.svg){kind=logo}
What are the best ETFs for you?
Whether you're new, retired or seeking growth, the best ETFs will depend on the kind of investor you are. We break down the best ETFs for eight different investor types.
The ETF Lab
ETF Spotlight: Mid-year market outlook ETF perspective
In Mackenzie Investments' 2023 Mid-Year Market Outlook, our experts, including Mackenzie’s co-CIO’s Lesley Marks and Steve Locke, share their views on what lies ahead for the second half of 2023.
Below we distill some of these views in the context of Mackenzie’s ETFs.
2023 YTD asset class returns
Risk asset returns have been impressive YTD, with a balanced portfolio (60% equities, 40% bonds) returning 6.68% YTD.
Source: Makenzie Investments; as of June 16, 2023
Income is back in core fixed income
Central banks across the developed world raised policy rates at a historic pace to combat significant inflationary pressures. This resulted in one of the worst years for fixed income performance in modern history in 2022.
With the peak in headline inflation and a more data dependent approach moving forward for central banks, our outlook points out that bonds may outperform equities in the short term.
Higher yield levels across core fixed income mandates also provides a much-improved income buffer when compared to just a year ago.
Mackenzie Investments offers several core fixed income ETF solutions for advisors to consider. Several options are shown below:
Value of active management in Canadian fixed income
The Canadian fixed income ETF category has dominated flows over the past year as investors reallocate back to fixed income. Core Canadian fixed income ETFs have attracted just shy of $7 billion over the past year, representing ~55% of all fixed income ETF flows over that period1.
Mackenzie offers two solutions in this category, both active and index (highlighted in the table above). MKB - (Mackenzie Core Plus Canadian Fixed Income ETF) is an actively managed ETF managed by our Mackenzie Fixed Income Team. Tactical adjustments on duration, credit, and fixed income sectors have helped MKB deliver higher risk adjusted returns than index solutions in the Canadian fixed income category since common inception.
As of May 31, 2023
Attractive yield opportunities in investment grade corporate bonds
Source: Mackenzie Investments; as of May 31, 2023
As credit conditions tighten and the economy slows, we will likely see some further spread widening in the months ahead. Sticking to high-quality companies with strong balance sheets may provide attractive risk-adjusted returns for investment grade bonds.
Advisors looking to add cost effective, diversified, index exposure to US high grade corporate bonds can consider QUIG - Mackenzie US Investment Grade Corporate Bond Index ETF (CAD-Hedged).
QUIG has a weighted average yield-to-maturity of 5.45% and an effective duration of 7.052. QUIG can help provide a cost-effective way of adding diversified US investment grade bond exposure to your clients’ portfolio.
Source: Mackenzie Investments; as of May 31, 2023
Core index equity ETFs for fee budgeting and portfolio rebalancing
Source: Mackenzie Investments; as of June 16, 2023; *compound annual returns; **ETF Characteristics as of May 31, 2023
As higher rates continue to work their way through the economy, tighter financial conditions will begin to put greater pressure on corporate earnings and thus on stock prices moving forward.
In a more volatile equity environment, cost control becomes even more critical. Using these low-cost index ETFs shown above can help advisors allocate fee budgets to areas and active managers with higher alpha generation potential. Additionally, when it comes to rebalancing the portfolio, index ETFs can help reduce the operational complexities of regularly transacting in multiple individual securities and/or funds.
For more information on any of these ETFs, please contact your Mackenzie wholesaling team.
ETF News & Notes
Dispelling several myths about ETFs
Below are three myths we often see out there on trading ETFs:
- Low ETF trading volumes and assets under management (AUM) translate into low liquidity.
- Secondary market ETF liquidity is entirely reflected on screen.
- ETFs are more risky investments than mutual funds.
For a deep dive on each of these myths and the reality in Canada’s ETF market, see our white paper: Dispel ETF myths with ETF realities.
Exploring the continued growth in the Canadian ETF market
Despite the 2020 global pandemic and 2022 market downturn, Canadian ETF flows have been positive in every quarter since 2018. Over the last five years, ETF assets in Canada have more than doubled to over $367B, growing at rate 3x faster than mutual fund assets (over that same period).
Source: Morningstar Direct. ETF data as of May 31, 2023. Mutual fund data as of April 28, 2023. All data in millions of CAD unless otherwise stated.
ETF Flows Update
- Globally, ETF assets have hit a new record of $10.32 Trillion (in US dollars)3. While the rebound in risk assets in 2023 has helped ETF assets, flows globally have remained resilient amidst the market volatility of the last couple years.
- The asset allocation ETF category has consistently gained assets over the last several months. According to National Bank’s Weekly ETF Flows, the AA category has seen inflows every week this year and now stands at $18.6B in assets.4
- Canadian fixed income ETFs remain in favour as investors begin to allocate back to core fixed income and duration. Month-to-date this category, both active and index ETFs, has added ~$450.4M.5
This Week’s Read
Mackenzie ETF Top Performers
Source:
1: Morningstar; as of May 31, 2023
2: Mackenzie Investments; as of May 31, 2023
3: Assets invested in global exchange traded funds hit record $10.32tn | Financial Times (ft.com); as of June 15, 2023
4: As of June 16, 2023
5: Bloomberg, Mackenzie Investments, National Bank Canadian ETF Flows June 2023; all data as of June 20, 2023 unless otherwise noted
FOR ADVISOR USE ONLY. No portion of this communication may be reproduced or distributed to the public as it does not comply with investor sales communication rules. Mackenzie disclaims any responsibility for any advisor sharing this with investors.
Commissions, brokerage fees, management fees, and expenses all may be associated with ETF investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns, including in share or unit value and reinvestment of distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.
This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of June 20, 2023. There should be no expectation that such information will in all circumstances be updated, supplemented, or revised whether as a result of new information, changing circumstances, future events or otherwise.
The content of this article (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.
Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index.