Random observations from recent performance data … (to Jan 31, 2017)

So January came and went, the S&P/TSX 60 ETF rose a mere 1.22%; the S&P 500 CAD hedged one 1.64%; EAFE International hedged brought in 0.53%; and EM rose a more substantial 3.68% versus the end of December 2016. Nasdaq (CAD hedged) fared better, at +5.05% for January.

As I scan through the performance “rolls” for January though, a few things come to light – some possibly worth passing along, so here we go:

  • The Pref square continues to perform well – The passive benchmark ETF for Prefs is up 10.59% since the end of July 2016 – and this despite the risk reiterated recently by the BoC’s Poloz that a rate cut was still not off the table. RBC’s relatively recent entry in the space has already accumulated over $200 MM of AUM, and is – performance-wise – in the early returns, showing results exceeding those of its passive ZPR competitor, as well as (for now?) that of other actively managed pref ETFs such as HPF and HPR. I’d love confirmation though as to what % of AUM are “real” new inflows into Pref ETFs, versus what I’ve suggested would happen – namely that Advisors might be encouraged to turn their books into RPF in exchange for the diversification and active management it delivers.

At the other end, First Asset’s Actively Managed Pref ETF , while also tagging on assets – though not at the same clip, appears a) overpriced, and b) underperforming ie it is being left behind by its peers. That – if you ask me, will make it hard to compete for flows, making each passing month that its pricing is excessive relative to peer stand out all the more when it doesn’t otherwise keep up on the investment front by producing returns offsetting the difference…

  • Dividend ETFs – Several High Dividend, or Dividend ETFs didn’t exactly fare that well last month. If looking to add to cash flow generation in your portfolio, some of them might be worth looking at … although if January’s performance trend continues …

Europe High Dividend Covered Call and International Dividend CAD Hedged each declined >7%. The former though – high dividend ok. covered call on top = high high dividend? what about the upside being capped? perhaps a little too cute.

  • Momentum versus Value – amongst other things, 2016 was the year that saw Value rehabilitated, if I can put it that way. For January, in Canada, Value continued to outpaced Momentum (+2.95% vs +1.30%). For Canada, it is the relative performance in past 3, 6, and 12 months that is staggering as far as differential. As an example, 3 months trailing: FXM:+11%; WXM: +1.84%.

International and US were mostly neck and neck in January, while on a trailing 3, 6, and 12 months basis, Value rules: 6 months, for instance, +13.6% for value, versus 4.21% for momentum. Will that continue? As for international, 6 months has the same kind of differential: +12.69% for Value, versus -3.65% for momentum.

overall that raises the question: How long will that continue? Remember once trends are in place, they can last …

A ray of hope for momentum? the above contrasts value and momentum looking at non CAD hedged First Asset ETFs. Looking at Vanguard’s Global Factors ETFs, Momentum was ahead of Value last month (+0.28%, versus -1.09%).


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