-owned fund managers saw $129.4 million in combined net outflows.

While net flows into sustainable funds were relatively weak in the first quarter, assets hit a record high of $50.5 billion, up 10.1% from the previous quarter.

Over the same period, the U.S. market suffered record quarterly outflows of $8.8 billion, marking the sixth straight quarter of negative net flow activity.