By Tom Bradley

I’ve been remiss in doing a follow-up to an article I wrote for the Globe and Mail a few weeks ago (clients come first). In it I made the point that ETF sales in Canada have been disappointing, despite all the hype and favourable press.

As it turns out, the piece created some back and forth with a few of my ‘ETF friends’, out of which came additional information. Pat Chiefalo, the head ETF analyst at National Bank Financial, provided the most insight. In taking a more conciliatory view to the growth of ETFs, he made the following points:

• Canadians also buy U.S.-domiciled ETFs and these assets are meaningful. (Separately, I’ve been told that after Vanguard launched a family of ETFs in Canada, flows into their U.S. ETFs from Canadian investors have picked up significantly.)
  
• On balance, international money moved out of Canada in 2013, specifically flowing out of the resource-based ETFs and the iShares S&P/TSX 60 Fund (XIU).
  
• The trend away from bonds in the last half of 2013 impacted ETF flows, although much of this was re-invested in other fixed income funds - shorter duration and variable rate ETFs.

Pat also added some color to my comments about the 10-to-1 U.S./Canada ratio. He felt that the ratio would be a lot closer to 10-to-1 if U.S.-domiciled ETFs were included in the Canadian investor totals and some recognition was given to the fact that the U.S. market is the go-to market for International ETF buyers.

These are all good points. The ownership of U.S. ETFs is particularly relevant to the comparison. The headwinds from international investors and bond funds holds less water for me. There are always factors like these impacting our market, and indeed, resource and yield hungry investors accounted for a lot of the growth in previous years.

Pat’s information added a lot to the conversation. It doesn’t negate the point of my article, however. For structural and inertia reasons, the ETF train is slow to get going in Canada.