2018 – Onward & Upward? (Perspectives – December 2017)

2018 – Onward & Upward? 2017 will by then have gone down as the year when volatility didn’t return, Bitcoin rocketed upward, “Normalization” took hold, the economic recovery turned Global and synchronized, and … seemingly no matter what the headlines, stocks rose … (Notice how I didn’t mention a certain prominent US political figure here …)

The USD disappointed, Europe was strengthened by French President Macron, while Germany’s Merkel was weakened, yet all in, the EUR gained markedly post French Presidential elections, while in Japan, Abe defied skeptics. Talking about rocketing upward, North Korea’s “Rocket Man” fired countless missiles, risking the ire of a US President who threatened Fire and Fury … Pray reason prevail … Though coming from one “Donald”, thinking about reason perhaps is akin to defying it…

What of 2018? Another year into the longest, nay, the second longest recovery on record. They say Bull markets don’t die of old age … BUT that rather more usual is for policy missteps to be the culprit. Will continued sychronized global growth bring policy miscalculations? Will the rate hikes penciled in prove problematic? robots? politics? demographics? Hard to tell, but the higher stocks and valuations, the greater the risk – should gravity reassert its pull…

Latest Developments:

  • OPEC – extends production cuts to the end of 2018
  • North Korea – continues on playing games with missile launches … a dangerous game
  • Canada – Strength in employment numbers sees CAD regain some ground
  • Barron’s – Speaks to attractive relative valuations of Swiss equities and otherwise highlights further upside for US Banks.
  • Bitcoin – The mother of all bubbles? Or a nascent FIAT currency replacement?
  • Apple’s Tim Cook speaking in China – “I worry about people thinking like machines” … “We all have to work to infuse technology with humanity, with our values” …
  • Special Prosecutor – Mueller making further strides … As former US Security Adviser Michael Flynn admitted to lying to the FBI (BAAAD – in case he didn’t know…)

 

ETF Industry Highlights – November 2017

November 2017  – Strong inflows and sustained supportive markets performance allowed AUM to attain new records in November.

Aggregate AUM stood at an estimated CAD 145.9 Billion, with favorable market conditions contributing CAD 1.3Billion of the total monthly CAD4.6Billion increase, the remaining +CAD3.3 Billion being net inflows for the month.

November net new creations – iShares, powered by strong XIU and XIC issuance, topped the month as far as net inflows.  Tier 1 players overall accounted for 78.8% of total net sales, while Tier 2 claimed 9.2% of the month’s net take, and Tier 3 players (dominated by PIMCO) enjoyed 12% of November’s flows.

Canadian ETFs – Nov 30, 2017 AUM: CAD 145.9Billion (+3.2% from Oct 31 level of CAD 141.3 Billion). y/o/y growth: +34.5%.

Aggregate creations remained strong, totaling CAD 4.6 Billion, which combined with redemptions of -CAD 1.24 Billion, resulted in net inflows of +CAD3.3Bn.

YTD Net sales to Nov 30, 2017: +CAD 24.6 Billion.

ETF industry Highlights – Flows for November 2017

  • Equity flows – Aggregated to CAD 2.4 Billion (72.3% of overall net inflows for the month) – with XIU and XIC contributing strongly to the total (+CAD 1.15 Billion between them).
  • Fixed income flows –  Represented 18.4% of the month’s total net inflows, with BMO contributing most to the category (ZAG; ZFL; ZFS; ZFM).
  • Preferred Shares – Flows into Preferreds bounced back from the lower total registered in October – coming in at +CAD140MM for the month (+CAD 68.7MM in October).

Creations/redemptions versus market impact for November 2017:

 

Bottom line: Issuance remained strong, markets supportive, resulting in another strong month in terms of overall AUM growth: +3.2%. AUM as at November 30, 2017: CAD 145.9 Billion.

Latest market share numbers (with/without XIU):

 

Of note: the gap between iShares (ex-XIU) and BMO ETFs continues to shrink … as distribution remains paramount, expect the gap to disappear in short order…

Who would have predicted that back in 2009?

