You won't believe the size of the Canadian ETF market - MoneySense

You won’t believe the size of the Canadian ETF market

ETF assets are catching up to mutual funds. Plus, the ETFs that are knocking it out of the park this year


Mutual funds may still rule in Canada, but exchange traded funds are gaining ground fast. According to the latest industry snapshot the Canadian ETF industry just hit an important milestone.

There are now more than 500 ETF now trading on the TSX and TSXV, controlling $129 billion worth of investor assets, as of the end of June. To put that in context, the Canadian ETF market is now about a quarter of the size of the Canadian mutual fund sector. As of the end of March, the Mutual Fund Dealers Association reports its members controlled about $522 billion in assets under administration.

The ETF revolution is just getting started  »

What makes the growth of the ETF space even more remarkable is that as recent as a decade ago there were fewer than 50 ETFs available in Canada with less than US$20 billion in assets. Every one from mutual funds to pension operators have been piling into ETFs to take advantage of their efficient low-cost structure.

Some investment experts, most notably active investors, increasingly express their reservations about the size of the passive investment structure. In April, George Athanassakos, director of the Ben Graham Centre for Value Investing Ivey Business School, wrote that if ETFs continue to grow at their current rate, they will distort financial markets. He writes:

Financial assets will be severely mispriced. Such investment vehicles have low costs simply because they forgo the research and trading that active managers carry out. ETFs or robo-advisors do not determine prices. They simply accept what active investors have arrived at after extensive bottom up research on stocks. Who would analyze stocks and determine their fair prices if everyone owned and traded autopilot investments like ETFs or what robo-advisors peddle? Who would mind the shop? If we eliminate active managers, the financial system cannot exist, as someone needs to make prices informative. Berkshire Hathaway’s Charles Munger agrees. As he has put it, “If you pushed indexation to the very logical extreme you would get preposterous results.

In terms of value, the combined ETF assets now account for more of the quoted market value of the TSX then either real estate or technology companies.

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Here’s a look at how quickly the ETF market has grown in terms of assets and the number of products.

Here is a quick look at the top performing ETFs in Canada so far this year:

Canada’s top performing ETFs

ETFs with a minimum 15% YTD return


 Total return (Year to date)

iShares BRIC Index ETF (CBQ) 27.7%
BMO China Equity Index ETF (ZCH) 25.3%
BMO India Equity Index ETF (ZID) 24.1%
PowerShares QQQ Index ETF (QQC/F) 21.5%
iShares NASDAQ 100 Index ETF CAD-Hedged (XQQ) 21.4%
BMO Nasdaq 100 Equity Hedged To CAD Index ETF (ZQQ) 21.3%
iShares India Index ETF (XID) 20.6%
BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index ETF (ZMT) 19.3%
First Asset Tech Giants Covered Call ETF (TXF) 19.3%
BMO Equal Weight US Health Care Hedged to CAD Index ETF (ZUH) 19.1%
BMO MSCI Emerging Markets Index ETF (ZEM) 18.4%
iShares MSCI Emerging Markets Index ETF (XEM) 17.3%
iShares Core MSCI Emerging Markets IMI Index ETF (XEC) 16.8%
Purpose Best Ideas Fund (PBI) 16.3%

Source: Bloomberg as of July 29, 2017