The ETF Roundup with Étienne Joncas-Bouchard – July 2025

Hello and welcome to Fidelity Connects. I'm Pamela Ritchie. Canada's ETF industry is on pace to surpass its previous annual inflow record with equity ETFs, particularly those focused on international and Canadian markets, leading the way. It's a clear signal that investors are leaning into diversified strategies amid shifting global dynamics. Fidelity's expanding ETF lineup has navigated volatile markets with resilience since inception, offering advisors and investors innovative tools to stay ahead. Joining us here today to explore what is driving ETF flows, how Fidelity is positioned and what you should be watching in the month ahead is Etienne Yonkers-Bouchard. Etienne is Fidelity's Director of ETF and Alternative Strategy. A warm welcome to you. Great to see you here from Montreal. It's great to be in the studio. It's been a very long time. It's got a little bit of a different feel than in Montreal, but it's nice to be here. Well, I'll just let everyone know that you can send your questions in for Etienne over the next half hour or so. And also we are broadcasting right now with live French interpretation. So do go ahead and use that. Join us in either official language. Etienne can speak to you in French. I won't understand his answers, but that's okay. I'll put the questions to you. Yeah. What does your studio look like? Well, in Montreal, we have a little bit of like a moving setup, but it's great. It's definitely an improvement on just me being in my basement with my webcam. But yeah, it's got a couple more windows, but definitely less tech than here. So hopefully everything comes out perfectly. It's got a blue black backdrop. Does it not? It does. It does. It's actually in one of our conference rooms. So yeah, we try to set it up as best as we can, but no, it's fun to be in Toronto. I guess maybe I'll even start by apologizing to all Blue Jays fans because I attended my first Blue Jays game in maybe four years and they broke their longest winning streak in history. So I'll take some of the blame. Apologize Blue Jays fans, but no, it's great to be in Toronto. And you do tons of podcasts, actually. What are the names of the podcasts you do? So right now we've actually kind of relaunched a podcast, which we used to have a show called the Fidelity ETF Exchange. And just last month, we launched our first episode of what we call Ticker Talk now. And being here in Toronto, we're actually gonna be recording our next episode a little bit later today. So yeah, please everybody check that out. It's a video podcast as well. So a bit of a different feel to it. We answer internet questions. Obviously bringing guests from Fidelity. We also try to bring in external guests as well. So just a different vibe a little bit, but it's definitely fun to do. And we're really excited about building that out over time. You're building a lot of things out, actually. You're adding to your team, I hear. Let's talk about ETFs, the expansion. We're gonna talk about the flows, especially. You're building a bigger team now as well, right? Yeah, well, thanks to everybody who's probably listening in today. Obviously, we've had tremendous growth in our assets under management on the ETF side so far this year. Just at Fidelity, we're talking more than $5 billion in net new assets. And I guess the culmination of that was June, which was one of our best months ever at around $1 billion in net new assets, putting us in second place in terms of providers in Canada for the month. And that's somewhere where maybe three, five years ago, we were only dreaming of. So we're really excited about that. And that also means that we've got to provide more insights, more content, more support to all the advisors that are actually supporting and buying some of our products. So yes, we are expanding the team. We've now got dedicated ETF strategists in each region that we cover, which is, I think, fantastic. Once again, we just want to make sure that, one, the message that we're getting out is clear, and that we're providing the right insights to our clients, and then just offering more research around all the products we have, which is now more than 50 ETFs. Amazing. We're going to go around the world a little bit, ask you about the international trend that we've seen for investing. But first, let's talk about flows. Actually, I think we'll put the first chart up here. We've got a chart to help us guide us through this. But it's been an extraordinary time. You can look at it on a year-to-date basis, considering what has happened year-to-date. Take us through a little bit of what you've seen. Yeah, it's been an extremely strong year for the Canadian ETF industry. And obviously, it's not just Fidelity. This is the entire industry, like you mentioned in your introduction. We're well on pace for a record year at $54.8 billion year-to-date, as of the end of June. If we were to take that times two, it would be more than $25 billion more than previous years, which I think is quite astounding. June was slightly less than previous months, which is kind of normal. As we roll into the summer months, it feels like everything just slows down a little bit. But still, $7 billion in net new assets, it's non-negligible. Some of the key trends that we've highlighted so far this year have continued. We've seen international equities continuing to lead the way in terms of the three main regions being US, Canada, and international. International including as much the developed sides, like Europe, Asia Pacific, as well as emerging market economies. So all those equity mandates that invest in those areas of the world have been popular so far