What Are We Looking For
Strategic beta ETF factors that have staying power.
The Screen
Factor investing (building an ETF around a trait such as “cheap,” “growing,” or “stable,” rather than owning one invested in the whole market) has grown into a roughly $86-billion business in Canada over the past two decades, though not smoothly. These funds go by a few names: strategic beta, smart beta, factor investing, and quantitative, to name a few. They all mean the same thing, a passive, rules-based index that deliberately tilts toward one or more investment factors instead of simply weighting by company size. Because that tilt is built into the index rather than run by a human stock picker, these ETFs typically cost a fraction of what a true actively managed fund charges. My April column on Canada’s ETF graveyard looked at why so many funds quietly close. This week, using Morningstar Direct, I dug into 235 Canadian-domiciled strategic beta ETFs to see which factors tend to survive, and which tend to disappear.
Quality factor ETFs, which target companies with the highest profitability (measured typically by return on equity), the strongest balance sheets, and the most consistent earnings growth, posted a 90-per-cent survival rate (nine of 10 products), among the highest of any ETF factor types. Risk-oriented approaches – funds built to smooth the ride rather than chase bigger returns – came in at 49 per cent (17 of 35). With sample sizes this small, a single fund closing can swing the percentage meaningfully, so treat these as directional rather than exact.
Asset flows (the amount of new money going into or out of an ETF) tell a complementary story. Quality’s asset flows jumped to $1.13-billion from $183-million between the back half of 2025 and the first half of 2026, though still modest next to Dividend ($4.39-billion from $2.9-billion) and Value ($2.93-billion from $1.6-billion), the two biggest destinations for factor investing dollars in Canada.
Multifactor funds, which blend several factors into one ETF, reversed to $302-million in inflows from $132-million in outflows. Fundamentals, a category of funds that weight holdings by measures such as sales or cash flow instead of by size, posted the largest flow acceleration of any factor at 663 per cent, though off a smaller base.
The premise of today’s screen: A high survival rate combined with rising inflows suggests a strategy has staying power, even though neither guarantees better returns. That’s what makes Quality worth a closer look and the focus of the list below.
What We Found
Counting only the oldest share class of each ETF (several of the names below also have USD or currency-neutral versions), the nine Quality factor ETFs listed here are the same nine that survived since their respective launch dates, now listed by name, category, ticker, MER (the annual fee you pay to own the fund), trailing returns, and inception date. Given their outsized survival rate compared with other factors, they might be worth researching further. Interestingly, though no explicit screen was placed on ratings, every ETF listed here carries either a Morningstar Medalist Rating of Gold, Silver, or Bronze (meaning our analysts believe it has the ingredients to outperform its category peers going forward), or a four- or five-star rating (meaning it has already beaten its category peers on an after-fee, risk-adjusted basis).
This article does not constitute financial advice. Readers are encouraged to conduct their own research before buying or selling any of the ETFs listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.