Bitcoin Funds Fuel Near-Record Inflows to Canada ETF Sector

(Bloomberg) -- The launch of new Bitcoin exchange-traded funds helped Canadian ETF managers attract $5.2 billion in February, the second-highest month of inflows on record.

Toronto-based Purpose Investments Inc. launched the first Bitcoin-backed exchange-traded fund in North America last month. Rival Evolve Funds Group Inc. followed with a similar fund that's 25% cheaper. The funds, which are listed in Toronto, pulled in a total of C$701 million ($555 million) during the month, according to National Bank Financial analyst Daniel Straus.

Canada has long had a permissive regulatory environment that has allowed financial firms to create new products and structures there before moving to larger markets. The country's exchanges listed the first equity index ETF in 1990, the first fixed-income ETF in 2000 and the first ETF based on cannabis stocks in 2017.

Equity funds received about two-thirds of the C$6.6 billion ($5.2 billion) investors put into Canadian ETFs during the month, Straus said Tuesday in a note to clients. The only month they surpassed that was in February 2020, when inflows topped C$8 billion just as the Covid-19 outbreak began to rattle global markets.

The biggest-selling specialty ETF with C$950 million in flows was the TD Global Technology Leaders Index ETF, which has large exposure to mega-cap tech firms including Apple Inc. and Amazon.com Inc. The Canadian-dollar version of the Purpose Bitcoin ETF was second with C$510 million.

“In a microcosm of ETF market dynamics, Purpose had ‘first-mover advantage' for just one day, but that gave its pair of Bitcoin ETFs a half-billion-dollar head start in asset gathering,” Straus said in the note.

During its first two days of trading, the Purpose ETF saw almost $400 million shares trade, but activity has since cooled, dropping to just $17 million on Tuesday.

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