this year with about 60% of the total equity component. And that continued obviously in June with $2.2 billion coming in. So I think that's the main story. But other little kind of more niche stories, if you will, on the fixed income side, it was a slower month with $1.4 billion in June. A lot of that was kind of rotations and additions into more duration-focused products as yields have increased over the past month or so. You've seen every time the 10-year or 5-year goes up by 10, 20 basis points, you start to get more bids. Somebody is now willing to take on those bonds that are yielding 4.5%, 6%, 5%, 6% on certain cases. Whereas maybe when rates were coming down and the yield curve had kind of rallied, if you will, there was a bit less appetite. Now we're seeing cash alternatives once again being sold to buy longer-term maturity and duration products. What about crypto? We can put that up for one more second. Just take us through the crypto story because it's also been taking over the reins, it seems, from gold. I mean, yeah. I mean, gold's had quite a run also, right? So it has been very popular as well. You've seen some of that slow down a little bit, but definitely the crypto space is kind of surprisingly low, to be quite honest, in terms of flows. A lot of the flows have been led by direct investors, discount brokerages, and such. We see that here at Fidelity, just from an advisor channel perspective. It's not as simple or as easy to say, if I'm a discretionary advisor, I can't necessarily just put Bitcoin everywhere in my model. So it's a bit more of a challenge on that front. But nonetheless, you've seen positive flows. But I would have expected with the rally that we've seen and the all-time highs we've hit in both Bitcoin and Ethereum, that we would have seen more demand. That being said, there has been a bit of product innovation as well. There was a Solana ETF that was launched this year. I think we might start to see a bit more alt coins, or I want to say meme coins, or there's other words, maybe less nice words for them. Because there's a whole other meme story going on right now, but we'll talk about that later. Yeah. It's been a growth area, but it's not to the pace that we've seen in the U.S., for sure. And in Canada, it's a bit more mature, it seems like. OK. That's super interesting. It's also been around a little bit longer. Yeah, it's been a while. I wonder if we can take a look at the phases, because the year-to-date number is one number, but it's quite fascinating what the investments, the ETFs that you oversee have done through the dips and rises over the course of the last now seven months of this year. It's been a little bit of a wild ride. Yeah. I mean, it's been an interesting year, for sure. It feels like we've gone through three main phases, to say the least. And obviously, with the lineup, the way that we've structured it is heavily focused on factor investing and various equity factors such as high quality value, low vol, momentum, dividend. And those different factors obviously perform, they behave very differently through various market cycles. And you've already seen like this year, there's been kind of three mini phases. And if we throw up actually slide five, it's a great also way to explain attribution on, say, our all-in-one ETF portfolios, which include all the different factors. So we walked into the year and momentum was still going from really last year. Yeah. So the way that we identified, and this is from our partners at FMR, who we work with very closely, who are our quantitative index solutions team headed by Bobby Barnes, who's many of you might've heard from before and is a great partner for us. We have the chance to chat with them very often and sometimes, actually often, they produce really cool slides. And this one I particularly love. And basically the three different phases that we've identified is trend continuation. So as you mentioned, basically what worked in 2024 continued to work for the first couple of months of the year. So you saw momentum as well as, excuse me, high dividend do quite well to start the year. And then as we went into the tariff tantrum, which is obviously initiated by, we had liberation day and all this going on, which lasted about a month and a half to two months in anticipation of, and then the actual day of it happening, you saw momentum basically being the one factor that underperformed and all the other factors working. Yeah, exactly. And this is relative returns to, and this is looking at the US and it's looking at the Russell 1000 and then each one of those factors on a relative basis to the Russell 1000. So when we see like the red line for momentum being at like the bottom at minus 6%, that was like a 6% underperformance relative to the benchmark. On the flip side though, things like low volatility worked extremely well, value, dividend, even quality to a certain extent. So those factors, which maybe had been a bit less popular in the last year or so, now became more attractive because their fundamentals looked really good. It's just, they weren't part of that wave of just consistent buying into the same types of names, the same types of sectors and performed really well. And then you have that 90 day tariff pause rally or however you want to call it, where bullish momentum really came back strong. And what you saw is everything that had worked in the tariff tantrum started to not to work post because everything that we were looking for was beta. So you saw momentum rally significantly, but then you see on the flip side of that low volatility, which was the best performing for that other previous two month period, now being the worst performer. So