‘ETFs are often used as part of a portfolio completion strategy,’ says CIBC’s Jennifer Li
Treating ETFs as a long‑term asset allocation tool, rather than just a vehicle for tactical trades, is increasingly reshaping how institutional investors design portfolios.
During a panel discussion at the ETFGI Summit on Tuesday, Jennifer Li highlighted that shift shows up most starkly in the money flowing into single‑ticket multi‑asset portfolio ETFs, where assets in Canada have reached “almost $40 billion,” accounting for about 5 per cent of the domestic ETF market while pulling in roughly $10 billion of inflows this year alone, nearly double last year’s full‑year figure.
“This year, we've seen a lot of growth in these single stock ETFs, which are also used by investors for either shorter term or event driven trades but then you also see on the other side the growth in these all in one ETFs, which then means that investors are thinking longer term and using ETS as an asset allocation tool to park their assets longer term rather than using it as just a tactical trade. We're very bullish on models in general,” explained Li, director of institutional ETF sales at CIBC Capital Markets.
She also emphasized that the infrastructure is starting to catch up with demand, pointing to the few Canadian platforms that already allow a one‑click or “button” purchase of model portfolios, and that she sees more providers working to deliver that capability so they can offer customization at scale and turn model portfolios into fully executable portfolio solutions across their client base.
Additionally, Li argued that investors are becoming more deliberate about how they pay for active management. They are effectively running a “fee budget,” carving out one bucket of assets for cheap beta exposure through passive products, and a separate bucket where they are willing to pay higher fees for genuinely active, high‑conviction strategies that can move the needle on performance.
By consciously splitting fees and capital between low‑cost beta and more expensive, high active share strategies, she believes investors can build portfolios that have a better chance of outperforming while still driving down the overall fee load.
Domestically, hedge funds and other institutions are running relative value trades that go along a specific stock or sector ETF to isolate stock‑specific alpha and strip out broader sector risk, particularly in areas like energy, financials and real estate.
Meanwhile, pension funds often rotate into ETFs as swaps mature, using them as a temporary home for assets while they decide where to redeploy capital, which explains some of the larger ETF blocks visible in the market, explained Li.
While big institutions have many instruments available, like futures and other derivatives among them, ETFs aren’t always the default choice, but they remain attractive when speed of execution and clean, scalable exposure matter most, noted Li. She also acknowledged a single-use case among single‑family offices, which are using model‑based, ETF‑driven approaches to build tailored portfolios for individual family members, structured much like an LDI framework where each portfolio reflects that person’s spending profile and lifestyle.
As for portfolio completion, “there's always unintended exposures that we see, just by investing in different types of strategies, whether it's active, whether it's country factors,” explained Li. “There can be unintended alpha at a total portfolio level that a PM might be taking on and they would just want to hedge that out. ETFs are often used as part of a portfolio completion strategy.”
As for Daniel Straus, managing director of ETF research at National Bank Capital Markets, the equity landscape in 2025 has been an environment shaped by earlier shocks and policy headlines. The year began with tariff announcements that stalled equity inflows and pushed investors toward international equity instead. Consequently, a difficult fixed income backdrop drove heavy use of short‑term cash ETFs as a defensive parking place.
But now as the year draws to a close, Straus argued the “billions of dollars that are trapped in those assets are looking to branch out,” with investors rotating from simple cash and beta exposures into more complex and yield‑focused structures.
“They're looking for alternative or strategic forms of credit, credit management, active opportunities, things like that are exotic like CLOs, senior loans,” noted Straus, adding the current flows are essentially an extension of earlier trends as those large positions migrate into higher‑risk, higher‑opportunity corners of the ETF market.
Straus argues that investors who buy active ETFs want strategies that truly differ from the index and justify their fees. Among his clients, “they're looking for active share, they're looking for high conviction, because the passive side of the market is well covered.” He believes that raises the bar for what counts as legitimate active management.
Additionally, the dominance of cheap passive beta has “brought renewed attention on the kind of active management that people are looking for,” which means more concentrated, differentiated portfolios rather than “as broad an exposure as you possibly get,” added Straus.
Yet, Andrea Hallett, vice president and portfolio manager at Mackenzie Investments emphasized, the ETF is simply one of several interchangeable tools for accessing a desired market exposure and shouldn’t be a goal in and of itself. She explained how they weigh ETFs against futures and mutual funds on a case‑by‑case basis, asking which instrument delivers the target exposure at the lowest total cost and with the right implementation profile.
In that framework, their biggest ETF allocations tend to sit in passive equity, whether regional or single‑country, but they also use active equity ETFs where those make sense alongside other vehicles.
When it comes to choosing between in‑house products and external ones, Hallett is blunt that cost is a major swing factor. At the fund level, “our ETFs come with zero management fee on them for our mutual funds, because the mutual funds charge an equity at the top level,” she noted, which gives internal ETFs an edge on headline fees.
But she also stressed that this advantage is not absolute. For a big US equity position that is meant to be tactical, she noted that the management fee rebate “doesn't make that much of a difference,” because in that context, trading costs will dominate the outcome.
“There's not a hard and fast rule for anything. Everything in investment comes with a trade-off so it's really weighing those trade-offs and figuring out what is the most efficient way to get the exposure that we're looking for,” said Hallett.
