With assets under management approaching $760 billion, Canada has built one of the most robust ETF ecosystems in the world. Yet beneath the surface of record inflows and expanding investor choice, structural and tax disadvantages are quietly pushing capital south of the border.
Eli Yufest, executive director of the Canadian ETF Association (CETFA).
According to Eli Yufest, executive director of the Canadian ETF Association (CETFA), roughly 30% of Canadian ETF assets are now held in U.S.-listed products, a trend that could accelerate further as American fund managers roll out ETF share classes tied to some of the world’s most successful mutual funds. For Canadian issuers, exchanges, and policymakers, the stakes are high — and the window to act may be narrowing.
In this Q&A, Yufest breaks down what the ETF boom really means for investors, why capital flight is becoming a growing concern, and which policy changes are urgently needed to ensure Canada remains a global leader in ETF innovation.
Zandile Chiwanza, Staff Writer at TMX Vetta-Fi: ETFs continue to see record inflows and new product launches in Canada. What does that growth mean for everyday investors?
Eli Yufest: In simple terms, it means Canadian investors now have access to almost any asset class or investment exposure they could want through ETFs. When people compare Canada to the U.S., they often use a 10-to-1 ratio, given the size difference between the two markets. But when you look at ETFs, Canada is actually over-indexed. As of the end of 2025, Canada had roughly 1,700 ETFs, compared to about 4,500 to 5,000 in the U.S. Adjusted for size, that means Canadian investors are extremely well served.
Whether it’s equities, fixed income, commodities, currencies, or more specialized strategies, Canadian investors can find those exposures easily through domestically listed ETFs.
Chiwanza: Canadian investors often discuss how much exposure to allocate domestically versus the U.S. or international markets. There’s also concern about capital leaving Canada through U.S.-listed ETFs. How is the association addressing that issue?
Yufest: This is a major focus for us. The Canadian ETF market is roughly $760 billion in assets under management. At the same time, Canadians have invested about $250 billion into ETFs outside of Canada, primarily in the U.S. That means roughly 30 cents of every ETF dollar invested by Canadians is held outside the Canadian ecosystem.
When that happens, Canadian exchanges, issuers, custodians, and capital markets don’t benefit. There’s also no Canadian regulatory oversight and no Canadian tax revenue tied to those assets. Once that capital leaves the country, it’s very difficult to bring back.
We’re speaking with the federal government and to the regulators as well around structural issues that are creating an uneven playing field when it comes to the Canadian market versus the US market. All we’re asking Canadian regulators and policy makers to do is to level that playing field. We’re not advocating for restrictions or any regulation that prevents Canadians from buying American or foreign listed ETFs. We don’t want any protectionism. What we’re saying to the government and the regulators is remove the structural and tax barriers that will prevent us from competing fairly against American or foreign ETF products.
Chiwanza: What specific policy changes is the association advocating for?
Yufest: We made a pre-budget submission to the federal government outlining several key proposals.
First, we’re calling for changes to the allocation-to-redeemer tax rules that were reworked in 2019 and implemented in the 2022 budget. These changes have created unintended disadvantages for Canadian ETFs.
Second, we’ve proposed the idea of a “Maple Investment TFSA.” Today, an estimated 60% of TFSAs are held in cash, often because investors view them as savings accounts rather than investment vehicles. Simply adding the word “investment” would help signal the intended use.
We’re also advocating for increased TFSA contribution room when Canadians invest in Canadian-listed ETFs, along with a government matching component similar to what exists for education savings plans. That would both incentivize investing and encourage long-term savings.
Third, Canada is the only jurisdiction we’re aware of that charges sales tax on ETF management fees. Removing those taxes would immediately improve competitiveness.
Finally, Canada has 13 separate securities regulators. We need better coordination at the federal level to reduce fragmented regulation, overlapping fees, and inefficiencies.
We’re actively engaging with Finance Canada, the PMO [prime minister’s office], and regulators, and while nothing is guaranteed, we’re cautiously optimistic that progress can be made.
Chiwanza: Globally, active ETFs are seeing strong growth. Is Canada following that trend?
Yufest: Yes, absolutely. Growth is happening across nearly every asset class. If you look back 20 years, ETFs were largely limited to plain-vanilla equity exposure. Today, the growth curve looks like a hockey stick.
That said, there are significant headwinds. One of the most important developments investors should be aware of is what’s happening in the U.S. around ETF share classes.
Chiwanza: Why are ETF share classes in the U.S. such a big deal for Canadian investors?
Yufest: Outside the U.S., investors have never had access to U.S. mutual funds. ETFs changed that by making investment products tradable on exchanges, giving global investors seamless access to U.S. strategies.
[While Canada has utilized ETF share classes for years, the structure is a recent development in the United States. Following the 2023 expiration of Vanguard’s exclusive patent, the SEC has seen a surge in applications from U.S. issuers. With several already approved, a wave of new American products is expected to enter the global market.]
If you assume each issuer launches even 20 ETF share classes, that’s potentially 1,800 new ETFs entering the global market — many tied to some of the most successful mutual funds ever created. That creates a real risk that capital flows out of Canada accelerate even further. What’s already 30% of ETF assets moving south could increase meaningfully.
This is why we’re urging policymakers to act with urgency. There’s a potential tsunami coming, and Canada needs to address its structural disadvantages before it hits.
Chiwanza: Looking ahead, are there specific areas of the Canadian ETF market that deserve more attention this year?
Yufest: Every investor’s situation is different, so product selection really depends on individual goals, risk tolerance, and whether someone is working with an advisor. From an industry perspective, momentum is clearly on our side. The ETF market has seen double-digit growth for several years and has nearly tripled in size over the past five years. Canada has a thriving ETF ecosystem today.
But if we don’t address the structural and tax challenges we’ve discussed, that ecosystem could be hollowed out over time. That would mean fewer high-quality jobs, less innovation, and fewer benefits for the Canadian economy.
Chiwanza: If there’s one message you want investors and policymakers to take away, what is it?
Yufest: The government and regulators need to act with urgency. Canada has one of the most resilient and sophisticated ETF ecosystems in the world, but that won’t remain the case by default.
If we want future generations to have a strong domestic ETF market, we need policy changes now. Without them, Canada risks losing its competitive edge within the next 15 to 20 years — and that’s not hyperbole.
This interview has been edited for length and clarity.
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