30th Anniversary … (Perspectives – October 2017)

30th Anniversary … October 19th will mark the 30th Anniversary of Black Monday … Remarkably, markets these days appear – if not blissfully unaware of any and all manners of problems, risks and challenges – then certainly willing to overlook them. Will that change as the FED continues on its normalization path? September saw the FED confirm the path ahead for FED Funds as well as the timing of the onset of balance sheet reduction. Thus far … NP.

Will it remain smooth sailing?

Latest Developments:

  • PM Justin Trudeau – Surprises provinces by suggesting 50/50 split with them in relation to Marijuana sales, which are to be legalized here in July 2018
  • From here on it, Profits – Will be THE critical support for markets … Thankfully, the Global picture has seen improvements of late …
  • September – Saw a flurry of new ETFs being launched => Click HERE!
  • Recent CSA discussion regarding embedded compensation – Postview: Click HERE! (BTW … the ORIGINAL Glorianne Stromberg report calling the industry out on the conflict of interest issue … published in January 1995 (!!!) turning 23 in January 2018 … How long does it really take to look after conflicts of interest issues and side with investors whose money it is, after all, one might ask?)
  • German Finance Minister Schauble – to retire.
  • North Korea – Not a pretty scene with “Rocket Man” on the one side of it, and possibly “trigger prone” Trump on the other …
  • Spain – Problems, problems … with the Spanish government dealing harshly last Sunday with would be separatists Catalans … and being widely criticized for it.

ETF Industry Highlights – September 2017

September 2017  – As is often the case, significant in/outflows out of Canada’s largest ETF (XIU) skewed the month’s total net inflows picture, this time, taking it to a very modest net positive +CAD 48.9MM (XIU outflows for September est: CAD 1.8 Billion).

Aggregate AUM, however, climbed by some CAD 1.5 Billion from their Aug 31, 2017 levels, on account of supportive market action (incl some renewed CAD weakness toward month-end). Sept 30, 2017 AUM: CAD 135.4Billion (+1.1% from Aug 31 level of CAD 133.9 Billion). y/o/y growth: +26.1%.

September net new creations – While Tier 1 players overall ended September in negative net creates territory due to XIU’s outflows, Tier II and Tier III players enjoyed positive net creates to the tune of +CAD 290MM (Tier II) respectively +CAD 221MM (Tier III). Amongst Tier II, RBC GAM ETFs registered the strongest net creates of the group, bolstered by additions to its ETF line up. Amongst Tier III Players, WisdomTree seems to have managed to generate some momentum (+CAD90MM of net sales for September).

Canadian ETFs – Aggregate assets  across the Canadian ETF industry rose 1.1% in September from their end of August levels, respectively 26.1% on a y/o/y basis.

Aggregate creations and redemptions were closely matched last month: creations: +CAD 3.69 Billion; retractions: -CAD3.64 Billion.

ETF industry Highlights – Flows for September 2017

  • Equity flows – Turned negative on account of XIU (-CAD458MM in the aggregate), however removing XIU’s impact, inflows into equities would have been positive to the tune of +CAD 1.36 Billion. Within iShares line-up, XUU (US Total Market) recorded strong inflows for the month (+CAD794MM).
  • Fixed income flows –  Closely matched their issuance level for the prior month (September: +CAD357MM; August: +CAD374MM.  Residual anticipation of rising yields in the period ahead likely will continue to keep levels in the category in check.
  • Preferred Shares – Flows into Preferreds remained steady (+CAD160MM in September vs +CAD 165MM for August) – with the asset class status as an area to favor against a rising yield backdrop continuing to push flows into the category. Interestingly though, BMO’s ZPR saw modest outflows (which is a rather rare occurence …). As for RBC’s Actively managed Preferred Share ETF (RPF), a year after its entry into service, so to speak, AUM has handily crossed the CAD 500MM mark (CAD 537.3MM to be more precise as at 30/9/2017).