everything that was more defensive and like utilities, staples, staples actually was a little bit better than other sectors, but utilities definitely, and some of the more defensive sectors really had a bit more of a challenging time as the trade just went right back to what had worked last year. So when the all in ones have, is it an equal weighting to the different factors? How do you use all of them all of the time? So that if something suddenly happens like liberation day, or perhaps the V shape coming out of that, you're able to kind of capture a smoother ride. Just tell us how you work that or why you do that. Sure. Actually, maybe we can throw a slide four on to the screen for our audience. And that's going to maybe once again, like every time I'm here, we'll throw the slide on. So sure. Everybody's pretty used to it. But it's just to highlight, you know, the various portfolios that have on the all in one ETF suite, if you will. And as you can see, on the factor side, maybe just looking at FEQT, our all in one equity, for example, which, you know, it's easier to see the equity component. But the equity component is mainly consisting of our four main equity factors. And they're, you know, invested in an equal weight approach for a few reasons. One reason being, we're not trying to make tactical asset allocation calls on a style basis as much on a geographical or an asset mix basis. But holding each one of these factors over the long term will generally give us a smoother ride because of exactly what we've just explained with regards to the phases. Like nobody wanted to own low vol going into the year because markets were doing super well. But then something happens like, you know, it could be a geopolitical event. It could be, you know, policy change like we saw in the US. It can be, you know, monetary policy changes. But you have these events and situations where you can have a very sharp shift in which style works. So, for example, low vol was extremely useful for us in Q1, not so much in Q2. But that's why we also own momentum and didn't sell out of momentum when it wasn't working for a three month period. And we consistently try to rebalance those through, you know, through flows. But then also once a year, we really go back to this initial neutral mix that we see on screen here. So tell us a little bit more on the factors themselves. So you are, it's very, it's strategically done so that you are capturing all styles essentially at all times. Is that correct? Yeah. And each style will have, the way that it's constructed, the methodology, there's some parts that are extremely similar, right? So like they have the same investment universe. They also have the same sector allocation methodology with a few little tweaks. But then the real difference is the way that we select those individual stocks by style, right? So like which criterias are important for value. They're not the same criterias that are important for momentum, not the same criterias that are important for low vol and so on and so forth. So what ends up happening is if even if you're picking out of the same pool, you're going to end up with much different holdings in that, like say 100 stock portfolio for our US factors. And the thing that is the most interesting, obviously, is we're looking at fundamental characteristics. We're not looking at, I mean, momentum is looking at price momentum and kind of trends. That's a little bit different. But the others, you're looking at things like for value, free cash flow yield, you're looking at ED to EBITDA, you're looking at forward price to earnings, price to tangible book. Like those are metrics that display value characteristics. And they're unbiased in the way that we select them is that these are the four metrics that we look at. You screen well, you'll probably be in the portfolio. You don't screen well, you won't be in the portfolio. And it creates these very diversified stock portfolios where the factors themselves, some of them have, it's not negative correlation because they are just, I mean, they are US quality and US value ETF. They're both 100 stocks. They're both US large caps and mid caps. So they will correlate, but their excess returns relative to the benchmark have negative correlations on some of them. So like when value is outperforming, generally quality is underperforming and vice versa. You put all that together, you add the geographic diversification as well, you add fixed income and some of the products. And that's really where the strength shines, if you will, in our all-in-one ETF portfolios as you're covering kind of all different boxes, if you will, or checking all the boxes. Hello, investors. We'll be back to the show in just a moment. I wanted to share that here at Fidelity, we value your opinion. Please take a few minutes to help us shape the future of Fidelity Connects podcasts. Complete our listener survey by visiting fidelity.ca slash survey, and you can win one of our branded tumblers. Periodic draws ending by March 30th, 2026. And don't forget to listen to Fidelity Connects, The Upside and French Dialogue Fidelity podcasts available on Apple, Spotify, YouTube, or wherever else you get your podcasts. Now back to today's show. When you see, I mean, one of the examples probably of momentum right now, and it's a different kind of momentum is there's, I mean, means stocks are going crazy again, like they did in 2021. Sometimes that has certain signals and there's some different things to it back then. But in any case, what happens because you're active, you're may not be choosing some of those names. Maybe you can just give us a bit more on how you choose stocks, how you stay away from