July Commentary on the Canadian ETF Industry
Overall Industry Growth through time:
Industry AUM - Canadian ETF Industry assets lost ground modestly in July, wrapping up the month with CAD $130.6 Billion of AUM (-0.25% month-over-month, from CAD $130.9Billion as at mid-year point). The blistering pace of net issuance recorded to June 30 has thus been significantly slowed, however, seasonal factors as well as the overhang from one specific ETF in July (XIU: -CAD $1.5 Billion outflows) suggest this is transitory and something new entrants in the space ought to assist in mitigating as they gain momentum in their efforts.
Impact: Creations/Redemptions - July 2017
[1]
Of note:Continued strength in the Canadian Dollar remains detrimental as far as the value in CAD of ETFs providing exposure to US, respectively International and Global Assets (on an unhedged basis). That said, taking advantage of this strength to diversify away from our in-grained home-biasought to result in additional flows toward ETFs providing International exposure. Evolve followed up on its earlier announcementby filing for several additional ETFs, this time of a “thematic” nature.
Growth:AUM as at July 31 reflects a 23.3% increase from their corresponding level a year ago. To the mid-year point, Tier I providers (iShares; BMO ETFs, Vanguard, and Horizons) are estimated to have captured 75% of net inflows in the past 12 months, Tier II (PowerShares, RBC GAM, First Asset, and Purpose) 15.4%; leaving the remaining 15 Tier III industry participantsto lay claim to the remaining 9.6%. Year-to-date aggregate net issuance stands at CAD $15.7 Billion, marginally higher than as at June 30th, with, as noted previously, record issuance seen in 2015/2016 are on track to be exceeded.
Net creations by Asset class:Net creations across ETF providers for July 2017 arepresented in the following table. Equity inflows turned negative on account of XIU, fixed income flows slowed as well, while Preferreds flows, though lower than the spike seen in June, continue to be strong, with the asset class favorablyperceived against a backdrop of rising rates.
Net Creations by Asset Class (and provider)
The latest as far as top 25 ETFs across providers (AUM change vs prior month, respectively net creates):
ETFs enjoying Top Creations for the month, respectively suffering the largest redemptions in July (by provider):
May/June/July 2017 ETF launches:
Of note: WithFirst Asset eliminating its advisors’ Series ETFs this past month, iShares and First Trust are the only two providers still offering Advisors’ Series ETFs (embedded fees). As earlier noted, while aggregate industry assets have continued to grow rapidly in recent years, Advisors’ Series ETFs saw their overall AUM decline sharply – suggesting that Advisors embracing ETFs no longer need the inducement of embedded commissions as part of their business model, respectively that those that did weren’t being sold on the idea of incorporating ETFs as part of the solutions they provide their clients anyways
[1]The Tiers are based on a reflection of relative scale and overall breadth of product.