There are 1,236 exchange-traded funds listed on Canadian exchanges, according to the latest census by National Bank Financial. By the time you finish reading that previous sentence, a few more might have been added.
That’s ETF-land for you in 2022. Money has been flying into funds since the market crash in March, 2020, and new products are being introduced at a furious pace. Curious to know where your fellow investors are putting their ETF dollars? Let’s take a look at a few highlights from NBF’s ETF summary:
There are a lot of smart investors getting core Canadian market exposure for close to zero in fees
There are 10 Canadian market equity ETFs with assets of $1-billion or more, the biggest being the $12.9-billion iShares S&P/TSX 60 Index ETF (XIU-T) and the $10.1-billion iShares Core S&P/TSX Composite Index ETF (XIC-T). XIU’s management expense ratio is 0.18 per cent, while the other billion-dollar Canadian equity ETFs have MERs no higher than 0.06 per cent. That’s 60 cents on $1,000 invested.
Interest in international and global funds is, um, subdued
Investors have put $62-billion in total into broad Canadian equity ETFs, compared with just $7.6-billion for global equity funds and $25.8-billion for developed market international funds. Global funds include the U.S. market, while international means everywhere but North America. For all the commentary about the growth potential of emerging markets, Canadian investors have committed only $6.4-billion to this sector.
Non-hedged is the preference for U.S. equity
NBF reports a total of more than $69-billion in U.S. equity ETFs that both do and do not use currency hedging to mute the effect of fluctuations in the Canada-U.S. exchange rate. A bit more than $49-billion is in unhedged funds, which means a falling Canadian dollar adds to your returns and a rising dollar erodes them. The remainder is in hedged funds, where you make whatever the underlying index makes.
The favourite Canadian equity sectors for investors are energy and financials
The two biggest sector funds are the $2.7-billion BMO Equal Weight Banks Index ETF (ZEB-T) and the $1.7-billion iShares S&P/TSX Capped Financials Index ETF (XFN-T), followed by the $1.6-billion iShares S&P/TSX Capped Energy Index ETF (XEG-T). Next up is the $1.3-billion iShares S&P/TSX Capped REIT Index ETF (XRE-T).
Asset allocation ETFs have caught on
Also known as balanced ETFs, these funds give you a diversified package of stocks and bonds in a single product. There are 69 of these funds with assets of $15.5-billion.
Crypto ETFs are a force …
NBF reports 37 ETFs holding cryptocurrency, with total assets of $4.8-billion. If that doesn’t seem like much, consider that ETFs holding alternative assets such as commodities, private equity and real estate hold only $3.1-billion and covered call ETFs, favoured by income-hungry investors, have accumulated $5.8-billion in the many years they’ve been available.
… but ESG is bigger
Socially responsible equity and fixed income ETFs – they hold stocks and bonds that score well on environmental, social and governance factors – have attracted $7.4-billion.
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