Report reveals growth has far outpaced passive ETFs or mutual funds
Canada’s ETF market is buoyant with consistent net sales reported by SIMA as mutual funds have a bumpier ride, but one half of the market is showing exponential growth.
Active ETFs have grown fifteenfold in the 10 years to March 2025, leaving passive ETFs (fourfold) and mutual funds (doubled) in the shade, according to the inaugural Canadian Active ETF Landscape report from Morningstar.
This section of the Canadian investment fund market pulled in $42 billion of flows in the year to March 2025 and in absolute terms, the first three months of this year have emerged as the strongest three-month period of the past 10 years.
Equities take the largest share of the active ETF assets (39.7%) followed by fixed income (25.7%). But while cash-like strategies including allocation funds, high-interest savings accounts, and money market funds, account for only 15.7% of assets, they are the fastest growing category alongside thematic, while target-risk funds are also showing strong growth.
More than three quarters of active ETF assets are in single asset-class strategies.
Recent product launches have come largely in the form of target-maturity and covered-call bond strategies with firms like Fidelity rolling out ETF versions of popular mutual funds. However, 25% of all active ETFs have been delisted over 10 years and 66% of closures were due to liquidation (vs. 42% for mutual funds); liquidated ETFs had an average age of 3.6 years.
The Canadian active ETF market is a concentrated one with just 39 (5%) holding more than $1 billion in assets and accounting for more than half of the market. More than half (53%) hold less than $50 million in assets.
Established providers like BMO, Global X, iShares, and CI Investments remain top players by total assets, the report highlights. But they are facing competition though as new entrants continue to disrupt the market. Firms outside the top 10 have grown their market share from less than 1% to 21%.
One of the attractive qualities of ETFs for investors is lower fees, with equity and money market funds among those that are cheaper than their mutual fund equivalents. But alternative ETFs often charge performance fees, making them 22% more expensive than mutual fund equivalents.
