Canadian ETFs See Record Inflows of $6 Billion in February

National Bank's report reveals highest level of inflows in 11 months, surpassing $400 billion in total assets. Last peak seen in March 2023 amid major economic shifts.

Investors showed strong interest in Canadian ETFs during the month of February, with a significant $6 billion in inflows pushing total assets to over $400 billion. According to National Bank’s Canadian ETF Flows report, this surge in inflows marked the highest level in 11 months. The last time such a peak was reached was in March 2023, amidst major macroeconomic shifts, U.S. regional bank failures, and rapid changes in interest rates and business conditions.

The latest increase in inflows can be attributed to investors heavily investing in equities, which accounted for $4.5 billion of the total inflows last month. The majority of these investments were directed towards U.S. equities ($2.8 billion) and International equities ($1.5 billion), with Canadian equity ETFs receiving a smaller portion of just $233 million. Leading sectors for equities included healthcare and utilities, while energy and financials experienced minor outflows.

The seasonal trend of investors bolstering their RRSPs before the deadline likely contributed to the gains seen in 'all equity' portfolio ETFs. Equity ETFs have dominated the Canadian ETF market in 2024 so far, representing 75% of the nearly $10 billion in total inflows. This marks a shift from the previous year when fixed income ETFs were more prominent.

On the other hand, fixed income inflows exceeded $1 billion in February, with a focus on Canada corporate bond ETFs, particularly ultra-short term, short term, and target maturity ETFs, which saw $684 million in inflows. Foreign bond and long-term bond ETFs also attracted investor interest.

However, money market funds experienced net outflows of $228 million, and there was a continued decline in crypto ETFs with $99 million in outflows. This trend has persisted since the launch of spot Bitcoin ETFs in the United States, where significant inflows of US$36.5 billion have been recorded since early January.

In terms of Canadian ETF providers, RBC iShares and Vanguard stood out in February, each attracting over $1 billion in inflows. Conversely, Horizons, CI, and Purpose saw lower numbers than usual due to their significant exposure to cash alternatives or crypto-asset ETFs.

The Canadian ETF market experienced a notable influx of investments in February, driven primarily by strong interest in equities and fixed income securities. The shifting preferences of investors reflect changing market conditions and investment strategies.