2025 ETF year in review: Active ETFs take the lead

As 2025 comes to a close, investors can reflect on a year of shifting market dynamics and record ETF activity. Moderating inflation and gradual rate cuts provided a constructive backdrop for markets, despite periods of volatility. Through it all, ETFs continued to shine as a preferred vehicle for flexibility, cost efficiency and innovation.

Record-breaking growth in 2025

Canada’s ETF industry continued its remarkable expansion this year. Canadian-listed ETFs drew more than $108 billion in net inflows by the end of November, well-surpassing 2024’s full-year record and pushing overall ETF assets to approximately $767 billion across roughly 1,803 ETFs.

Equity ETFs led the charge, with $56 billion in year-to-date inflows, as investors rotated toward global and US exposures. Fixed income ETFs attracted more than $33 billion, buoyed by expectations for lower rates and renewed demand for yield across short-duration, aggregate and corporate bond strategies.

But the standout story of 2025 was the rapid rise of active ETFs, as investors sought professional oversight and adaptable strategies in a changing environment.

Active ETFs move mainstream

Active ETFs accounted for a growing share of new assets this year — roughly 33% of all new ETF assets — marking a structural shift in how Canadian investors access active management.

Investor demand for professionally managed solutions within the ETF structure continued to build momentum, driven by three key factors:

1. Flexibility and transparency: Investors increasingly appreciate how active ETFs combine the low-cost, intraday tradability of traditional ETFs with the adaptability of active management.
2. Volatile markets favour expertise: In an environment where sector leadership rotated frequently, from cyclicals early in the year to quality growth and income themes later, active managers were well-positioned to navigate selectively.
3. Advisor adoption: Advisors have been instrumental in driving uptake, using active ETFs to enhance diversification and improve portfolio tax efficiency.

This year also saw a wave of new active ETF launches, including income-oriented, factor-based and defensive tilt products from several providers, including Mackenzie. This underscores the trend toward customized portfolio solutions.

Tax-smart moves for year-end

As investors prepare portfolios for 2026, year-end brings a timely opportunity to improve after-tax efficiency:

1. Tax-loss harvesting opportunities are limited but valuable.
Given strong market performance, few sectors posted losses — though select energy and long-term bond ETFs offered potential loss harvesting opportunities this fall. Selling a losing ETF and reinvesting in a similar (but not identical) ETF can realize a capital loss to offset gains elsewhere in a portfolio.

2. Review capital gains distributions.

ETF distributions often occur in December. Understanding which funds are distributing capital gains and in what amounts can help avoid surprises at tax time.

3. Rebalance with intent.
After another strong year for equity and fixed income ETFs, rebalancing can help maintain your strategic asset mix. ETFs make it easy to fine-tune exposure efficiently across geographies and asset classes.

Looking ahead to 2026

With interest rates expected to drift lower and markets transitioning toward a more balanced growth phase, 2026 may see active and income strategies continue to gain ground. Innovation remains vibrant, with sustainable, alternative and multi-asset ETFs offering new avenues for diversification.

For investors and advisors alike, ETFs have never been more dynamic or more integral to constructing resilient, tax-efficient portfolios.

The bottom line

This year confirmed what many investors already knew: ETFs are no longer just about indexing. Active ETFs are now a core component of modern portfolios, blending professional management, liquidity and transparency in a way that resonates with today’s market realities.

For more information about Mackenzie ETFs, please talk to your Mackenzie sales representative.

Commissions, management fees, brokerage fees and expenses may all be associated with Exchange Traded Funds. Please read the prospectus before investing. Exchange Traded Funds are not guaranteed, their values change frequently and past performance may not be repeated. 

Index performance does not include the impact of fees, commissions and expenses that would be payable by investors in the investment products that seek to track an index. 

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This article may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of November 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.