Canadian ETFs once again made waves in 2024, breaking records for annual inflows and fund launches and outperforming mutual funds in sales for the third year in a row, according to National Bank Financial Inc.
“Eye-catching returns from many corners of the markets, all-time high levels of inflows and a record number of new launches all contributed to the phenomenal growth of the industry,” the bank said in a research report on Friday.
ETF inflows hit $76 billion in 2024 — a 45% increase from the previous annual inflow record set in 2021.
Total ETF assets under management (AUM) stood at $519 billion by the end of the year, representing a five-year annualized growth rate of 22% and a 10-year annualized growth rate of 21%, the report noted. The funds surpassed the half-a-trillion-dollar milestone in AUM in November.
The ETF industry also expanded in terms of issuers and products in 2024.
A record 224 funds hit the market, bringing the total number of products in the country to 1,497. Another 61 funds were delisted in 2024.
Meanwhile, the number of ETF issuers in Canada grew to 45, with five new entrants — including U.S.-based asset managers J.P. Morgan Asset Management and Capital Group — and no exits recorded throughout the year.
Equity ETFs dominate inflows
Equity ETFs led inflows in 2024. With $44.6 billion in creations, they accounted for 58% of total ETF inflows for the year.
Amid a U.S. stock market rally, U.S. equity ETFs recorded nearly half of all inflows — $21.8 billion — in the equity ETF category. Meanwhile, Canadian and international region equity ETFs gathered 20% and 31% of total equity inflows, respectively.
Fixed-income ETFs set an annual inflow record of $24 billion, more than double the previous record set in 2023.
Commodity ETFs also recorded an all-time high of $995 million in inflows for the year, with gold bullion ETFs accounting for 95% of the sales in the category.
Multi-asset ETFs recorded $6 billion in creations.
Some fund categories were not as fortunate.
Investors pulled $1.1 billion out of cryptoasset ETFs in 2024, after spot-bitcoin ETFs were launched in the U.S. early in the year, increasing competition for Canadian providers.
ESG ETFs also saw waning investor interest in 2024. The category experienced its first year of annual outflows, just a year after recording its highest annual inflows. Net outflows last year totalled $1.6 billion, about one-third of the inflows registered in 2023.
There were no ESG ETF launches in 2024, and 14 delistings.
Mutual funds take a back seat to ETFs
ETFs outshone mutual funds in sales for a third consecutive year in 2024, the report noted. ETFs have been “chipping away at mutual funds’ market share steadily over the years.”
While net flows to mutual funds over the past four years were still positive, mutual funds suffered two consecutive years of outflows in 2022 and 2023. The products reversed course slightly in 2024, with inflows totalling $8.3 billion as of October.
ETF AUM currently stands close to 18% of total mutual fund AUM in Canada, according to the report.
“Although there’s no conclusive evidence that any particular outflow from a mutual fund is matched with an inflow into an ETF, we have observed such switches occurring at the advisor level, at least anecdotally,” the report said.
“Even though Canadian ETFs lack some of the comparative tax benefits over mutual funds that their U.S. counterparts do, their other benefits still draw the attention of many advisors: they are ideal for fee-based managers because of generally lower cost, transparency, convenience and wealth of selection.”
From passive to active
National Bank Financial defines actively managed ETFs as those that do not track a published index, while passively managed ETFs do.
The report noted that over the past five years, an average of 119 active ETFs launched in Canada each year, almost double the amount of passive ETF launches.
As a result, the number of active ETFs has now surpassed the number of passive ETFs — more than half (53%) of the total in Canada are active, the report said.
Active ETF AUM totalled $161 billion by the end of 2024, or 31% of assets for all Canadian ETFs, it added.
December 2024 takeaways
The year ended on a high note in December, with Canadian ETF inflows topping $10 billion for the first time in a single calendar month — $10.6 billion to be precise.
Equity ETFs dominated inflows in the month, with Canadian and U.S. equity funds each pulling in more than $3 billion and international equity funds drawing $1.6 billion.
Fixed-income ETFs registered inflows amounting to $2 billion.
Cryptoasset ETFs suffered $606 million in redemptions, the largest monthly outflow for the year and the second largest monthly outflow since 2021, National Bank Financial noted.
As well, LongPoint Asset Management Inc., which made its first foray into the ETF industry in November 2024, launched four more ETFs in December. The leveraged and inverse-leveraged ETFs provide exposure to crude oil or natural gas and track Solactive indices.