Canadians are piling more investment dollars into exchange-traded funds as sales for the month of July were more than double those of traditional mutual funds.
Mutual fund assets totalled $1.64-trillion at the end of July, up by $42.1-billion or 2.6 per cent compared with June, according to the latest data released from the Investment Funds Institute of Canada.
Despite mutual fund assets surpassing the record high of $161-trillion in February, net sales for the month of July slipped to $3.4-billion, compared with $3.9-billion the month prior.
In comparison, Canadian ETF assets totalled $231.7-billion at the end of July – also sweeping past its record high in mid-February of $220-billion. While still only a fraction of the overall total assets in the fund industry, ETFs have brought in more than twice the sales of mutual funds with $7.3-billion in assets for the month of July.
Sales of ETFs, which are typically passive funds that track major stock indexes for a fraction of the cost of mutual funds, are quickly accelerating in 2020. For the first seven months of the year, ETF sales have totalled $29.9-billion, compared with just $12.3-billion in 2019. For the same period in 2020, mutual fund sales have brought in $11.2-billion, compared with $8.6-billion in 2019.
July’s ETF sales were the second highest of the year. Bond funds sold the most over all, with $3.3-billion in net sales, up from $1.0-billion in June.
Equity ETFs saw sales of $3.1 billion, an increase from $2.7-billion the month prior. The surge back into the equity markets demonstrates that risk appetite among Canadian ETF investors has remained strong over the past three months of equity market recovery, says Daniel Straus, vice-president of ETFs and financial products research at National Bank Financial Inc.
“In order of [equity sales], money poured into Canada, then the U.S., then international products, reversing the trend from [June] when international equity ETFs attracted the most inflows,” Mr. Straus said in a research note.
Money market ETFs finished the month with $420-million in net sales, while specialty ETFs saw sales of $315-million.
Despite equity markets bouncing back considerably throughout the summer, mutual fund investors flocked to bond funds with $2.6-billion in net sales, while balanced funds saw $203-million in sales. Money market funds have seen a positive rebound after several months of sell-offs, with $154-million in sales, up from redemptions of $429-million in June.
However, equity mutual funds took a hit with $87-million in net redemptions for the month of July, compared with sales of $245-million the month prior.
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