Depending on which data set you look at, October was either a great month or a decidedly spooky one. According to a new report from London-based ETFGI, October saw global exchange-traded funds (ETFs) take in US$35.8 billion—not a record, but still a pretty big figure.
It was different story for Canada, however, where Canadian-listed ETF saw net outflows of US$85 million with equity-based products leading the way.
Canada did, however, follow the global trend with larger flows into fixed income with net inflows of US$319 million (global inflows hit US$35.8 billion in October).
But there was another key differentiator for Canada: commodities. And in this area (unlike equities) Canada came out ahead. While global commodity-based ETFs experienced outflows of US$833 million, we got a boost at home with Canada-listed commodity ETFs experiencing a modest but positive US$13 million in net inflows.
For Canada’s ETFs, there are some small but subtle differences when it comes to investors and their shifting preferences.
As ETFGI managing partner Deborah Furh noted:
“October was a challenging month with increasing macroeconomic concerns over deflation fears in Europe, the ECB’s stimulus program, Germany cutting GDP forecasts due to “geopolitical crisis,” dismal employment figures in France, 25 of around 130 European banks having reported to have failed the European Central Bank’s “stress test,” and questions over the U.K.’s continued membership in the European Common Market.
Another interesting story in the month’s ETF flows reporting, BlackRock has noted a resurgence of interest in high-yield corporate bond ETFs, which investors punished quite brutally earlier this year. According to BlackRock, high-yield corporate bond ETFs had their best month of 2014, putting them on track to recover from the summer’s sell-off. All told, high-yield ETFs pulled in US$2.3 billion. Why? Investors are taking another look at the low default rates (contrary to earlier concerns over valuation risk). Interest has also been buoyed improving U.S. growth and wider spreads since the July sell-off, which has made high-yield corporate bonds look more favourable.