From Jan. 1 to Feb. 2, Canadian ETFs witnessed an inflow of $5.5-billion, marking a rise of $2.2-billion from the previous month, according to Scotia ETF EDGE reports.
Most of the inflows in the first month of the year came from equities, with a substantial $4.7-billion being net creations of the month’s total inflows while fixed income and cash ETFs accounted for $0.6-billion and mixed allocation for $0.45-billion.
One event of note that occurred in January was the long-awaited approval and listing of Bitcoin ETF by the US Securities and Exchange Commission (SEC).
Seeing that Canada has allowed for the trading of bitcoins for the last three years, this announcement south of the border provided resurgence in interest as investors jumped in on the new digital asset products from BlackRock and ten other firms who filed for a spot Bitcoin ETF in 2023. There was no surprise that bitcoin prices fluctuated and volatility continued to be exhibited throughout the month, but having the SEC on board could be a game changer for market dynamics as confidence grows with increased adoption and mainstream acceptance.
On the Canadian side, the cryptocurrency asset class experienced a net redemption of $138-million. One can only surmise that investors are capitalizing on the exuberance of the bitcoin space and selling on the news. Further developments to come will determine the trajectory of the market, particularly with respect to regulations.
The Vanguard S&P 500 Index ETF (VFV-T) saw the largest inflows at $0.57-billion, followed by the BMO Equal Weight Banks Index ETF (ZEB-T) at $0.55-billion. This seems to indicate that investors are turning towards large cap equities at the start of the year.
Additions
January saw eleven new ETFs launches in the Canadian market split into three sectors including equity, fixed income, and alternative asset classes.
Equity
The Invesco Morningstar Global Next Gen AI Index ETF (INAI-T) offers exposure to global companies related to the advancement of artificial intelligence with most holdings involved in generative AI.
CI Global Asset Management has added two new factor-based equity funds this month. The CI U.S. Enhanced Value Index ETF (CVLU-T) invests in high value large and mid-cap U.S. while the CI U.S. Enhanced Momentum Index ETF (CMOM-T) invests in higher price momentum U.S. equities.
Fixed Income
Harvest have added two fixed income funds this month. The Harvest Premium Yield 7-10 Year Treasury ETF (HPYM-T) invests in intermediate to long-term maturity U.S. Treasury Bonds with a covered call strategy, offering monthly distributions. The Harvest Canadian T-Bill ETF (TBIL-T) provides exposure to Canadian Treasury Bills not exceeding 3 months.
The Invesco US Treasury Floating Rate Note Index ETF – USD (IUFR.U-T) invests in 80 per cent of its net assets in floating rate note secyrities issued by collateralized loan obligations (CLOs). Alternatively, the Horizons USD High Interest Savings ETF (UCSH.U-T) invests primarily in USD deposit accounts with Canadian banks.
Guardian Capital LP launched a suite of funds called GuardBondsTM on the NEO Exchange, now operating as Cboe Canada. Each fund is given a mandate to provide exposure to a diversified portfolio of Canadian-denominated investment grade bonds which have defined maturity dates that correspond to each calendar year from 2024 to 2027 (GBFA-NE, GBFB-NE, GBFC-NE, and GBFD-NE).
The only differing fund among the suite of funds is the GuardBondsTM 1-3 Year Laddered Investment Grade Bond Fund (GBLF-NE), which seeks to offer exposure to a diversified portfolio consisting primarily of Canadian-dollar denominated investment grade bonds, segmented into three groupings with maturities from one to three years.
Alternative
The investment strategy for the Arrow EC Equity Advantage Alternative Fund ETF (ADIV-T) is to take balanced long and short positions in North American equities, maintaining 50 per cent to 100 per cent net exposure.
Purpose Investments have added two funds using covered call strategies to maximize yields, namely the NVIDIA (NVDA) Yield Shares Purpose ETF (YNVD-NE) and the Microsoft (MSFT) Yield Shares Purpose ETF (MSFY-NE). Both funds invest in the underlying equities in addition to a covered call strategy and around 25 per cent leverage.
Lastly, the BMO US Equity Buffer Hedged to CAD ETF – January (ZJAN-NE) tracks an index measuring large-cap U.S. equities and uses derivatives to provide a buffer against the first 15 per cent of a decrease in its target outcome period.
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Anthony Ménard, CFA, is vice-president of data management at Inovestor.