Canadian ETFs Smash Records, Surpassing C$500 Billion in Assets

Canadian exchange-traded funds (ETFs) experienced record-breaking growth in 2024, surpassing C$500 billion in assets for the first time, as reported by Bloomberg. This surge was fueled by strong market returns and substantial inflows.

At the end of December, Canadian ETF assets under management reached C$519 billion, according to National Bank of Canada. This represents a significant increase from the previous year, with inflows reaching C$76 billion – 45% higher than the previous record set in 2021.

ETFs saw strong inflows across various fund types, particularly in US stock funds, which attracted nearly C$22 billion in fresh capital, resulting in approximately C$130 billion in assets by year-end. This makes US stock ETFs a larger category than Canadian equity ETFs, which hold C$102 billion in assets.

However, crypto-asset ETFs experienced outflows of C$1.1 billion, the only asset class to see negative performance. This is likely due to the approval of Bitcoin ETFs in the US earlier in the year, undercutting Canadian counterparts on price.

ETFs continued to outperform mutual funds for the third consecutive year. While mutual funds saw a modest inflow of C$8.3 billion in the first ten months of 2024, ETFs clearly dominated.

"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, told Bloomberg.

The Canadian ETF market also witnessed a record 224 new ETF launches in 2024, while 61 funds were delisted. This brings the total number of ETFs in Canada to approximately 1,500. Five new ETF providers entered the market this year, including two US-based firms: JPMorgan Chase & Co. and Capital Group.

Psarofagis expects this trend to continue. "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."

Interestingly, ESG-themed ETFs experienced outflows of C$1.6 billion in 2024, representing a significant decline from the previous year.

"Outflows can be mostly attributed to institutional redemptions from a few ETFs," wrote National Bank analyst Daniel Straus and his team, to Bloomberg.

The Vanguard S&P 500 Index ETF saw the largest inflow of the year at C$6.2 billion, while the CI High Interest Savings ETF experienced the greatest outflow, at C$2.4 billion, likely due to the Bank of Canada's policy interest rate cuts and stricter liquidity requirements for high-interest savings account ETFs.