other ones. Yes. So actually the period where we have kind of this, I don't want to say euphoric, but like when you have this like really positive momentum around a lot of names that don't really screen well from a fundamental standpoint, like they just, they've become very popular. They have momentum. Maybe like expectations have risen rapidly where like growth expectations went from 20% to 200%. Like there's no way for us to fundamentally capture that with a factor methodology other than through momentum, potentially. I mean, if they do become very profitable, eventually we have quality, it might make sense and so on and so forth. But that's actually usually a phase where, you know, if I'm going to look at, you know, where is it a bit more of a challenging environment for our portfolios? It's during those initial kind of junk rallies or relief rallies post the correction because we'll rarely own as much of those names as an index would or a market cap weighted index would. So for example, like you mentioned early 2021 when you had like GameStop and AMC and all those names, you know, one, they're very, very small part of the index and then they have outsized returns. So that's a period where we, you know, might lag a little bit, but where we really do well is one definitely in kind of the later parts of the cycle, but then just in regular environment where investors maybe a bit more rational and are rewarding companies based off of one results, but then also their fundamentals being strong. So whether that's profitability, valuation, et cetera. And evaluation growth paths, it's just a little smoother than what you want. Exactly. And if I look at say, like our all-in-one equity, it's usually going to have a downside capture of about 80 to 85% of say an MSCI world index. Okay. On the upside though, it's about 95%, right? So we don't necessarily capture exactly the upside, but if, you know, and this is coming from a lot of the conversations I've had with advisors over the years is if I'm managing a portfolio for retail clients and we are in a situation where markets are going up by, you know, say 30 global markets, equity markets are at 30%, but I'm up 28. That's generally not when things are challenging. When it's challenging is when markets are down 20 and you have a portfolio that's down 26. That's significantly harder to explain for clients and hence why the construction approach that we have in our portfolios is to say, let's help you out as much as we can during the tougher times. And yeah, maybe if we miss out a little bit of the upside and kind of the really exuberant upside parts, that's something we're willing to accept. That's something you're willing to accept. Have you noticed trends or can you tell us about anything where you've seen certain things go in and out of favor? I'm thinking a little bit of, so an all equity sleeve that's, you just explained that that seems to be extremely popular. There are also ways that clients get exposure to perhaps a sector or they want to just add. Do you find there's a bit more of a wanting of a diversification rather than adding up different perhaps sectors or different styles like that? What's shifted? Yeah, we actually, we didn't mention it in the initial flows and part, but there's something that we've seen over the past couple of months is we've seen a decline in demand for sector specific ETFs. So like some that were very popular in Canada were like bank ETFs. You know, you had energy ETFs that were just investing in the Canadian energy sector. Like those have been a bit less popular. And then, I mean, those are also two kind of cyclical sectors. So maybe there's a correlation there, but just. There's an oil price story perhaps that could also be. There's probably many different things impacting it, but in the sense that like we've seen more demand for kind of these core solutions and actually we've seen it also on our all-in-one equity ETF portfolio, which is like a global diversified equity portfolio. You know, we've seen more demand into that as say, you know, instead of buying five, six different lines to get my global equities, you know, maybe I'll just use this as a core allocation and then, you know, maybe a few little things around it. But, you know, in terms of, you know, wanting to add diversification, that kind of brings me back though, to the demand for international, right? Because it's been a fairly, I mean, once again, I don't want to overgeneralize, but it's something that we probably don't own a lot of as Canadians in general, right? Like we generally own a lot of North America and a lot of Canada, which is a domestic bias, which is traditional for any investment market globally. But, you know, international developed markets represent about 25% of the global stock market. And it's very rare to find a Canadian investor that owns that much. And this year with the performance that we've seen in those markets, as we've saw flows and demand go up, we've definitely seen an increase in demand on our end as well with, you know, some of our products that we have on that side. And what are the parts that you have on that side? What is the main? Yeah. So we have obviously like each individual factor that are part of the all-in-one ETF portfolios. But then last year, once again, like we're trying to, you know, follow the demand and follow what our clients are telling us. We created our all international equity ETF. The ticker is FCIN. We do have it in a fund version as well. I don't know the code by heart, unfortunately, but what we've done is similar approach to the all-in-ones. But let's say like somebody just wants international equities. Like, can I just buy all four