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

 

Bottom line: net creates were close to non-existent last month, leaving market gains to prop up the category to a new record of CAD 135.4 Bn as at 30/9.

Latest market share numbers (with/without XIU):

 

Of note: the gap between iShares (ex-XIU) and BMO ETFs is as narrow as it has ever been … Suggesting H2, 2017 could see BMO ETFs aggregate AUM surpass that of iShares if XIU is left out of the picture … Who would have predicted that back in 2009?

ETFs by the numbers: September 2017

  • 24 ETF providers (Including Evolve, which launched its first 4 ETFs last month – 3 on the equity side HERS; CYBR; and CARS, and one in the Pref space: DIVS). Of note – look for Questrade’s ETFs to be folded into WisdomTree’s offering, effectively taking one provider out of the picture … Market share highlights: Tier 1: 88.7% of AUM ($120.1 Bn); Tier II: 8.5% of AUM ($11.6Bn); Tier III: 2.8% of AUM ($3.7 Bn).
  •  26.1% y/o/y AUM Growth –with record net issuance to-date highlighting momentum that will see 2017’s overall take easily exceed their earlier 2015/2016 levels
  • Aggregate AUM: $135.4Billion (30/9/17)
  • +$1.49Bn – August’s AUM increase versus Aug 31 (iShares: -$352MM; BMO ETFs: +$666.6MM; Vanguard: +$207MM; Horizons: +$342MM;  First Asset: +$39MM; PowerShares ETFs: +$7MM; RBC GAM ETFs: +$298MM;  Purpose Investments: +$31MM; Mackenzie: +$71MM; Franklin Templeton+$3.9MM; WisdomTree: +$92.8MM).

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

equities fixed income preferreds portfolios commodities Sep-17 Flows by Category
-$980,838,442 -$4,919,234 $22,537,916 -$21,426,679 $- -$984,646,438 ishares
-$91,171,157 -$59,255,064 $16,877,316 $2,062,091 $5,624,745 -$125,862,069 ishares claymore
$265,016,463 -$62,799,999 $65,576,760 -$907,350 -$6,433,714 $260,452,160 horizons
-$19,946,800 $324,534,725 -$10,195,435 $- $- $294,392,490 bmo etfs
$124,287,413 $100,160,225 $40,188,170 $- $- $264,635,808 rbc gam etfs
$- $2,908,320 $- $- $- $2,908,320 td am
-$48,226,765 $46,964,243 $- $3,038,783 $- $1,776,260 first assets
$31,410,833 -$28,596,479 $- $538,001 $- $3,352,355 powershares
$173,192,195 -$79,695,548 $- $- $- $93,496,647 vanguard
$22,142,290 -$2,906,707 $- $- $- $19,235,583 ft portfolios canada
$1,678,391 -$4,999,880 $23,178,203 $- $174 $19,856,888 purpose
$- $- $- $- $- $- auspice capital
$3,618,900 $2,052,970 $- $- $- $5,671,870 questrade
$2,116,710 $2,116,710 lysander
$5,233,839 $- $- $- $- $5,233,839 hamilton capital
$- $- $- $- $- $- sphere etfs
$20,296,090 $49,617,818 $- $- $- $69,913,908 mackenzie etfs
$16,082,500 $73,437,255 $- $- $- $89,519,755 Wisdom Tree
$13,658,625 $- $- $- $- $13,658,625 Harvest Portfolios
$- $- $- $- $- $- AGFiqAssetMan
$- $- $- $- $- $- Desjardins
$5,145,350 $- $- $- $- $5,145,350 Manulife
$- $- $- $- $- $- Excel ETFs
$- $- $- $- $- $- Franklin Templeton
$6,049,514 $- $2,000,000 $- $- $8,049,514 EvolveFunds
-$458,420,275 $356,502,644 $160,279,641 -$16,695,154 -$808,795 $48,907,575

