Canadian fund assets hit new highs as RI and fixed income drive growth
A report published by SIMA and Pollara Strategic Insights shows Canadian investors are aggressively returning to traditional managed products, with purchasing activity for both mutual funds and ETFs surging over the past year. guvendemir via getty images
The Canadian investment fund industry continues its strong momentum, driven by a growing, cost-sensitive investor base and a structural shift toward specialized products.
A report from the Securities and Investment Management Association (SIMA) showed that total mutual fund and exchange-traded fund (ETF) assets reached new record highs in August, fuelled by four straight months of asset increases and strong inflows into fixed income and specialty funds.
ETFs continue to dominate new money inflows, with August net sales more than doubling that of mutual funds. ETF net sales this year are already close to equalling last year’s full-year total, underscoring their status as the industry’s primary growth engine.
“The structural shift is real, but the entire fund industry is benefiting from a more engaged investor base,” says Eli Yufest, executive director of the Canadian ETF Association (CETFA). “You have the historic weight of mutual funds maintaining stability, while ETFs act as the vehicle of innovation and cost reduction.”
A report published earlier this month by SIMA and Pollara Strategic Insights shows Canadian investors are aggressively returning to traditional managed products, with purchasing activity for both mutual funds and ETFs surging over the past year.
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The structural shift is real, but the entire fund industry is benefiting from a more engaged investor base. You have the historic weight of mutual funds maintaining stability, while ETFs act as the vehicle of innovation and cost reduction.
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The survey found that the proportion of mutual fund holders making a new purchase in the last year has doubled from the 2024 level, with ETF purchases also seeing a dramatic rise among holders. Despite the growth of self-directed platforms – four in 10 investors now hold a discount brokerage account – the vast majority (80 per cent) still made new investments with the benefit of professional advice.
The findings highlight a marketplace that is simultaneously valuing professional guidance while embracing a diverse set of products and information sources. Mutual funds (41 per cent), stocks (36 per cent) and GICs (29 per cent) remain the most common holdings, but ETFs (21%), bonds (14 per cent) and even cryptocurrency (11 per cent) maintain a substantial presence.
The report indicated that the value of the financial adviser appears to be strengthening amid uncertainty. An overwhelming 86 per cent of investors expressed high satisfaction with their adviser, crediting them for boosting confidence, improving returns and ensuring discipline during market downturns.
The report also noted a stabilization in investor behaviour related to market volatility. While over 30 per cent are still investing less than usual due to economic uncertainty, this figure represents a significant drop from the 50 per cent of investors who reported pulling back last year.
That doesn’t come as a surprise to Mr. Yufest, who has seen significant changes in the ETF market over the past couple of years.
“I can sum it up in two words: tremendous growth,” he says.
Mr. Yufest notes that the sheer number of ETF products available to Canadians has exploded, from about 10 a decade ago to over 1,500 today, across every asset class – equity, fixed income, crypto and commodities.
The primary drivers of the ETF boom, according to Mr. Yufest, are straightforward: lower management fees and superior trading flexibility.
This combination has made ETFs particularly appealing to a rising class of do-it-yourself (DIY) investors who are bypassing traditional financial advisory channels.
While ETFs clearly dominate the flows, Mr. Yufest doesn’t characterize the trend as “taking over” mutual funds, but rather as a demographic shift.
“ETFs skew from a demographics perspective a little bit younger, and mutual funds, generally speaking, skew a little bit older,” he notes.
A key area of innovation and investor interest has been in the cryptocurrency space. Canada was a pioneer, launching the world’s first Bitcoin ETF.
“Bitcoin is such a prominent player in the social zeitgeist of investing. People talk about it as this cool, new thing, even though it has been around for a while,” says Alex Smahtin, portfolio manager and senior analyst at Global X Canada.
He adds that for many investors, the ETF wrapper provides a crucial layer of safety and regulation.
“There’s a level of comfort in knowing a Bitcoin ETF has gone through all the regulatory steps to be listed on the Toronto Stock Exchange,” he says.
The focus on targeted, customized investment solutions also extends to Responsible Investing (RI) and ESG (Environmental, Social and Governance) funds.
While the growth rate for these funds has slowed and even seen some outflows, the total asset pool in RI mutual funds remains substantial. The emphasis within this segment is also evolving, with a greater focus on the social and governance components, including diversity, equity and inclusion (DEI) and corporate transparency.
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