Despite market volatility, investors have continued to pour money into mutual funds and ETFs.Nuthawut Somsuk/iStockPhoto / Getty Images
As more investment data from the first half of a volatile year in markets comes in, the more distant the memory of that sinking feeling in the pits of investors’ stomachs back in late winter and early spring becomes.
The Securities and Investment Management Association (SIMA) reported this week that Canadian investors responded to the market uncertainty from U.S. President Donald Trump’s policies by buying significant volumes of exchange-traded funds (ETFs) and mutual funds.
As Daina Lawrence reported, ETFs drew a record $55-billion in the six months ended June 30, and asset managers were confident enough to launch 192 ETFs in Canada in the first half of 2025, on pace to exceed the record 224 launches last year.
The news for mutual funds was also good. Net sales totalled $17.1-billion in the first half compared to net redemptions of almost $4-billion in the same period last year, according to SIMA. (Mutual fund sales rebounded in the second half of 2024 for inflows of $15.2-billion for the year.)
What’s contributing to this investor confidence? It doesn’t hurt that the S&P 500, the Nasdaq Composite Index and the S&P/TSX Composite Index each hit new all-time highs this week.
In a report last week, BMO Capital Markets senior economist Robert Kavcic said there’s little evidence so far that tariffs are weakening growth and pushing up inflation. As a result, markets are moving on, betting that 10- to 15-per-cent tariffs across the board can be absorbed.
Some of the new ETF launches indicate a bolder mood, with dozens of new leveraged and inverse ETFs – including the debut of triple-leveraged ETFs in Canada – and a flurry of new crypto products.
As Joel Schlesinger reported, new Canadian depositary receipts are providing Canadian investors with access to foreign equities with a currency hedge, with new products focusing on European and Asian stocks.
A new batch of meme stocks is also catching the hearts of a certain segment of investors.
But the mid-year data aren’t all about reliving the excesses of 2021. While ETF investors embraced equities, notably U.S. and developed market funds, most of the gains on the mutual fund side were in fixed income, with investors pulling more than $6-billion from equity funds.
Money market funds remained very popular, with $5.3-billion in ETF net sales and $5.2-billion for mutual funds. And money in checking and savings accounts grew by 9 per cent year-over-year in May and 7.1 per cent year-over-year in April as investors grew cautious following Mr. Trump’s “Liberation Day” tariff announcement and subsequent market turmoil, Meera Raman reported.
However, that flight to safety may have passed with the worst of the tariff worries. By June, money market ETFs and mutual funds both saw net redemptions.
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