Canadian ETFs set first-half inflow record of $22.4 billion
On the fixed-income side, it noted how the market became one-directional in March, with the vast majority of investors trying to sell their holdings in order to raise capital and rebalance in the face of steep declines in equities. That resulted in wide price dislocations between fixed-income ETFs’ market prices and their net asset values – a phenomenon critics said proved bond ETFs’ weakness, but was later attributed to the ETFs’ superior ability to effect price discovery among market participants as liquidity in the underlying bond market dried up.
“[W]e saw flows move from aggregate exposures to segmented ETFs as investors looked to capitalize on specific dislocations across credit and term,” BMO GAM said. Some of the action also reflected investors rotating into more defensive fixed income in a bid to offset heightened equity risk.
Equity ETFs emerged as a distinct winner, with net inflows exceeding $15 billion this year as of June 30. That was driven to a large degree by investors seeking broad-market exposure as they sensed opportunity from attractive valuations and prospective growth during the recovery from the COVID-19 selloff.
“Gold was a huge winner to start the year, in terms of asset gathering and performance,” the report said, noting how investors shaken by worsening economic data, inflation expectations, and second-wave fears looked for a safe-haven asset class. Gold prices ended the second quarter at more than $1,800 per ounce, and gold equity issuers have been among the few sectors to post strong positive earnings.
BMO GAM also reported increasing investor traction for factor exposures. Low-volatility strategies offered a measure of downside protection, but were not able to bounce back as strong as the broader market. The quality factor has outperformed as companies with low debt, stable cash flows, and high returns on equity demonstrated their resilience against market stress.