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

ETF Provider Net Creations: Top Creations: Top Redemptions:
bmo etfs $294.4 ZAG; ZDY; ZCN; ZID; ZFS; ZWE; ZPL; ZWB; ZSP; ZCS ZUE; ZEB; ZLU; ZBK; ZDM; ZPR; ZUB; ZEF; ZGI; ZMT
rbc gam etfs $264.6 RPF; RCUB; RID; RCSB; REEM; RGGB; RINT; RPD; RUSA; RCAN RCE
horizons $260.5 HXT; HOD; HPR; HXDM; HVU; HNU; HMMJ; HUN HOU; HTB; HVI; HBB; HIX; HXU; DLR; HGD; HEA.U; HSU
vanguard $93.5 VIU; VE; VCN; VEE; VSP; VFV; VUS; VXC; VDY; VA VVU; VSB; VSC; VCE; VAB
wisdom tree $89.5 CAGS; CAGG N/A
mackenzie etfs $69.9 MUB; MFT; MGB MXU
purpose $19.9 RPS; PDF PSA; PBI
ft portfolios canada $19.2 FST; FHC; FHQ; FDE FSL; EUR
harvest portfolios $13.7 HBF; HHL HUL
EvolveFunds $8.0 HERS; CARS; CYBR; DIVS N/A
questrade $5.7 QGE; QCP N/A
hamilton capital $5.2 HFMU.U; HBG N/A
Manulife $5.1 MINT.B; MUMC; MUMC.B N/A
powershares $3.4 PGL; TLV; PDC; PXS; QQC.F PSB; PFL; PXU.F; PTB; GHD.F
td am $2.9 TDB N/A
lysander $2.1 PR N/A
first assets $1.8 FSB; FIG; REIT; BXF RWU.B
auspice $- N/A N/A
sphere etfs $- N/A N/A
AGFiqAssetManag $- N/A N/A
Desjardins $- N/A N/A
Excel Funds $- N/A N/A
Franklin Templeton $- N/A N/A
ishares claymore -$125.9 CPD; CLG; CBH; XQB; CGL; CWW; FIE; CGR; CEW CDZ; CBO; CMR; CBQ; CJP; CLF; CUD; CSD; CLU.C; CVD
ishares -$984.6 XUU; XIC; XFI; XFF; XUS; XEF; XEG; XAW; DXP; XBB XSP; XSB; XFN; XGB; XMH; XMW; XBZ; XAL; XGD
$48.9 Source: ETFi DB as at September 30, 2017
  • Min/Low Vol; Risk Weighted ETFs –  Flows into Min/Low Vol turned modestly negative last month -CAD 32.5MM.
  • Dividend ETFs – Dividend ETFs  picked up +CAD154MM, relative to September +$119MM.
  • EM flows – Some positive flows into the category in September primarily at BMO ETFs…
  • Europe – Inflows slowed somewhat in September relative to their recent pace: Sept: +$101MM (Aug:+$135MM; July: +$136MM).
  • High Yield – Inflows slowed further from August: +$53MM (+$80.5MM in August), with Mackenzie accounting for the bulk of it (+$39.6MM).
  • Sectors – Financials: Flows remained negative for XFN last month, and flows  for US Banks were also to the negative, positive performance notwithstanding.  … As for the Cdn Banks square, anyone looking for a sense of what others are up to would note that inflows into the covered call banks ZWB continued, while EW ZEB saw outflows…
  • Energy – XEG (iShares S&P/TSX Capped Energy) enjoyed some inflows in September, reversing part of the prior month redemptions (+CAD39MM September vs -CAD 78MM in August).
  • Preferred Shares – The Pref category continues to enjoy steady sales: + CAD160MM in September. With the BoC surprising some market participants by hiking last month, is another hike in the offing for October? Or is the most recent “data dependent” commentary a sign that now that the earlier insurance cuts have been removed, we are on hold for now?

 

 

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