In 2024, Canadian exchange-traded funds (ETFs) reached an unprecedented milestone by surpassing $500 billion in assets under management. This remarkable achievement comes on the heels of a record-breaking year for inflows and new fund launches.
A Year of Unprecedented Growth
According to data from National Bank of Canada, ETF assets stood at $519 billion as of December 2024. This significant increase is attributed to strong market returns and substantial inflows of $76 billion, which was a 45% higher annual record than the previous year (2021).
ETFs Outperform Mutual Funds
For the third consecutive year, ETFs have outperformed mutual funds in terms of inflows. National Bank analyst Daniel Straus notes that this trend indicates ETFs are becoming the preferred investment vehicle among investors.
U.S. Stock Funds Lead the Charge
ETF providers experienced robust inflows across various fund types as markets rallied. U.S. stock funds were a significant contributor, taking in almost $22 billion in fresh capital and boasting about $130 billion in assets under management. This makes them a larger category than Canadian equity ETFs, which have approximately $102 billion.
Cryptoasset ETFs Experience Outflows
On the other hand, cryptoasset ETFs saw outflows of $1.1 billion – the only asset class to experience a decline. The approval of Bitcoin ETFs by U.S. regulators at the beginning of 2024 contributed to this trend, as Canadian counterparts were largely undercut on price.
Active Management Gains Traction
Bloomberg Intelligence analyst Athanasios Psarofagis attributes the growing popularity of actively managed ETFs to the Canadian market’s receptiveness to active management. With most launches being of actively managed funds in 2024, it is likely that this trend will continue in 2025.
ESG-themed Investing Faces Backlash
As investor interest waned due to environmental, social, and governance (ESG) concerns spreading across North America, ESG-themed funds saw outflows of $1.6 billion – representing about a third of inflows from the previous year.
Largest Inflow and Outflow of 2024
The Vanguard S&P 500 Index ETF had the largest inflow of the year at $6.2 billion, while the CI High Interest Savings ETF experienced the greatest outflow, $2.4 billion, in a year marked by the Bank of Canada’s policy interest rate cut and stricter liquidity requirements for high-interest savings account ETFs.
Conclusion
The unprecedented growth of Canadian ETFs to over $500 billion in assets under management is a testament to their increasing popularity among investors. As the market continues to evolve, it will be interesting to see how these trends develop in 2025.