In the last few years, exchange-traded funds (ETFs) have accounted for more of the overall Canadian market than mutual funds. CIBC Capital Markets research shows that EFTs have gained momentum among mutual fund managers as well.
An exchange-traded fund, or ETF, is an investment fund that allows you to purchase an array of individual stocks or government and corporate bonds in one purchase.
The funds are traded on stock exchanges and create greater portfolio diversity than owning individual stocks. ETFs typically have lower fees than mutual funds and they can be traded throughout the day.
ETF explosion
In 2024, assets in Canadian exchange-traded funds exceeded CA$500 billion for the first time that year — a year that stands out for breaking records for inflows and new fund launches (BNN Bloomberg).
ETF assets under management stood at $519 billion at the end of December 2024 due to strong market returns and inflows of $76 billion, which is 45% higher than the previous annual record achieved in 2021.
A record 224 ETFs launched in 2024. At the same time, 61 funds were delisted, leaving 500 ETFs in Canada. Five new ETF providers also joined the market in 2024, including US-based JPMorgan Chase & Co. and Capital Group.
Gaining speed
“Canada’s ETFs hitting record inflows while exceeding mutual fund flows really shows that ETFs are becoming the preferred investor vehicle,” —Athanasios Psarofagis, Bloomberg Intelligence analyst.
He added that “most launches were of actively managed ETFs”, which now make up 53% of all ETFs and 31% of total ETF assets under management based on National Bank data.
“We’ll likely see more of this in 2025,” he said. “The Canadian market is very receptive to active management, more so than any other region.”
Moving forward
The Vanguard S&P 500 Index ETF generated the largest inflow of the year at $6.2 billion. The CI High Interest Savings ETF had the greatest outflow at $2.4 billion in 2024 — the same year that the Bank of Canada cut its policy interest rate by 175 basis points.
In addition, Canada’s banking regulators have also established stricter liquidity requirements for high-interest savings account ETFs.
For more information about ETFs and which direction to take your your investment portfolio, we recommend speaking with a trusted financial advisor.
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