of your factors in one ticker? So that's kind of the rationale of how we got here. And then we built it with an equal weight approach similar that we did to the all-in-ones. And the objective of this one and the reason why I particularly like this one is because the international market is generally speaking less concentrated and less efficient than, say, a U.S. market. Right. So when I compare, because we have a Canadian and a U.S. version, but this international one stands out from a consistency basis. If I look at, say, backtest, these are, you know, indices that we can look at and backtest. There seems to be a story about consistency with international markets where you're picking, you know, MSCI IFE index is more than 1500 stocks. It's not 500. That's a lot. The largest stock is a little bit more than 2 percent SAP. And it allows us then to create more active share and historically creating more active share generally leads to strong. And this is from academia. It's not something I'm just throwing out of thin air. Generally, higher active share is a good indicator of excess returns and consistency of excess returns. So when I look at that, our international all-international equity ETF and so far since, you know, we've launched it only last year, obviously, so not a lot of live track record, but it's not exactly what we want, which is protecting periods of a bit more volatility, but then definitely do well as well as markets rally internationally. We heard overnight that the U.S. has done a trade deal with Japan and much lower tariffs than had sort of been feared. A whole piece of how Japan can and should and will be directed to invest in the U.S. and that's that's the deal itself. It's caused a big upswing, actually. In the U.K., we've seen we've seen Japanese stocks do very well off this. Is Japan involved? Absolutely. So for all of our international mandates, I guess it's kind of a broad stroke, if you will, but in the sense that we're neutral to super regions, not by country, but super region. So, like, for example, like the U.K. developed Europe, you know, and then we have Asia Pacific's kind of the same thing or Australia and New Zealand. So we're staying neutral to those regions. And by doing that in all of our international products, we own quite a bit of Japan because it is one of the largest international developed economies. So anywhere from, like, 20 to about 30 percent of our international portfolios and an FCIN, I'd have to double check, but it's probably somewhere in between 20 and 30 percent. So, yeah, obviously, it's a great thing when Japan is going because it is a big motor of international developed markets. And there's some very sizable firms as much on, say, discretionary side as on the industrial side, even on the financial side as well. So we definitely love to see that. And being and this is this holds true for our index as well. Our benchmark will hold, you know, we'll have a lot of Japanese names as well. So ideally what we're doing is, yes, we hold Japan and ideally we're picking the better stocks in that Japanese market that are benefiting from these changes in the tariff policies, obviously, that you mentioned, which are good for them to have a deal and get beyond that. Yeah, we're next. Maybe. Yeah, exactly. OK, lots of questions coming in. If you so have a sip of water, we'll put these to you. What trends could result in a bullish call for longer duration bonds? Yeah. So, I mean, you certainly have exposure to bonds through some of the all in ones and you've upped that recently. But the longer duration story is it's hard for everyone, I think. Yeah, I feel like we've been waiting for that capitulation moment since 2022 and it hasn't quite come like you've had these little periods of rallies. But I think it's what we need is inflation expectations to really, really fall off. And we're not. I mean, right now, like you've started to see inflation prop back up a little bit in the U.S. and Canada. I mean, we're kind of I feel like regardless of what we do from a monetary policy standpoint, it's getting very hard to actually maintain and hit the 2 percent target of inflation, whereas the U.S., it seems like that's more of a challenge and hence why, you know, Jerome Powell and the Fed have been maybe a bit sticky, maybe in their approach with regards to lowering rates and the great dismay of the U.S. administration. But I think that's really what needs like five year inflation expectations have been propping up. One year inflation expectations were probably it's going to be hard for long term rates to fall if inflation continues to rise. Will ETFs be available in U.S. dollar denomination for U.S. dollar accounts? Yeah. So some of our ETFs are and we're always trying to give more options, you know. So like recently we launched one series of some of our products, which isn't a U.S. series, but one series. So if somebody wants to buy in series F series B, it's something we're continually looking at, especially for the all in ones. Right. Like I think that's something that's we're definitely taking a look at it right now. We do have U.S. options for our factors. So if you want to buy our U.S. high quality ETF, you can buy in U.S. dollars. Same thing for like our value. So we do have some products that are available in U.S. dollars. And, you know, we have a list that we can, you know, that we have a list on our website that you can look at. OK, perfect. Well, we're going to see a lot more of you, Etienne. Congrats so far. Keep doing what you're doing. Glad to see you here today in studio. Thanks for watching or listening to the Fidelity Connects podcast. 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