Canadians’ Demand for ETFs Surges in 2024: National Bank of Canada Analysis

Find out how Canadians’ demand for exchange-traded funds (ETFs) continued to grow in 2024, with strong inflows in U.S. and International equities, according to the monthly National Bank of Canada analysis.

Canadians’ demand for exchange-traded funds (ETFs) continued to grow as 2024 began, with January showing strong inflows following a successful year for the funds in 2023. According to the monthly National Bank of Canada analysis of the ETF market, U.S. and International equities contributed to the overall equities asset class posting $2.8 billion in combined inflows. This included $1.5 billion for U.S. equities, $1 billion for International equities, and $234 million for Canadian equities. Fixed income ETFs also started the year strongly, with $1 billion created, including $667 million for money market funds, while multi-asset funds gained $370 million and Inverse/Levered gained $111 million.

However, crypto-asset ETFs experienced outflows of $447 million, which is the second-largest monthly redemption on record since the category was launched in 2021. Additionally, commodities lost $39 million. With the uncertainty surrounding the Canadian economy, ETF investors favored mid- and long-term bonds and pulled back from short-term options. The industry also faced challenges due to OSFI’s decision to hike the wholesale liquidity requirement for High Interest Savings Account (HISA) ETFs to 100%, which dented sentiment slightly. Despite this, HISA ETFs remained popular in January, according to the report.

In terms of ETF providers, January proved to be a good month for Desjardins, Fidelity, and Hamilton, with the highest flow as a percentage of starting assets. However, it was a challenging start for CI GAM and Mackenzie, as both recorded large outflows. Last month, 21 ETFs were launched, including Purpose Investments’ expansion of income-oriented products. RBC iShares, BMO, and Vanguard continue to be the largest Canadian ETF providers by market share. BMO GAM also provided insights into how it sees the ETF industry in the year ahead, predicting continued growth with a focus on a few themes reflecting more sophisticated ETF investors with more targeted demands.

The Canadian ETF market saw strong inflows in January 2024, with U.S. and International equities leading the way. Despite challenges in certain sectors, the overall outlook for the ETF industry remains positive, with continued growth and a focus on meeting the demands of more sophisticated investors.