Climate … Whaaat? (Perspectives – June 2017)

Climate … Whaaat?  Having left European leaders last week unimpressed, including in relation to article 5 and NATO, US President Donald Trump has now succeeded in drawing their ire – as he pulled the US out of the Paris Accord.

Recent Developments:

  • May Payrolls underwhelm – but June’s FED hike is still seen as in the cards, all the while the odds of one in September have apparently retreated markedly, leaving a December hike more likely
  • Risk on? or off? – While the prospect and ultimate win of the French presidency contest by Emmanuel Macron boosted “risk on” as well as the EURO last month, the possibility of early election in Italy may reintroduce some risk off caution
  • FED – the FED is still expected to go for another hike this month, although recent speeches had suggested a reduced commitment to the pace earlier telegraphed … For his part, BlackRock’s Rick Rieder expects both a June and a September hike, likely followed in December by the onset of the FED gradually, but certainly slowly, unwinding its balance sheet…
  • Theresa May – is seen remaining PM after Elections to be held June 8th, but here lead has considerably shrunk, causing weakness in Cable
  • OPEC – Extended production cuts by a further 9 months, which markets reacted by … selling on the news. Interestingly, I have read an article suggesting what OPEC is really after is unwinding the contango present in the oil curve, as a way of weakening the profitability of Shale Cos. This hasn’t worked thus far – and … if that is what they are after, why not try themselves to sell into the futures market?
  • NAFTA – The Nafta clock has started – where will negotiations lead, with a protectionist US President? Will mutual interest prevail, OR will AMERICA FIRST result in unintended consequences triggering undesirable outcomes for all?

 

ETF Industry Highlights – May 2017

May 2017  – saw AUM pick up by an additional CAD 3.3 Billion, to near the CAD 130 Bn mark (CAD 129.6Bn), this time WITHOUT positive market contribution, which in the aggregate is actually estimated to have detracted $451MM from assets – which record net inflows helped overcome (+CAD 3.76Billion net; CAD 4.7Billion gross, offset by some CAD 900MM of retractions).

With this all-time record in net creates for the month – though acknowledged to have been boosted by CAD 1.09 Billion of inflows in XIU which could be transient (subject to future flows reversal) – the pace of growth in the industry remains strong: up 28.9% relative to May 2016. Year-to-date creations of CAD 12.3 Billion highlight continued favorable momentum in flows – something action on the regulatory front should serve to further amplify – if action there ever ends up being…

Following on the heels of Desjardins and Manulife, which joined the ranks of providers in April, May saw the arrival of Excel Funds ETFs (launching ETFs fitting the ETF Strategist category), respectively that of Franklin Templeton, which joined the ranks of the “Smart” or Factor (multi factor even) set.

Of note, Manulife looks to have enjoyed some early success with their DFA ETFs, while on a smaller scale, Wisdom Tree looks to have finally generated some creates of size, after pretty much sitting out any creations since their launch almost a year ago …

Breakdown of net new creations – Tier 1 players (iShares; BMO ETFs; Vanguard; and Horizons ETFs) are estimated to have accounted for 82.6% of net new creations for the month, while Tier 2 (RBC GAM ETFs; Purpose Investments; PowerShares; and First Asset) captured 9.4%, leaving Tier 3 (15 providers) at an 8% share of net new issuance, over 3/4 of which went to Manulife (56%) and Mackenzie (21%).

Canadian ETFs – Aggregate assets  across the Canadian ETF industry rose $3.3Billion in May (2.6%) relative to their level as at April 30.

Record aggregate creations (+$4.7Bn) were offset by retractions totalling CAD 929MM – the resulting net creations of CAD 3.76Billion itself an all-time record.

ETF industry Highlights – Flows for May 2017

  • Equity flows – Rose markedly from April’s level, though noted inflows into XIU comprised the bulk of the increase (overall: +$2.35 Billion, vs +$805MM in April). Besides iShares, BMO saw the strongest net creates on the equity side on the month: +$757MM.
  • Fixed income flows –  Inflows into Bonds totalled +$1.2 Billion in May with iShares; BMO; Vanguard; and Powershares leading the issuance in this asset class (April: +$1.0Bn, vs March: +$1.2Bn).
  • Preferred Shares – Flows into Preferreds slowed notably: +$94.5 MM (April: +$184MM) – interestingly as the month saw performance by the asset class reverse a portion of the strong gains experienced in 2017.

