10 Top Performing Canadian ETFs in 2021

These major gainers exemplify the changing tides in the market.

Andrew Willis 30 December, 2021 | 4:49AM
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If the term ‘cautiously optimistic’ could be a year in the markets, it would be 2021. A little volatile, ambiguous, but headed in the right direction. The only thing is, not everyone stands to benefit equally – and a potential broadening (or rotation) of the bull market is challenging fund managers.

Are we shifting from growth to value stocks? Or is this all a transient comeback in commodities (and inflation)? The top-performing Canadian ETFs have some clues, and we’ll see which products delivered the most to investors this year. To compare these ETFs, we’ll look at their returns to date, the cost of performance with the Management Expense Ratio (MER) and lastly combine these factors in a bigger view – the forward-looking Morningstar Quantitative Rating (MQR).

“The Morningstar Quantitative Rating, or the ‘Medalist’ rating, is a forward-looking assessment of a fund’s prospective ability to outperform similar funds,” explains Morningstar Canada’s Director of Investment Research, Ian Tam. Medalist ratings are based on five factors: people (the quality of management team), process (the effectiveness and consistency of the investment process), parent (organizational structure and talent retention), performance, and price (fees).

First, here’s the list of the 10 top-performing ETFs:


YTD Returns



Horizons S&P/TSX Capped Energy ETF (HXE)




iShares S&P/TSX Capped Energy ETF (XEG)




Horizons Enhanced Income Energy ETF (HEE)




BMO Equal Weight Oil & Gas ETF (ZEO)




Hamilton U.S. Mid/Small-Cap Financials ETF (HUM)




BMO Equal Weight US Banks ETF (ZBK)




CI Energy Giants Covered Call ETF (NXF.B)




BMO Covered Call US Banks ETF (ZWK)




Horizons Equal Weight Canada Banks ETF (HEWB)




Morningstar Direct Data as of Dec 6, 2021

Oil Be Back

Surprise, surprise. Helped by rising commodity prices, half of the top 10 in Canada this year were energy-related ETFs. But there are some big differences between them. First and foremost, the fees. 

At the top of the list, we have the gold-medalist Horizons S&P/TSX Capped Energy Index ETF (HXE). Coming in with a management expense ratio at only 0.27%, the top-performing ETF in Canada also had the lowest fees of the top ten. The fund does differ from the rest in the sense that it’s all about the capital gains – there’s no yield here, but it may have been the best way to play the swift energy rebound this year.

Giving Horizons a run for its money, a similar fund from iShares saw a stellar year as well. Around the same returns, but with some yield at 1.34% (twelve-month trailing distribution) that offset the difference in fees as of Dec. 8th. Bronze-medalist iShares S&P/TSX Capped Energy ETF (XEG) is a much larger fund (about 18 times larger) in assets under management than Horizons but ranked lower in returns vs. the category as of Nov. 30th (average vs. above average).

Differing from the top two on both the downside and distributions, in 3rd place, Horizons Enhanced Income Energy ETF (HEE) eked out similar returns but delivered double the yield of iShares’ at 3.86% as of Dec. 8th - offsetting the higher fees. The fund also outperformed on the downside in 2020.

With a similar yield, but lower returns in exchange for a much simpler portfolio, BMO Equal Weight Oil & Gas ETF (ZEO) has 9 equity holdings as of Oct. 31st, vs. 36 in Horizon’s HEE. BMO’s fund does rank higher on returns vs. category as of Nov. 30th (although lower on risk. vs category at the same date).

Briefly skipping ahead to 8th place, we have one more energy ETF with some interesting properties. CI Energy Giants Covered Call ETF (NXF.B) has a whopping yield of 7.95% as of Dec. 6, likely thanks to the options. Of all the energy ETFs on the list, it’s also the most value-oriented and large-cap.

Value Returns

Another option for Canadians seeking value with an American (and financial) focus is Hamilton U.S. Mid/Small-Cap Financials ETF (HUM). The portfolio’s largely smaller cap, as you can guess, aims to get exposure to companies in markets with M&A potential. It’s got the highest fees of the bunch, but a low turnover of 37.40% as of Oct 31th, and made up with a decent yield at 2.10%.

Coupling a covered call strategy with a strong year for US financials, BMO’s big yielder, BMO Covered Call US Banks ETF (ZWK) distributed 6.56% on top of delivering a top-ten return. Launched at the beginning of 2019, it’s a newer fund with a high momentum factor profile, so it’s worth watching.

Lastly, after Canadian banks made their mark with generous dividends and buybacks across the board, it may come as no surprise to see them in an ETF here. With another all-appreciation (no yield) focus this year, Horizons Equal Weight Canada Banks ETF (HEWB) rounds off the top ten in returns but joins the top two with a bronze medal thanks in part to its above-average processes, parent firm and fees.

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About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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