According to data from the Investment Funds Institute of Canada (IFIC), ETF sales surged to nearly $10.1 billion for the month, with every category experiencing positive net sales. Bond ETFs emerged as the standout performers, attracting the lion’s share of investments.
IFIC’s report highlighted that June saw the highest-ever sales of bond ETFs, underlining a significant shift towards fixed-income securities among investors seeking stability and consistent returns. Tiffany Zhang, Vice President of ETFs and financial products at National Bank Financial, pointed out that a substantial portion of these bond ETF investments stemmed from a major institutional investor making strategic, long-term allocations to various BMO ETFs.
For instance, BMO’s Aggregate Bond Index ETF (ZAG) alone witnessed inflows exceeding $2 billion in the first half of June, a testament to growing institutional confidence in fixed-income instruments.
The momentum in ETF sales throughout the first half of 2024 has been striking, totaling $32.6 billion, marking an impressive 80 per cent increase compared to the same period last year. In contrast, mutual funds faced net redemptions totaling $1.9 billion, continuing a trend observed over the past three months.
Despite this, bond mutual funds managed to attract around $1.2 billion in investments during June, indicating a nuanced investment landscape where fixed-income options are gaining favor even as broader mutual fund sales struggle.
Equity ETFs also continued to attract significant investor interest, comprising approximately two-thirds of total ETF sales since January. Vanguard’s S&P 500 Index fund (VFV.TO) emerged as a standout, becoming Canada’s largest ETF by assets under management after attracting $2.9 billion in investments.
This surge in equity ETFs was largely driven by funds focused on the U.S. market, reflecting robust investor confidence in the performance of American equities amidst favorable market conditions.
However, not all segments of the ETF market experienced growth. Specialty and money market ETFs saw diminished sales compared to previous years, which Zhang attributed to a heightened risk appetite among investors seeking higher yields in other segments of fixed income or alternative investments.
Looking forward, industry experts are cautiously optimistic about the trajectory of ETF investments in the latter half of 2024. With net assets in both ETFs and mutual funds climbing to $440.5 billion and $2.02 trillion, respectively, by the end of June, the Canadian investment landscape appears poised for continued evolution and adaptation to shifting economic conditions and investor preferences. As markets adjust and opportunities emerge, the resilience and adaptability of ETFs are likely to play a pivotal role in shaping Canada’s investment outlook in the coming months.
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