 

Summing up creations/redemptions versus market impact for May 2017:

 

Latest market share numbers (with/without XIU):

 

ETFs by the numbers: May 2017

  • 23 ETF providers. Tier 1: 89.7% of AUM ($116.3 Bn); Tier II: 8.5% of AUM ($11 Bn); Tier III: 1.8% of AUM ($2.3 Bn).
  •  28.9% y/o/y AUM Growth – placing the industry on solid footing for a record year, with record net issuance to-date underpinning hopes to see the records of 2015/2016 easily surpassed …
  • Aggregate AUM: $129.6Billion (31/5/17)
  • +$3.3 Bn: AUM increase from Apr 30, 2017 (iShares: +$865MM; BMO ETFs: +$1.22Bn; Vanguard: +$414MM; Horizons: +$157MM;  First Asset: +$82MM; PowerShares ETFs: +$153MM; RBC GAM ETFs: +$103MM; FT Portfolios: +$19.6MM; Purpose Investments: +$4.0MM; Manulife: +$170MM).

ETFs in May 2017: Aggregate Creations/Redemptions across ETF providers:

equities fixed income preferreds portfolios commodities May-17 Flows by Category
$1,012,390,276 $227,588,455 $9,991,074 $1,703,117 $- $1,251,672,922 ishares
-$86,518,503 $57,935,227 -$2,772,901 $10,687,556 $2,398,091 -$18,270,530 ishares claymore
$72,877,985 $86,848,584 $22,673,584 $5,137,044 $41,189,224 $228,726,422 horizons
$757,373,816 $489,396,492 $11,251,705 $5,401,427 $- $1,263,423,441 bmo etfs
$40,957,818 $26,015,958 $40,190,063 $- $- $107,163,838 rbc gam etfs
$5,246,065 $2,991,060 $- $- $- $8,237,125 td am
$47,658,162 $34,584,598 $177 $- $- $82,242,938 first assets
$14,550,815 $133,428,092 $4,793,753 $3,311,241 $- $156,083,900 powershares
$241,129,239 $142,179,187 $- $- $- $383,308,425 vanguard
$10,290,358 $7,821,005 $- $979,351 $- $19,090,715 ft portfolios canada
$10,212,456 -$12,031,142 $6,821,666 $2,483,257 $13 $7,486,250 purpose
$- $- $- $- $- $- auspice capital
$5,774,294 $6,280,473 $- $- $- $12,054,766 questrade
$1,565,775 $1,565,775 lysander
$6,901,129 $- $- $- $- $6,901,129 hamilton capital
$3,355,760 $- $- $- $- $3,355,760 sphere etfs
$24,610,815 $37,723,730 $- $- $- $62,334,545 mackenzie etfs
$3,843,975 $3,843,975 Wisdom Tree
$11,124,500 $- $- $- $- $11,124,500 Harvest Portfolios
-$1,282,393 $- $- $- $- -$1,282,393 AGFiqAssetMan
$- $- $- $- $- $- Desjardins
$169,314,135 $- $- $- $- $169,314,135 Manulife
$- $- $- $4,318,275 $- $4,318,275 Excel ETFs
$2,349,810,702 $1,240,761,718 $94,514,896 $34,021,267 $43,587,328 $3,762,695,911

Top creations; Top redemptions – by provider (with tickers):

