Money talks … What’s it saying (Maybe?)

We’ve all heard the saying – Money talks …

Apparently it means –

If you say that money talks, you mean that people with a lot of money have power and influence.

We’ve also all heard of the concept “skin in the game”, often linked to the idea that a PM, for example, who has his or her money invested in their strategy will, one would presume …, be that much more likely to look at doing a good job and making lots of money for his/her investors.

Ultimately, money “talking” could mean, in the case of ETF investors, investors moving into a specific ETF exposure, be it regional, domestic, factors-based, or thematic. Arguably, money going in would be money that is “talking”, as far as effectively – by committing capital – agreeing that the exposure the ETF in question provides meets with their approval aka they put money in expecting their investment to bear fruit.

Post facto, we get to see the outcome – obviously, and in that sense, one could argue that the broader investment community at that point in time has spoken: the exposure, or strategy has underperformed, performed according to, or overperformed relative to expectations. That money, by the way, at the end of the period in question, is “real money” aka one could exit the position, and having entered it at the various points from which performance was calculated, that investor would realize the percentage gains indicated (or close to it, in that ETFs trade on the exchange, generally at very tight spreads to NAV, but with bid/ask spreads to take into account).

Anyways, interestingly, as at March 31, 2022, this is what looking through the top and bottom 10 performers at BMO ETFs tells me:

  • as noted repeatedly of late: a) several factors are outperforming the reference “benchmark” ZCN above, by s significant margin … Value and Fundamental leads, Min Volatility is punching above its weight recently (remember it is NOT meant to capture 100% of the upside in exchange for not experiencing as severe drawdowns …) At that, it is, this year, and on a trailing 6 months basis, outperforming Low Vol (often it was low vol in the past that was the better of the two). Credit “sector” constraints at XMV for that, with Oil and Gas exposure, as well as materials, two areas ZLB has no exposure to (Energy), respectively slightly over 50% of that found in XMV (Materials). With these two areas leading the market of late, evidently more is better, and so XMV is ahead …
  • Growth is being left behind – although it had a decent March
  • ESG – evidently not all created equal … in this instance, being a Leader versus Aware = a differential of close to 550 bps in favour of merely “Aware”. (I’ll have to dig into exactly what that means … concretely, but can on surmise it means higher ESG scores for Leader versus Aware (otherwise why, or how “Leader” …)



  • Similar to what I noted with regards to iShares, the performance leader charts is topped by both Energy, and Materials, followed by Gold. What does contrasting amongst them highlight?
    • XEG versus ZEO: XEG is market cap weighted, WITHOUT Pipeline and Energy infrastructure. In that sense, and driving significant outperformance, has been the pure plays Oil Cos in particular. In that sense, investors obviously have to decide what they are after. With ZEO a) including pipelines such as ENB and TRP, evidently less direct “traction” to the oil price, which at current levels spells massive cash flows for the E&G space. Also, EW methodology aims to play the return to the mean, but trimming winners and rebalancing regularly into laggards. Fundamentally a “value” type strategy – but one which possibly doesn’t work as well in the current context. Will that continue? Time will tell.
    • Same story with ZMT as far as the EW strategy. Net on Net for the current bull phase, while XEG and XBM arguably more aggressive, they may continue to lead higher, while conversely, on pullbacks, I’d expect ZEO and ZMT to possibly fare better on a relative basis.
  • Gold – oh, yes, gold. What interesting here? Likely too early to suggest this is a “trend”, respectively a bullish sign, BUT … should Junior Golds manage to outperform more Senior names, it basically would imply greater bullishness for the Gold space overall. When will we convincingly cross USD 2,000 per oz?
  • On the negative side of the ledger – not too surprisingly, are all the “thematic” ETFs BMO introduced in the past 12 or so months. I say not surprisingly, in that looking at the “thematic” space specifically, which I have kept an eye on weekly for some time now, we know that the entire “thematic” space has undergone a brutal repricing lower exercise, particularly from the point on when Jay Powell decreed the inflation spike as not transitory after all …
  • Beyond that, can we actually agree we are witnessing a prickling of the Bond bubble fanned early by aggressive FED and other CBs buying? That, is the only reason, coupled with them becoming price insensitive sellers, why I’d be reluctant to touch bonds, after the massively painful “correction” they’ve undergone in recent months …
  • China – yeah … again not new news. Equities there have been a painful place to be. Having it deemed ESG for ZCH evidently hasn’t made it any less “painful”. I have ZERO inclination personally to touch this, specifically for the S reason…


  • US banks … have undergone a lot of pain of late. Are recession worries overplayed? Will improving NIM on rising FED Funds sufficiently offset the sharply declining mortgage origination, respectively possibly weaker Capital markets related performance? This will play out in 2022 …
  • Utilities – interesting that typically, one would expect significantly rising bond yields to hit Utes – instead, what we’re likely seeing here is their defensive characteristics more than offsetting that rate sensitivity element

Other observations (though not based on tables above aka data not shown):

  • US Banks, particularly after last month’s performance have significantly underperformed Canadian Banks. Will the latter manage to regain some upside momentum? or be dragged down by the worries that have sunk US banks of late?
  • In terms of US exposure, NASDAQ has been hit the hardest in recent months, with US Quality performance numbers paralleling those of NASDAQ closely (was quality overbought also?)
  • S&P500 fared better than both on a relative basis, also outperforming ESG Leaders.
  • US Dividends, while slightly in the negative of late, outperformed the market, while lagging LOW VOL equities, which closed Q1, 2022 marginally in the black (+1.06% for ZLU).

Happy Easter Monday 🙂


Oh, BTW – flows …

Big in / Big outflows at BMO in March (noteworthy, in that month immediately following Ukraine invasion …):

BUT on balance, big inflows (+CAD 1.96 Billion):

Highlights – Notable:


  • (-CAD400MM+) EM outflows
  • sizable Bond outflows … Long Bonds; Short Corporate; Mid Corporate; Short Federal; Short Provincial; Long Corporate …
  • US Low vol seeing outflows (despite decent recent performance I would add …)


  • Large inflows into … other Bond ETFs: Canadian AGGREGATE; US Mid Term IG Corporates (hedged and unhedged)
  • USA ESG Leaders
  • Europe High Quality
  • US HY
  • TSX EW Canadian Banks & Covered  call of same …
  • some inflows into US Banks: Hedged; unhedged, as well as with covered call overlay

the latter two noteworthy in light of a) US banks recent performance (significant pullback …); respectively Canadian banks pausing last month … (weakness ahead? or resuming to the upside?)