Sales of both Canadian ETFs and mutual funds have slowed in the higher interest rate era, but only ETF sales have remained net positive.After pulling billions of dollars out of Canadian mutual funds, February 2024 was the first time in a year that investors put more money in than they took out.by the Investment Funds Institute of Canada .
Sales of Canadian ETFs have also slowed in this interest rate cycle, but have remained net positive. Net sales of ETFs in 2023 were $37.6 billion, up slightly from 2022 but down from a peak of $58.3 billion in 2021, according to IFIC’sMoneta said that the move from mutual funds to ETFs can be understood as one “from products which are more expensive … to a cheaper product.
“I know a lot of people who would say, I'm getting five per cent, six per cent on a GIC — why bother with a mutual fund?” The experts say the changes playing out will likely mean more choice for investors, but not the demise of mutual funds. Whereas robot advisor platforms like Wealthsimple favour ETFs, the financial advisory divisions within Canada’s major banks “rely heavily on the mutual fund distribution model,” Patel said.The decline in mutual funds is playing out in many cases at the same institutions seeing ETF growth.
Christoffersen outlined two potential positive outcomes for investors: first, the proliferation of lower-cost alternatives will put downward pressure on mutual fund fees, “just in terms of the competitiveness within the marketplace.” More importantly, investors will see an even wider range of options for their money.
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