ETF Provider Net Creations: Top Creations: Top Redemptions:
bmo etfs $1,263.4 ZAG; ZWE; ZCM; ZUQ; ZCS; ZLE; ZMP; ZEA; ZWB; ZDM ZSP; ZFL; ZBK; ZWH; ZLU; ZLI; ZRE; ZMT; ZIN; ZJO
ishares $1,251.7 XIU; XLB; XEF; XAW; XSH; XEC; XSE; XIN; XCB; XHB XIC; XFN; XSP; XDV; XRE; XGD; XMC; XBM; XMD; XWD
vanguard $383.3 VSC; VFV; VSB; VAB; VCN; VEE; VE; VEF; VXC; VUN VDY; VCE
horizons $228.7 HXT; HPR; HFR; HOU; HYI; HUF.U; HAC; HNU; HBB; HTB HXS; HPR.A; HGU; HAC.A; HAZ.A; DLR; HEX.A; HAL.A; HAB.A; HVI
Manulife $169.3 MULC.B; MINT.B; MCLC N/A
powershares $156.1 PGL; PDC; PSY; PSB; ULV.F; PTB; TLV; QQC.F; PPS; GHD.F PXU.F; PSY.U; PXC; PFH.F; ELV; ILV
rbc gam etfs $107.2 RPF; RID; RBO; RLB; RUD; RCD; RUDH; RQH; RQJ; RGRE RQE; RPDH
first assets $82.2 VXM.B; FIG; RIT; BXF; TXF; WXM; ZXM; UXM.B; CIC; FSF FGB; XXM; XXM.B; FXM; ZXM.B; FQC; XXM.D; YXM.B; RWU; YXM
mackenzie etfs $62.3 MUB; MEE; MKC; MFT; MGB N/A
ft portfolios canada $19.1 FHQ; FSL; FHC FDE; FUD
questrade $12.1 QCP; QRT; QGE N/A
harvest portfolios $11.1 HHL; HHL.U N/A
td am $8.2 TPE; TDB; THE N/A
purpose $7.5 PID; RSP; PYF; PHR; PBD; PUD PSA; PDF; PHW
hamilton capital $6.9 HFY; HBG N/A
Excel Funds $4.3 EXGB; EXGG N/A
wisdom tree $3.8 EHE N/A
sphere etfs $3.4 SHZ; SHA N/A
lysander $1.6 PR N/A
auspice $- N/A N/A
Desjardins $- N/A N/A
AGFiqAssetManag -$1.3 N/A QCD
ishares claymore -$18.3 CBO; XQB; FIE; CLF; CDZ; CGR; CBH; SVR; CLG; CWW CUD; CRQ; CEW; CLU; CSD; CLU.C; CBO.A; CPD; CMR; CIE
$3,762.7 Source: ETFi DB as at May 31, 2017
  • Min/Low Vol; Risk Weighted ETFs –  Flows into Min/Low Vol were modest at +$57.3MM.
  • Dividend ETFs – Similarly, net inflows into Dividend ETFs came in at a relative low of +$56.9MM (vs stronger numbers in both April and March: +$157MM in April, vs 178MM in March).
  • High Yield  – Inflows into the HY category remained healthy (compared to Low Vol and Dividend), though of the prior months +$260MM (May: +$137MM).
  • EM flows – Rose markedly further +$205MM (having already picked up in April: +$93MM relative to March:+$48.2MM).
  • Europe – Picked up further, influenced in no small part by strong net issuance at BMO in the category: +$185MM (April: +$95.7MM; March: +$38MM)
  • Looking across the entire Factors Spectrum Incl. multi-factors (akin to multi-vitamin?), aggregate net issuance is estimate at +$922 MM (HY excluded).
  • Sectors – For a second month running, outflows out of US Banks (ZBK; ZUB) – on a likely continuation of reduced bullishness relative to the prospect of a reduced regulatory burden, respectively less bullishness relative to the yield environment (yields backed off recently…). In Canada: some outflows out of XFN (financial sector), but some inflows into Covered Call CDN Banks (ZWB) and some into ZEB.  Oil and gas related: some inflows into XEG and HOU, inflows which obviously would have been disappointed by the post OPEC performance of the price of Oil if they entered the trade prior to it … (as the extension of production cuts is seen currently as too little, respectively not long enough, given a return of Shale to higher production levels).
  • Other – Medical Marijuana, which had made a splash last month in its debut, reaising over CAD 100MM mark in record time, experienced some weakness, and modest outflows. The theme though, while expected to remain highly volatile, could be of the longer lived nature, explaining why money there might be “dedicated”, and sticky …
  • Preferred Shares – RBC’s Active Pref ETFs continues to top their monthly sales, with this ETFs AUM now through $400MM of AUM

 

Comments are closed.