ETFs by the numbers: November 2017

  • 26 ETF providers (Including PIMCO which actually launched in October, and Equium). Questrade’s ETFs consolidation into Wisdom Tree’s line-up will be completed shortly.
  • Market share highlights: Tier 1: 87.8% of AUM ($128.1 Bn); Tier II: 10.1% of AUM ($14.8Bn); Tier III: 2% of AUM ($3 Bn).
  •  34.5% y/o/y AUM Growth –with 2015/2016 record net issuance significantly surpassed, with one month left to smash it further…
  • Aggregate AUM: $145.9Billion (30/11/17)
  • +$4.6Bn – November’s AUM increase versus Oct 31 (iShares: +$1.8Bn; BMO ETFs: +$1.3Bn; Vanguard: +$387MM; Horizons: +$251MM;  First Asset: +$195MM; PowerShares ETFs: +$124MM; RBC GAM ETFs: +$97MM;  Purpose Investments: +$12MM; Mackenzie: +$135MM).

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

equities fixed income preferreds portfolios commodities Nov-17 Flows by Category
$1,473,319,640 $1,400,818 $51,003,905 $- $- $1,525,724,363 ishares
-$7,086,794 -$68,280,864 -$9,345,837 -$9,978,522 -$11,039,370 -$105,731,387 ishares claymore
$53,980,851 $35,466,360 $60,159,120 -$449,165 -$22,881,616 $126,275,550 horizons
$417,125,250 $461,315,282 -$41,936,865 $4,905,840 $- $841,409,507 bmo etfs
$30,699,138 -$19,793,620 $57,082,558 $- $- $67,988,075 rbc gam etfs
$1,885,475 $5,861,400 $- $- $- $7,746,875 td am
$33,056,039 $109,473,784 -$1,141,371 $8,742,443 $- $150,130,895 first assets
$57,211,130 $16,690,946 $5,883,761 -$621,271 $- $79,164,566 powershares
$195,391,093 $28,524,128 $- $- $- $223,915,221 vanguard
-$9,810,925 -$55,132,495 $- $5,844,510 $- -$59,098,910 ft portfolios canada
$7,957,265 -$5,838,573 $11,429,048 $- -$5,833,792 $7,713,948 purpose
$- $- $- $- $- $- auspice capital
$1,159,918 -$2,336,037 $- $- $- -$1,176,119 questrade
$4,893,413 $4,893,413 lysander
$6,082,216 $- $- $- $- $6,082,216 hamilton capital
-$1,191,345 $- $- $- $- -$1,191,345 sphere etfs
$75,108,110 $51,995,488 $- $2,126,639 $- $129,230,236 mackenzie etfs
$29,370,005 $30,053,424 $- $- $- $59,423,429 Wisdom Tree
$22,655,250 $- $- $- $- $22,655,250 Harvest Portfolios
$2,903,470 $- $- $- $- $2,903,470 AGFiqAssetMan
$- $- $- $- $- $- Desjardins
$2,762,710 $- $- $- $- $2,762,710 Manulife
$- $- $- $- $- $- Excel ETFs
$2,123,045 $1,968,710 $- $- $- $4,091,755 Franklin Templeton
$1,061,008 $- $2,065,315 $- $- $3,126,323 EvolveFunds
$- $- $- $5,040,000 $- $5,040,000 Equium Capital
$- $17,018,275 $194,700,340 $- $211,718,615 PIMCO
$2,395,762,547 $608,387,026 $140,093,046 $210,310,814 -$39,754,778 $3,314,798,654

