More and more Canadian investors are opting for exchange-traded funds over generally higher-cost traditional mutual funds when looking for actively managed strategies.
Morningstar’s recently published 2025 Canadian Active ETF Landscape found that active ETFs in Canada hit a significant milestone in March 2025 when they reached C$178 billion in assets. While that’s only about one sixth of what active mutual funds hold, it’s a clear sign that investors are changing their preferences. Over the last 10 years, Canadian investors have really taken to active ETFs, putting around C$150 billion into them, which makes up 82% of their current assets. On the flip side, mutual funds have seen outflows of C$117 million during the same time.
Active ETFs are often seen as an evolution of mutual funds and offer some unique perks that have caught investors’ eyes.
One of the main benefits of active ETFs is that they’re cheaper. Our study found that, on average, investors pay less for active ETFs compared with fee-based and do-it-yourself share classes of active mutual funds. For example, allocation, equity, and money market ETFs have fees that are 64%, 37%, and 36% lower, respectively, than their mutual fund counterparts. But it’s worth mentioning that alternative ETFs tend to be pricier, costing 22% more because of performance fees (fees that vary based on how the fund does) on popular funds. These fees have bumped up the asset-weighted average starting in 2024.
Another big plus for active ETFs is that they’re generally easier to buy and sell compared with mutual funds. However, this ease of access can come with higher trading costs. Plus, providers of active ETFs sometimes struggle to limit the capacity of their strategies, while mutual funds can usually close to new investors.
Despite these challenges, the lower costs and greater accessibility of active ETFs have made them a popular choice for many investors. As the market keeps evolving, active ETFs may continue to play an important role in Canadians’ investment strategies.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
