The Canadian ETF industry is on pace for a record year. Through the first four months of 2026, total net flows reached $74 billion — $60 billion of that landing in the first quarter alone. April added another $13 billion, a figure that might appear modest by comparison but was, in fact, approximately 30% above last year's monthly average. This is the context Hilly Cutler, Senior Portfolio Consultant at BMO Global Asset Management, brought to a recent episode of Views from the Desk — a market that is not slowing down so much as pausing after a historic sprint.
"ETF flows overall in April came in at just over $13 billion," Cutler notes. "Bit of a slowdown. We did have a record level set in Q1. We had ETF flows so far year to date of $74-billion, but we had $60-billion in the first three months of the year. We did see a bit of a slowdown there, but otherwise still better than average monthly flows from last year."
Equities Are Shooting the Lights Out
The dominant story in 2026 ETF flows is equity. Cutler places it directly: equities accounted for 75% of net flows in April and 65% of flows year to date. That momentum held even through the geopolitical turbulence of April — the conflict in Iran, sharp swings in commodity markets, and ongoing uncertainty in rates — suggesting that investor conviction in equities is structural, not reactive.
"The fact that we're still seeing strong equity flows is very positive momentum," Cutler says. "And where we're seeing it is also quite interesting. Canadian equity ETFs tend to be very strong. We saw some strong flows on the dividend side as well. And global equities are seeing a lot of flows."
Canadian equities led with $13.5-billion in year-to-date inflows. US and global equity ETFs followed closely, at roughly $11.5-billion each. A notable driver within the global equity category: single-ticket asset allocation ETFs — the all-in-one solutions with 100% equity mandates — which classify within global equity and are attracting growing adoption from both advisors and self-directed investors.
Emerging markets started 2026 strong but came under pressure as geopolitical risk rose. Cutler attributes the pullback to investor concern about the impact of rising oil prices and metals volatility on economies with significant commodity exposure. "A lot of emerging market countries that are producers of precious metals and other metals" felt the effect.
Index strategies continue to define the flow landscape. Sixty-three percent of all equity ETFs are now indexed. "Market cap has been very strong as well with the flows within the equity space," Cutler observes. "Low cost is still resonating with investors, which is great to see."
Fixed Income: Functional, Not Exciting
Fixed income is generating flows — all categories remain net positive year to date — but the environment is complicated. Rising bond yields compressed demand for both ultra-short and long-duration government bonds in April. Money market ETFs experienced net redemptions as short-duration bonds emerged as a more attractive alternative. "Where there's now more attractive yield opportunities on the short end of the curve. And then long term bonds of course getting hurt by the rising bond yields," Cutler explains.
Performance within fixed income reveals a clear pattern: credit is outperforming government. The Canadian bond universe is up 0.3% year to date through April, but within that, corporate bonds led at just under half a percent, while long-term federal bonds were slightly negative at -0.25%. Long-term corporate bonds, by contrast, posted +0.4%. The real standout: ultra-short-term credit, up 0.8% year to date — a material gap relative to the broad index.
Beyond the domestic universe, real return bonds delivered 1.5% year to date as inflation expectations remained embedded in pricing. In US credit, floating rate high yield returned 1.4% versus near-zero for fixed-rate high yield equivalents — a direct expression of the rate environment's impact on duration positioning.
The Cost Conversation Is at the Forefront
A meaningful structural shift is underway in how advisors and clients are thinking about fees. The majority of April's ETF flows went into products with management expense ratios below 0.3%. For Cutler, this aligns with what he is hearing consistently on the road.
"My conversations with advisors, I've been doing portfolio consulting for eight years now. The focus on lowering costs and fees has never been as robust as it is today," he says. "But now at the forefront it's really helped me to bring costs down, be as effective as possible. And that doesn't mean necessarily that everything is going to go to just low cost index based strategies. But it's where we believe we have the best opportunity for active to add value. We're willing to pay for it, the value is there. Otherwise let's try and be, you know, broad, low cost as possible and it's kind of you're going to get that core and explore type portfolio construction playing out."
The core-and-explore model — broad, low-cost index ETFs as the base, with targeted active positions where alpha opportunity justifies the fee — is now the dominant portfolio construction framework being deployed across the advisor channel.
Canadian Sector Performance: Energy Leads, Technology Trails
Energy is the unambiguous Canadian sector leader in 2026, up approximately 27% year to date through April. Second place went not to industrials — co-host Zayla Saunders' guess — but to utilities, up just under 12%. Cutler flags the structural rationale: many utility companies carry inflation pass-through mechanisms, providing real protection in a rising-rate environment. Materials also approached 12%, supported by gold prices recovering after weakness earlier in the year.
The outlier to the downside: technology, the smallest sector in Canada and largely driven by a single stock, fell more than 20% year to date.
At the index level, Canadian equities are up 7.5% year to date — ahead of the S&P 500's roughly 5% gain in Canadian dollar terms — while the NASDAQ 100 rose just under 9%. US small caps have been a quiet performer, up 13.5% and largely unreflected in flows.
"I'm kind of surprised really to see the strength and the resilience of US Small caps. And we haven't really seen that as strong on the flows just yet," Cutler says.
Three Key Takeaways for Advisors
1. Equity conviction is holding through volatility — and indexing is the primary vehicle.
Despite geopolitical disruption and rate uncertainty, 65% of year-to-date ETF flows are landing in equities. Sixty-three percent of equity ETF flows are going into indexed strategies. Low-cost, broad-market exposure remains the dominant allocation decision; advisors building or reassessing equity sleeves should ensure they are anchored in cost-efficient index exposures before layering complexity.
2. In fixed income, credit is outperforming government, and duration positioning matters more than ever.
Long-term government bonds are in negative territory year to date while long-term corporate bonds are positive. Ultra-short-term credit is outperforming the broad Canadian bond index by more than 2.5x. Real return bonds and floating-rate high yield have been the standout performers. Advisors navigating fixed income allocations should be precise about both credit quality and duration — the standard "broad bond exposure" assumption is masking significant dispersion.
3. The core-and-explore framework is now the practitioner standard, and the fee conversation has never been more central.
Cutler's eight years of portfolio consulting experience point to one unambiguous shift: cost reduction is now the opening agenda item with advisors, not a secondary consideration. The resulting portfolio architecture — low-cost, diversified core combined with selective active positions where alpha is demonstrable — is how advisors are constructing and justifying portfolios today. Advisors who cannot articulate cost rationale at the position level are increasingly out of step with client expectations.
Footnote:
1 "Podcast: Reading the Market Through ETF Flows - May 11, 2026." BMO ETF Dashboard, 14 May. 2026.
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