 Canada’s unified regulatory framework and low barriers to entry have allowed ETF series to double in number and quadruple their assets since 2020, outpacing the growth of standalone ETFs,†the BNMF note reads.
Thus, the number of ETF series increased from 144 in 2020 to 346 in September 2025. During the same period, assets under management increased from $11 billion (B) to $43 B, according to BNMF. “The share of total ETF assets represented by ETF series increased from 4% to 7%, meaning that ETF series grew faster than standalone ETFs,” reads the BNMF study.
This growth occurred without it being generally permitted for investors to exchange their share of a mutual fund of any series for an ETF series of the same fund. With its $13.6 billion in ETF series assets and 65 funds, at the end of September 2025, Purpose was the largest manufacturer in this sub-sector, followed by BMO ($10.1 billion and 18 funds).
This proliferation can be explained by various factors. First, fund issuers took advantage of this option to offer an ETF series of an existing mutual fund attractive to clients, the latter often being actively managed funds. Manufacturers thus found themselves riding a groundswell. “In Canada, actively managed ETFs represent approximately 34% of total ETF assets, and their net inflows account for 54% of total flows into ETFs between January and September 2025,” says BNMF.
The popularity of ETFs, their ease of use and the shift towards fee-based advice are also factors favoring the growth of the ETF series. Another tailwind: Mutual funds that have added their own ETF series are generally seeing net inflows into their mutual fund series, indicating that multi-class structures do not necessarily dampen overall asset growth.
“The addition of ETF series has grown the overall assets of fund families, with most funds experiencing net inflows and good resilience, even during periods of industry-wide capital outflows. Concerns linked to cannibalization are generally unfounded,” summarizes BNMF.
Additionally, ETF Series are more compatible with fund of funds design, whether ETFs that hold others or mutual funds that have ETFs as an underlying asset.
For and against
ETF series offer operational simplicity, cost savings for fund issuers and the inheritance of a fund’s performance history. However, they face challenges such as higher costs, pooling of capital gains as well as a larger share of their assets in liquidity, which can harm their competitiveness, underlines BNMF. Let’s examine these elements further.
Read also: The pros and cons of ETF series
- Operational simplicity and cost savings: ETF series can use the same operational infrastructure (reporting, accounting and compliance) as mutual funds, allowing fund issuers to reduce operational costs. In Canada, mutual funds and ETFs are regulated under the same framework, namely Regulation 81-102.
- Low barriers to entry: ETF series structure can reduce start-up capital requirements (seed capital) for certain strategies. “ For example, some bond ETF portfolios must hold hundreds of securities. A series of ETFs can leverage the size of the existing mutual fund portfolio to effectively provide this type of diversification that is difficult to replicate Â,” writes BNMF.
- Economies of scale: A series of ETFs with modest assets under management can leverage the larger assets of the pooled fund to reduce fixed costs per unit and benefit from better trade execution across assets, compared to a standalone ETF with similar, limited assets, BNMF points out.
- Performance brake linked to liquidity (“ cash drag »): FCPs generally hold a significant portion of liquidity in order to respond to investors’ redemption requests. “Therefore, if holding cash is not part of the fund’s strategy, a series of ETFs may not be as fully invested as an independent ETF with the same mandate. This may dilute returns for holders of the ETF series,” notes BNMF.
- Capital gains sharing : When a mutual fund includes an ETF series, the capital gains realized following redemptions in the mutual fund series can be allocated to the holders of the ETF series, and vice versa. This may result in unexpected tax consequences between different sets of investors.
“In Canada, because series of ETFs are typically created and redeemed for cash, cross-subsidization can occur in either direction. However, capital loss carryforwards are also shared between ETF series and mutual fund series,” the BNMF report specifies.
- Transaction cost sharing: When an investor buys or redeems shares of a mutual fund, the fund issuer must buy or sell securities in the portfolio. Costs associated with these transactions are borne by the fund and distributed among all unitholders, including ETF Series holders, according to BNMF.
Standalone ETFs work differently. The creation and redemption of shares is generally carried out by exchanging baskets of securities (in-kind), which makes it possible to externalize these costs to those who carry out a transaction and not to all security holders. This is one of the structural advantages of ETFs over mutual funds, especially for clients who hold an ETF for the long term. The latter are not affected by the transaction costs of other investors and, thus, their returns do not suffer.
“An ETF that cannot externalize all transaction costs due to sharing assets with a different fund structure deprives investors of one of the key benefits of ETFs,” reads a recent note from TD Securities.
This pooling of costs for a mutual fund’s ETF series exposes clients to the risk of large entry and exit movements, which can reduce the performance of the ETF series. This may also result in tax consequences for all FCP unit holders.
- Higher management fees: In Canada, ETF series generally cost about as much as FCP series, due to regulatory guidance. “Some Canadian providers have reduced fees on their mutual funds before launching a series of ETFs, or launched standalone ETFs with lower fees to attract cost-sensitive investors,” says BNMF.
