BMO ETFs (May 2021): “Sell in May, go away?” Didn’t happen!

BMO ETFs’ Assets Under Management as at May 31, 2021, are estimated to have risen by some 2.4% from the end of April, respectively 8.7% from the end of 2020 (Total AUM May 31: CAD 80.6 Bn)

For May, we estimate net new creations to have brought in 69% of the CAD 1.87 Billion increase, with market performance contributing the remaining CAD 580MM of added AUM.

Aside from the biggest inflows going into S&P 500 Index exposure (ZSP), the MSCI USA ESG Leaders ETFs saw sizable in and outflows, with a modest net negative (-CAD 33.4MM).

Beyond these (+CAD 504MM going into ZSP; respectively CAD 50MM going into ZSP.U), we note inflows into both US Banks (ZBK; ZUB), as well as the Covered Call Canadian Banks ETF (ZWB). Interestingly, these inflows aren’t far off in $ terms of the outflows (-CAD 91.3MM) seen at ZEB (the EW Canadian Banks ETF). Did these occur before … or after the strong reporting season we witnessed in the last week or so?   Maybe … maybe not.  Either way, if these moves were related — which granted they may not be — it would be an interesting comment on the further upside from here perhaps for Canadian banks, which have exhibited significant strength thus far in 2021. The news has been good … is it a case of buy the rumour… sell the news? Again, up to interpretation, respectively your own thoughts on the topic.

On the bond side, inflows are estimated at over CAD 500MM, with some offsets in terms of CAD 120MM outflows. Equities dominated creations at around CAD 1.5 Bn, offset, however, by a meaningful CAD 800MM or so of outflows (more than half of that being what looks to have been a switch from hedged to unhedged units for the MSCI USA ESG Leaders).

In terms of performance, here are the top/bottom 10 performing ETFs for BMO for the past month, and year-to-date:

5 takeaways:

  • Gold / Gold stocks – I’d bet that Gold stocks leading gainers last month comes as news to many. Interestingly, BMO saw outflows out of the category in May (despite, if memory serves, Gold stocks generally performing well at this time of the year)
  • Winners / Losers – YTD – Energy; US Banks; US Small Caps and Global Base Metals lead the performance table. Until the winds change, in my books these areas remain where the “new” market Leadership is to be found.
  • Bonds – Long duration = interest rate risk. Fixed income 101! Yields rise = greater losses with longer duration.  Whilst not a fan of bonds given the combo of duration risk and credit spread widening / corporate credit risk this suggests that at least with the correction in bond prices underway since the Covid-19 Vaccine news, at some point, bonds will be again a reasonable destination to reduce portfolio risk out of equities.
  • Thematic – Life in the Innovation / Disruption lane has become more challenging. To wit, the ARK Invest story which remains a developing one; AND, well the May performance for ZFIN; ZINN; ZINT; ZGEN; and ZAUT
  • Factors – Notable outperformance of MSCI Value and Canadian Dividends vs traditional market cap-weighted ZCN. The year-to-date performance gap widened last month, again perhaps indicative of a regime change in market dynamics.

Next up => a looks at iShares / RBC iShares in May 2021 😉