Between Unimpressive & somewhat negative (Perspectives – January 2018)

Between Unimpressive & somewhat negative (David Lafferty, Chief Market Strategist, Natixis) – With that as backdrop in terms of outlook for bonds, the question is: Have we seen the full effect of the great rotation?

Are 2017’s generally stellar returns all attributable to rising profits and the beneficial effects of a synchronized and strengthening global economy? Or – is there amongst contributing factors also an element of “the great rotation” – that being from bonds into stocks?

With the outlook still constructive for a global economy that has withstood and overcome some pretty dismal headlines in 2017, if none of last year’s returns are due to that great rotation, 2018’s return could in no small way be nicely juiced up if that migration takes full flight …

Latest developments:

  • Happy New Year’s –   “Fire and Fury – Inside The Trump White house” – Released this past week, will, according to its writer, bring down the Donald … Happy New Year!
  • Presidential – Talking of which … “My Nuke’s button is bigger than yours” – President Trump trying to … do what exactly? Prompt an unstable North Korean Leader into pressing the Armageddon button? Presidential indeed …
  • GE – After posting the worst performance by a landslide of all 30 Dow Jones stocks in 2017, GE had a strong rebound in the first trading week of 2018. Will it last – or fade?
  • US FED – Janet yellen’s term at the helm of the world’s most prominent Central Bank – the US FED – passes on the baton of leadership to Jerome Powell next month. What of the Dollar, Inflation, Employment and economic growth under his watch?
  • Marijuana stocks – exploding to the upside in the final week of 2017, courtesy of further positive news, this times pertaining to California

ETF Industry Highlights – December 2017

December 2017  – Overall ETF Industry AUM in Canada is estimated to have tagged on a further $1.15 Billion in December, with est. net issuance of $1.6 Bn offset by some $ 478MM of negative market impact.

Aggregate industry AUM reached CAD 147.1 Billion as at 31/12/2017, or 29.4% versus 31/12/2016. Contributing strongly to this overall headline growth, is the “Core” ETF segment (iShares, Vanguard, BMO ETFs), which grew 40% in 2017, ending the year with 22.7% of all ETFs AUM, and capturing 44.4% of 2017’s aggregate rise in AUM.

December net new creations – Totalled CAD 1.15 Billion, in spite of the headwind represented by XIU redemptions nearing CAD 713MM. For 2017 as a whole, XIU experienced a total number of units outstanding decline of 15.4%. Tier I claimed 81.4% of December’s net creates, Tier II 13.8%, leaving Tier III to share the remaining 4.9%.

Canadian ETFs – Dec 31, 2017 AUM: CAD 147.1Billion (+0.79% from Nov 30 level of CAD 145.9 Billion). y/o/y growth: +29.4%.

Aggregate creations eased off somewhat relative to November’s strong tally (CAD 3.4 Billion vs CAD 4.6 Billion in November). With CAD 1.8 Billion of redemptions, Net inflows came in at CAD 1.63 Billion.

Net sales to Dec 31, 2017: +CAD 26.2 Billion.

ETF industry Highlights – Flows for December 2017

  • Equity flows – Amounted  to CAD 1.0 Billion (61.5% of overall net inflows for the month) – but would have been notably higher without XIU’s redemptions for the month.
  • Fixed income flows –  Represented 19.2% of the month’s total net inflows, with iShares showing good inflows, on one side of its offering, while sustaining redemptions at the other (iShares Claymore). As a sidebar, it is interesting to note that for the year as a whole, assets in the iShares Claymore line-up barely grew (+0.4%).
  • Preferred Shares – Powered ahead, with strong sales at Horizons and RBC. The prospect of further rate increases could see preferred shares continue to enjoy strong growth as a category.

Creations/redemptions versus market impact for December 2017:

 

Bottom line: Issuance continued on strong, though markets were somewhat less supportive, including a strengthening CAD. This, however, didn’t prevent AUM from wrapping up 2017 at an all time high of CAD 147.1Billion.

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: December 2017

  • 26 ETF providers (Including PIMCO which actually launched in October, and Equium). Questrade’s ETFs consolidation into WisdomTree’s line-up allowed the latter to register growth of 260.3% in AUM for 2017 as a whole.
  • Market share highlights: Tier 1: 87.8% of AUM ($129.1 Bn); Tier II: 10.25% of AUM ($15.1Bn); Tier III: 1.95% of AUM ($2.9 Bn).
  •  29.4% y/o/y AUM Growth –with 2015/2016 record net issuance significantly surpassed, with one month left to smash it further…
  • Aggregate AUM: $147.1Billion (31/12/17)
  • +$1.15Bn – December AUM increase versus November 30th (iShares: -$150MM; BMO ETFs: +$551MM; Vanguard: +$149MM; Horizons: +$442MM;  First Asset: +$83MM; PowerShares ETFs: -$4MM; RBC GAM ETFs: +$31MM;  Purpose Investments: +$11MM; Mackenzie: +$63MM).

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

equities fixed income preferreds portfolios commodities Dec-17 Flows by Category
-$277,222,755 $230,467,530 $21,428,470 $6,876,543 $- -$18,450,212 ishares
-$15,863,622 -$137,666,383 $7,186,245 $7,575,337 $7,182,545 -$131,585,879 ishares claymore
$203,318,152 -$16,053,760 $63,991,083 -$1,824,184 $109,125,893 $358,557,184 horizons
$802,958,070 $73,837,575 $11,929,165 $1,631,920 $- $890,356,730 bmo etfs
$8,898,078 $17,879,540 $48,595,300 $- $- $75,372,918 rbc gam etfs
$3,648,375 $2,928,730 $- $- $- $6,577,105 td am
$21,498,059 $93,041,565 -$2,282,880 $4,491,983 $- $116,748,726 first assets
$56,089,828 -$30,465,415 -$10,073,187 -$2,206,611 $- $13,344,616 powershares
$215,063,292 $17,601,203 $- $- $- $232,664,495 vanguard
-$13,719,793 -$14,473,200 $- $977,315 $- -$27,215,678 ft portfolios canada
$7,287,828 -$20,530,731 $32,457,959 $497,673 $- $19,712,728 purpose
$- $- $- $- $- $- auspice capital
-$78,840,054 -$20,316,706 $- $- $- -$99,156,760 questrade
$5,914,370 $5,914,370 lysander
$6,140,841 $- $- $- $- $6,140,841 hamilton capital
$- $- $- $- $- $- sphere etfs
$17,271,840 $50,565,935 $- $303,322 $- $68,141,097 mackenzie etfs
$6,250,485 -$9,790,495 $- $- $- -$3,540,010 Wisdom Tree
$8,743,625 $- $- $- $- $8,743,625 Harvest Portfolios
$669,019 $- $- $- $- $669,019 AGFiqAssetMan
-$4,185,640 -$9,735,175 $- $- $- -$13,920,815 Desjardins
$- $- $- $- $- $- Manulife
$- $- $- $- $- $- Excel ETFs
$36,501,380 $1,964,360 $- $- $- $38,465,740 Franklin Templeton
$2,019,328 $- $1,549,898 $- $- $3,569,225 EvolveFunds
$- $- $- $- $- Equium Capital
$- $85,094,478 $- $- $85,094,478 PIMCO
$1,006,526,334 $314,349,050 $180,696,423 $18,323,297 $116,308,438 $1,636,203,542

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