Canadian investors divested from U.S. equity funds in the first quarter at the highest rate since the start of the pandemic, but overall withdrawal rates remained stable.The Globe and Mail
Canadian investors divested from U.S. equity funds in the first quarter at the highest rate since the start of the pandemic, moving their money into more conservative investments, according to a new report from Sun Life SLF-T.
But people aren’t cashing out. Overall withdrawal rates remained stable, suggesting that investors are staying committed to their long-term savings.
The report, released Tuesday and based on data from 1.5 million group retirement plan members, also found average contributions to group retirement plans rose to more than $9,500 in 2024, a 6-per-cent increase from 2022.
Sun Life draws its data from defined contribution pension plans and group registered savings plans, where members typically make regular payroll contributions matched by their employer.
“While some are adjusting their finances, it’s encouraging to see that they aren’t reactively pulling their money out of the market,” Dave Jones, senior vice-president of Group Retirement Services at Sun Life, said in a statement. “They’re engaged and taking their financial future seriously while navigating through turbulence.”
The report found that many Canadians are undergoing what it calls “statistically significant derisking,” especially among members investing in U.S. equities. Many shifted funds into guaranteed investment certificates or money market funds, which are lower-risk options that can offer more stability during periods of uncertainty.
Jason Heath, managing director of Objective Financial Partners in Markham, Ont., said that he is seeing the same thing with his clients. “Regardless of what’s going on politically and with trade and with tariffs, it’s probably a good thing that people are more hesitant about U.S. stocks.”
Many Canadians are more exposed to U.S. markets than they realize, Mr. Heath said. That is in part owing to the success that U.S. stocks have had in recent years compared with equities in the rest of the world.
In 2010, U.S. stocks made up 48 per cent of the MSCI World stock market index. Now, that share has grown to around 72 per cent.
“On that basis alone, if people have not rebalanced their portfolio, they’re probably overweight U.S. stocks because their U.S. stocks have done so well compared to everything else in their portfolio,” he said.
Some of this shift may also reflect a growing interest in “buy Canadian” investing, said Mr. Jones, which gained popularity earlier this year.
At the same time, more members are turning to target date funds, which are portfolios that automatically adjust to become more conservative as a person nears retirement. These funds now hold 42 per cent of member balances, up from 29 per cent in 2018, the report found.
Historically, people who invest only in target date funds have outperformed those who invest in non-target date funds in eight of the Past 10 years, according to Sun Life.
“This is investing on autopilot,” Mr. Heath said. “It takes away some of the potential for an investor to sell at the wrong time or making poor investment choices.”
