Is Canada back in vogue with the country’s ETF investors?

stickytoffeepudding/Thinkstock
stickytoffeepudding/Thinkstock

ETF flows hit new record territory following another impressive month of business aided by growing optimism towards Canada’s economy and its financial markets. Alan has the details.

Canada’s equity market got the cold shoulder from investors seeking better returns elsewhere during the first half of 2017, but the attitude towards Canadian stocks is beginning to warm up based on ETF flows in August.

A good majority of exchange traded funds tracking the country’s major equity indices attracted new money last month. This resulted in just over $1.6 billion* in net new business for the category, according to BlackRock’s Follow the Flow data for ETFs listed on Canadian exchanges.

iSH Blog ETF Flow Sept17.2

Much of the inflow came from a big net gain in the iShares S&P/TSX 60 Index ETF (XIU). The fund, which is prone to big monthly swings, netted $1.3 billion in new money after suffering a similar sized outflow in July.

At least in part, however, flows into Canadian equity ETFs can be attributed to a growing sense of optimism towards Canada’s economy and its financial markets. This is in stark contrast to a generally negative vibe that permeated earlier in the year and had many ETF investors piling into international equity ETFs – often at the expense of their Canadian counterparts. As Kurt Reiman, BlackRock’s chief investment strategist for Canada noted in a recent blog, we believe the prospects for Canadian stocks have improved following a disappointing first half with relatively attractive valuations and more stable oil prices potentially leading to a period of outperformance.

A stronger Canadian dollar also played a role in ETF flows last month as many investors fled currency-hedged versions of U.S. equity funds in favour of non-hedged versions. This translated into over $250 million in outflows from CAD-hedged U.S. equity funds versus inflows of $600 million for non-hedged U.S. equity ETFs.

Record territory with four months to go

Other highlights in August included inflows of $449 million into fixed income ETFs, and another $437 million into exchange traded funds replicating global equity indices in developed markets.

All in all, nearly $3-billion in net new business was added during the month, bringing total flows for the year to $18.9 billion. This surpasses the previous calendar year record of $16.8 billion set in 2015, reiterating the growing popularity of ETFs among Canadian investors.

*All amounts referenced throughout this article are in Canadian dollars unless otherwise noted.

Alan Green is a director and head of iShares Capital Markets for BlackRock Canada. He is a regular contributor to The Blog in Canada.

iShares® ETFs are managed by BlackRock Asset Management Canada Limited. Commissions, trailing commissions, management fees and expenses all may be associated with investing in iShares ETFs. Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”). Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). TSX is a registered trademark of TSX Inc. (“TSX”). All of the foregoing trademarks have been licensed to S&P Dow Jones Indices LLC and sublicensed for certain purposes to BlackRock Institutional Trust Company, N.A. (“BTC”), which in turn has sub-licensed these marks to its affiliate, BlackRock Asset Management Canada Limited (“BlackRock Canada”), on behalf of the applicable fund(s). The index is a product of S&P Dow Jones Indices LLC, and has been licensed for use by BTC and by extension, BlackRock Canada and the applicable fund(s). The funds are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, any of their respective affiliates (collectively known as “S&P Dow Jones Indices”) or TSX, or any of their respective affiliates. Neither S&P Dow Jones Indices nor TSX make any representations regarding the advisability of investing in such funds.

© 2017 BlackRock Asset Management Canada Limited. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. Used with permission. 259142

Join the Conversation