Despite economic headwinds and market volatility, Canadian investors are showing remarkable resilience and growing confidence in exchange-traded funds (ETFs) and mutual funds as 2024 unfolds. A comprehensive new survey reveals that investment appetite is expanding even as uncertainty looms on the financial horizon.
“We’re witnessing a fascinating shift in investor psychology,” says Michael Thompson, chief investment strategist at RBC Global Asset Management. “Canadians aren’t retreating from the markets—they’re becoming more strategic about how they position their portfolios.”
The nationwide survey of 1,500 Canadian investors uncovered that 68% plan to increase their ETF holdings this year, up from 57% in 2023. This surge comes despite 73% of respondents expressing concern about inflation’s persistent impact on their investment returns.
What’s driving this seeming contradiction? The data suggests Canadians are finding comfort in the diversification and liquidity that ETFs provide during uncertain times. Sector-specific ETFs focusing on technology, healthcare, and renewable energy lead investor interest, with 42% of respondents planning to add exposure to these areas.
The emerging trend of thematic ETFs—those focused on specific investment narratives like artificial intelligence or cybersecurity—has captured particular attention. These products saw inflows of $2.8 billion in the first quarter of 2024 alone, representing a 34% year-over-year increase.
“The beauty of today’s ETF marketplace is the precision it offers,” explains Jennifer Wu, portfolio manager at CI Global Asset Management. “Investors can express very specific market views without taking on single-stock risk, which is particularly appealing when economic signals are mixed.”
Fee sensitivity continues to shape investor behavior, with 81% of survey respondents citing cost as a “very important” factor in their fund selection process. This has accelerated the trend toward ultra-low-cost core ETF positions, with products charging less than 0.10% experiencing the fastest growth rates across all categories.
However, it’s not all about cutting costs. The survey revealed a growing willingness among Canadian investors to pay premium fees for specialized active management, particularly in fixed income and alternative strategies. Active ETFs now represent 23% of total ETF assets in Canada, significantly higher than the 15% market share they command in the United States.
“The pandemic fundamentally changed how Canadians think about their investments,” notes David Chen, director of ETF research at CO24 Business. “There’s greater awareness of both opportunity and risk, leading to more sophisticated allocation decisions.”
The demographic breakdown shows millennials leading ETF adoption, with 74% using these vehicles as their primary investment tool, compared to 51% of baby boomers. However, the fastest-growing segment of ETF users is actually investors over 65, where adoption has increased 28% year-over-year.
Financial advisors report adapting their practices accordingly. Nearly 70% have increased their ETF allocations in client portfolios over the past year, citing improved tax efficiency, transparent holdings, and intraday liquidity as key advantages over traditional mutual funds.
“The conversation has evolved beyond just ‘active versus passive,'” says Financial Advisor Sandra Patel with TD Wealth Management. “Today’s discussion focuses on building resilient portfolios that can weather different economic scenarios while maintaining alignment with clients’ long-term objectives.”
As interest rates remain elevated and economic indicators send mixed signals, the survey suggests Canadian investors are positioning defensively while maintaining equity exposure. Dividend-focused ETFs saw inflows of $1.7 billion in Q1 2024, while low-volatility strategies attracted $890 million during the same period.
The future looks bright for continued ETF growth in Canada’s investment landscape. With over 1,200 ETF products now available to Canadian investors and an average of eight new launches monthly, the industry shows no signs of slowing—even as market uncertainty persists.
Will this expanded ETF adoption translate to superior investment outcomes for Canadians navigating today’s complex markets? The data suggests informed investors using these tools strategically have reason for cautious optimism as 2024 unfolds.
