Market Rally Drives Inflows and New Fund Launches
In a remarkable year for the exchange-traded fund (ETF) industry in Canada, assets under management (AUM) surged past the $500 billion mark for the first time in 2024. This milestone was achieved despite market volatility, with strong returns and substantial inflows driving growth.
According to data from National Bank of Canada, ETF AUM stood at $519 billion at the end of December 2024. The significant increase in assets can be attributed to both robust market performance and the influx of fresh capital, totaling $76 billion. This figure represents a 45% higher annual inflow than the previous record set in 2021.
ETF Inflows Exceed Mutual Funds for Third Consecutive Year
ETF providers enjoyed substantial growth across various fund categories as markets rallied. U.S. stock funds saw almost $22 billion in fresh capital, placing this category above Canadian equity ETFs in terms of assets, with around $130 billion under management. In contrast, cryptoasset ETFs experienced outflows of $1.1 billion, making them the sole asset class to decline.
Record Number of New Fund Launches and Delistings
The market responded positively to the growing popularity of ETFs. A record 224 new ETFs were launched in 2024, while 61 funds were delisted. The total number of ETFs in Canada now exceeds 1,500. Five new providers entered the market, including two from the United States: JPMorgan Chase & Co. and Capital Group Companies Inc.
The majority of new launches consisted of actively managed ETFs, which now account for 53% of all ETFs and 31% of total ETF assets under management, according to National Bank data. Analyst Athanasios Psarofagis from Bloomberg Intelligence expects this trend to continue in 2025, citing the Canadian market’s receptiveness to active management.
ESG-Themed Investing Faces Backlash
In contrast, investor interest in environmental, social and governance (ESG)-themed investing waned in 2024. Investors redeemed $1.6 billion of ESG-themed funds, representing about a third of inflows from the previous year. This decline can be attributed to institutional redemptions from a few ETFs.
Key Trends and Statistics
- Vanguard S&P 500 Index ETF had the largest inflow of the year at $6.2 billion.
- CI High Interest Savings ETF had the greatest outflow, with $2.4 billion in losses.
- The Bank of Canada reduced its policy interest rate by 175 basis points in 2024.
- Stricter liquidity requirements were implemented for high-interest savings account ETFs by the country’s banking regulator.
Conclusion
The Canadian ETF industry demonstrated remarkable resilience and growth in 2024, despite market challenges. With records broken in inflows and new fund launches, it is likely that this trend will continue into 2025. As investor preferences shift and ESG-themed investing faces backlash, active management is expected to play a more significant role in the Canadian market.
References
- National Bank of Canada
- Bloomberg Intelligence
- The Bank of Canada
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