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

ETF Provider Net Creations: Top Creations: Top Redemptions:
ishares $1,525.7 XIU; XIC; XEF; XUU; DXP; XBB; XCB; XEC; XFR; XWD XEG; XSB; XFN; XGD; XGB; XSP; XHY; XMA; XSC; XDV
bmo etfs $841.4 ZAG; ZCN; ZUE; ZEB; ZFL; ZEA; ZWE; ZFS; ZDM; ZFM ZSP; ZPR; ZRE; ZDY; ZEQ; ZUQ; ZLU; ZWB; ZUH; ZCM
vanguard $223.9 VFV; VCN; VEE; VIU; VBU; VI; VA; VUN; VSB; VAH VSP; VSC; VGG
PIMCO $211.7
first assets $150.1 FSB; FIG; YXM.B; TXF; FSB.U; CES.U; SID; VXM; BXF; WXM VXM.B; FGB; FXM; FHB; DXM; RWU.B; UXM; XXM; FPR; CSY
mackenzie etfs $129.2 MFT; MUB; MEE; MGB; MCSB N/A
horizons $126.3 HMMJ; HXH; HPR; HFU; HOD; ROBO; HFR; HXU; HXE; INOC HXT; HXS; HOU; HUN; HEX; HAC; HIX; HGU; HUC; HAJ
powershares $79.2 PGL; PDC; TLV; PPS; ULV.F; QQC.F; PFL; UHD; PXS PXC; PSB; PXU.F; BKL.F; PTB; DWG
rbc gam etfs $68.0 RPF; RID; RBNK; RPD; RXE; RINT; RBO; RIDH; RPDH; RCE RUE; RUDH; RUD.U; RUEH; RCD; RQI; RGRE
wisdom tree $59.4 CAGG; UMI; DGR N/A
harvest portfolios $22.7 HHL; HBF; HTA N/A
td am $7.7 TDB; TPU N/A
purpose $7.7 PSA; RPS; PDF; PHR; PYF; RPU.B PBD; PIN; PID; BND
hamilton capital $6.1 HMU.U; HBG; HFY N/A
Equium $5.0 ETAC N/A
lysander $4.9 PR N/A
Franklin Templeton $4.1 FLUS; FLCI N/A
EvolveFunds $3.1 DIVS; CARS; CYBR N/A
AGFiqAssetManag $2.9 QIE N/A
Manulife $2.8 MINT MULC; MULC.B
auspice $- N/A N/A
Desjardins $- N/A N/A
Excel Funds $- N/A N/A
questrade -$1.2 QRT; QGE QCP
sphere etfs -$1.2 N/A SHU
ft portfolios canada -$59.1 ETP; FHG FSL; FHD; EUR; FST; FHQ; FHF; FHH; FST
ishares claymore -$105.7 XQB; CJP; CMR; CGR; CLG; CWW; CBH; CVD; CJP.A CBO; CLF; COW; CGL; CPD; CSD; CBD; CUD; CHB; CLU
$3,314.8 Source: ETFi DB as at November 30, 2017
  • Min/Low Vol; Risk Weighted ETFs –  Flows into Min/Low Vol  were half their October level in November, at a modest +CAD25.7MM.
  • Dividend ETFs – Dividend ETFs  flows rebounded, though the category’s flows can be described as subdued as far as November’s were concerned: +CAD 59MM.
  • EM flows – The category’s performance in 2017 looks to be encouraging flows, which came in at +CAD 102MM for the month, with BMO; iShares; and Vanguard leading the charge.
  • Europe – Inflows were more tepid in November after the strength evident in October (+CAD56MM vs October: CAD 150.3MM).
  • High Yield – Modest outflows in the HY space last month: -CAD 31.4MM.
  • Sectors – Financials: Flows continued to be negative for XFN, for a fourth consecutive month, while ZEB registered decent inflows (ZWB’s were modestly negative) at BMO.  US Banks flows were modestly positive (ZUB) on the CAD hedged front, while flat for ZBK, despite continued strong performance. Energy – XEG (iShares S&P/TSX Capped Energy) saw some outflows last month … will the removal of OPEC uncertainty combined with synchronized Global growth help in turning this around next month?
  • Preferred Shares – The Pref category enjoyed a sales rebound in November, led by Actively Managed prefs at Horizons; RBC; and iShares, while interestingly, laddered prefs saw some outflows at BMO.

 

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