BMO’s mid-year ETF trends report reveals new six-month inflow record

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Mark Raes, BMO

Canada’s BMO Global Asset Management (BMO GAM) has published its mid-year ETF report, which, it says, highlights the continued popularity and record-setting growth of ETFs in Canada. 

"The market seems to be moving faster than ever, pivoting with each trending headline: vaccine news, political shifts, company earnings," says Mark Raes, Head of Product, BMO Global Asset Management Canada. "Agility is key in this environment and more investors than ever are seeing how ETFs can play an important role in their portfolio strategy. ETFs continue to maintain their popularity as portfolio staples, as proven by another six-month inflow record and continued trading liquidity."

Key themes identified by BMO and its ETF team include inflation with Portfolio Manager Alfred Lee commenting that inflation will likely be monitored by central banks and investors as the economic reopening continues. “ETFs with exposure to certain sectors, such as Industrials and Materials, as well as US Treasury Inflation Protected Securities (TIPS), can offer investors a hedge against inflation,” Lee writes.

In terms of Growth and Innovation, Danielle Neziol, Senior Product Manager, writes: “In the short term, higher treasury yields, coupled with a strong vaccination rollout, have supported a rotation out of growth stocks and into value stocks.

“Long term, innovation remains a pillar of the growth equation; companies in this space are part of exponential growth markets that will continue to influence our behaviours and routines, and will power equity markets in the future.”

Erin Allen, senior product manager, writes on ESG, commenting: “Growing investor interest in ESG is driven by multiple factors, including growing millennial investor participation, improved ESG data availability and value-based preferences. Additionally, investors are more aware of the impact ESG risks can have on a company's value and reputation.” The BMO MSCI USA ESG Leaders Index ETF (ESGY/ESGY.F) has become the largest ESG ETF listed in Canada with a combined AUM of CAD1.69 billion.

Turning to the financial sector, portfolio manager, Chris McHaney, writes that Canadian banks have rebounded strongly since November and exceeded earnings expectations in the first half of the 2021 fiscal year. “Financial sector ETFs took in CAD648 million in June alone – approximately 60 per cent (CAD391 million) went into the BMO Equal Weight Banks Index ETF (ZEB),” McHaney writes.

Dividend and Value has also emerged as a theme this year, with portfolio manager Chris Heakes writing: “Vaccination rollout, and the subsequent economic reopening, has led to a factor rotation out of quality companies and into cyclical dividend and value companies. Investors used ETFs to add strategic portfolio positions to capitalise on this market rotation: dividend ETFs saw CAD1.5 billion in net new flows in the first half of 2021.”

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