Most Canadian exchange-traded funds are designed to track a broad index and hold a basket of different assets. But Canadians looking to fine-tune their investment portfolios are driving interest in a different kind of product: ETFs built around a single stock.
Billed by issuers as offering investors greater choice in their investments, single-stock ETFs often use leverage and other investment strategies to amplify share price moves or generate income. Total assets under management, or AUM, of Canadian single-stock ETFs have grown steadily, reaching $6.35-billion at the end of September, according to TD Securities data, up nearly 72 per cent over the past year.
Not everyone is convinced that’s a good thing.
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In an interview with The Globe and Mail, Benjamin Felix, chief investment officer and a portfolio manager at PWL Capital, called single-stock ETFs “tools for speculation.”
Citing a working paper from Harvard University researchers Chris Murray and Marco Sammon, Mr. Felix said that in the U.S. ETF market – which he called “a decent analogy for the Canadian market” – leveraged single-stock ETFs tend to be launched based on “volatile recent winners.”
“More volatile stocks tend to attract more AUM from investors. So to me, that says these are really being used for gambling and performance chasing,” he said. While the working paper showed money in leveraged single-stock ETFs had done “reasonably well,” Mr. Felix said this reflected the exceptional performance of a small number of stocks.
A recent Morningstar analysis found that the median U.S. single-stock ETF had lost 38 per cent in the four years ending in July, 2026.
“They’re, to me, lottery tickets,” Mr. Felix said.
Canadian issuers are presenting them in a different light. On Wednesday, Global X Investments Canada plans to launch single-stock ETFs starting with six major U.S. companies – Alphabet, Amazon, Apple, Nvidia, SpaceX and Tesla – using what Chris McHaney, Global X’s head of investment management and strategy, said in an interview was an approach “more attuned to a buy-and-hold investor.”
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These “PowerStock” ETFs will give investors leveraged exposure to the underlying stocks, hedged into Canadian dollars, without the addition of options strategies. That makes them different from existing Canadian single-stock ETFs, which have tended to combine a small degree of leverage – often around 25 per cent – with strategies like covered call writing. That approach is designed to pay ongoing income streams, but Mr. Felix said investors sacrifice upside in exchange.
Flows into covered call and lightly leveraged ETFs have accounted for more than 93 per cent of total flows into single-stock ETFs this year, said Casey Yang, director of ETF sales and strategy at TD Securities. Global X sees that shifting.
“The majority of investors that are interested in something like a single-stock ETF are probably more geared to a growth objective than an income objective,” Mr. McHaney said. He added that the underlying stocks chosen for the new ETFs are “the ones that are most popular with Canadian investors at the current time.”
Unlike U.S. single-stock ETFs, which have been characterized by heavy leverage that gives investors exposure to two or three times the daily performance of a given stock, the new Global X ETFs have a target leverage of 33 per cent, which doesn’t reset each day. Mr. McHaney called that leverage level “moderate.”
Leverage – borrowing money to increase exposure to an investment – can boost gains, but can also amplify losses.
“For compound returns, which is what matters to investors, volatility has a really, really big impact,” said Mr. Felix. “And when you’re levering up a single stock, the volatility that you’re going to induce by doing that is just enormous.”
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Leverage may make more sense for broader index ETFs for Canadian and U.S. markets, he said, adding that while such products are “interesting,” he would hesitate to recommend them to all investors.
Single-stock ETFs remain a relatively small part of Canada’s $934-billion ETF market. The Vanguard S&P 500 Index ETF, the country’s biggest, has more than $36-billion in assets under management.
But Paul MacDonald, chief investment officer and portfolio manager at Harvest ETFs, said that single-stock ETFs are a useful tool for investors with particular conviction around individual companies to boost their exposure. Innovation within ETFs, he said, “has opened up a wide array of new opportunities and options for investors.”
Mr. Felix said that despite his views on single-stock ETFs – he struggles to see how they fit into a “sensible portfolio” – the interest from investors is clear.
“As long as there’s demand, of course companies are going to come to the market to meet that demand, unless regulation tells them not to.”