(Bloomberg) --Assets in Canadian exchange-traded funds surpassed $500 billion (US$346 billion) for the first time in 2024, a year that smashed records for inflows and new fund launches.
ETF assets under management stood at $519 billion at the end of December, according to National Bank of Canada, thanks to strong market returns and inflows of $76 billion. The latter figure was 45% higher than the previous annual record, set in 2021.
ETFs providers enjoyed strong inflows across several fund types as markets rallied. US stock funds took in almost $22 billion in fresh capital and ended the year with about $130 billion in assets, according to National Bank.
That makes it a larger category for the ETF industry than Canadian equity ETFs, which have $102 billion.
Cryptoasset ETFs, however, saw outflows of $1.1 billion — the only asset class in the red. Bitcoin ETFs were given approval by US regulators near the beginning of the year, largely undercutting their Canadian counterparts on price.
Overall, ETFs outsold mutual funds for the third straight year, National Bank analyst Daniel Straus wrote. Mutual funds had a modest inflow of $8.3 billion in the first 10 months of the year, the most recent data available.
“Canada’s ETFs hitting record inflows while exceeding mutual fund flows really shows that ETFs are becoming the preferred investor vehicle,” said Bloomberg Intelligence analyst Athanasios Psarofagis.
The market responded. A record 224 ETFs launched in 2024, while 61 funds were delisted. There are now about 1,500 ETFs in Canada. Five ETF providers entered the market in 2024, including two from the US: JPMorgan Chase & Co. and Capital Group.
Psarofagis said most launches were 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.
“We’ll likely see more of this in 2025,” Psarofagis said. “The Canadian market is very receptive to active management, more so than any other region.”
As backlash to environmental, social and governance-themed investing spread across North America, investor interest waned. Investors redeemed $1.6 billion of ESG-themed funds in 2024, representing about a third of inflows from the year prior.
“Outflows can be mostly attributed to institutional redemptions from a few ETFs,” Straus and his team wrote.
The Vanguard S&P 500 Index ETF had the largest inflow of the year at $6.2 billion, while the CI High Interest Savings ETF had the greatest outflow, $2.4 billion, in a year that saw the Bank of Canada cut its policy interest rate by 175 basis points. The country’s banking regulator has also implemented stricter liquidity requirements for high-interest savings account ETFs.