Investing in Canadian Sector ETFs? Try Shopping Around for Cheaper Alternatives

Credit where it is due. iShares, BlackRock’s Canadian ETF arm, has played a major role in driving ETF adoption in this country.

Going as far back as 2000, investors were introduced to what would become one of the most recognizable ETFs in Canada, the iShares S&P/TSX 60 Index ETF (XIU), which traces its roots back to the Toronto Index Participation Units. The firm also launched sector ETFs as early as 2001.

At the time, these products were highly competitive. Your main alternatives were expensive mutual funds with expense ratios often north of 1%, or working with an advisor who might charge up to 2% of assets under management annually. In that context, early Canadian ETFs were a clear upgrade.

In 2026, that is no longer the case. Many of these legacy sector ETFs still command billions in assets under management thanks to inertia and brand recognition, but they are no longer competitive on fees. Meanwhile, newer Canadian ETF providers have been steadily launching lower-cost alternatives.

There are differences to be aware of. A number of these newer ETFs use equal-weight methodologies, which I think makes sense in narrower Canadian sectors, while the iShares products tend to be market-cap weighted. That distinction will impact performance and risk, so it is worth keeping in mind.

With that in mind, here are four Canadian market-cap weighted sector ETFs from iShares, covering energy, financials, utilities, and REITs, along with lower-cost, equal-weight alternatives to consider.

Energy ETFs

Up first is the iShares S&P/TSX Capped Energy Index ETF (XEG). At a 0.60% management expense ratio, it is expensive for what it offers. On a $10,000 investment, you are paying about $60 per year in fees.

The ETF tracks 26 companies in the Canadian energy sector, but due to its market-cap weighting, it ends up heavily concentrated. Despite a 25% cap on individual holdings, Suncor and Canadian Natural Resources together make up a significant portion of the portfolio, limiting diversification.

A more cost-effective alternative is the Global X Equal Weight Canadian Oil and Gas Index ETF (NRGY). This ETF uses an equal-weight methodology and, unlike XEG, includes midstream companies such as Enbridge, TC Energy, and Pembina Pipeline.

NRGY charges a 0.27% management expense ratio plus a 0.02% trading expense ratio, which is still less than half of XEG’s cost. It is smaller at about $301 million in assets under management compared to XEG’s $2.2 billion, but still reasonably sized. It also pays monthly distributions, with a current 12-month trailing yield of 3.14%, slightly higher than XEG’s 2.87%.

Canadian Financials

For financials, the comparison starts with the iShares S&P/TSX Capped Financials Index ETF (XFN). It also has a market-cap weighted portfolio and a 25% cap on individual holdings. In practice, Royal Bank makes up about 20% of the portfolio, followed by TD Bank at around 15%.

The more balanced alternative is the Hamilton CHAMPIONS Canadian Financials Index ETF (HFN). HFN tracks a Solactive equal-weight index of 12 companies, including all six major Canadian banks, several life insurance companies, and asset managers like Brookfield and Fairfax Financial.

Unlike XFN, it pays monthly distributions, but currently offers a higher forward yield of 2.99% compared to 2.21% for XFN. HFN charges a 0.19% management fee, which is competitive given the strategy.

Canadian Utilities

For utilities, the iShares S&P/TSX Capped Utilities Index ETF (XUT) follows the same familiar pattern. It charges a 0.61% management expense ratio and is heavily concentrated, with Fortis alone accounting for about 23% of the portfolio.

The alternative here is the Hamilton CHAMPIONS Utilities Index ETF (UMVP). This ETF tracks an equal-weight portfolio focused on high-dividend infrastructure-like businesses via a Solactive index.

It goes beyond traditional utilities to include midstream energy companies such as TC Energy, Enbridge, and Pembina, as well as telecom names like BCE, TELUS, and Rogers. What matters is not GICs sector classification, but the underlying characteristics, stable cash flows backed by essential infrastructure.

UMVP charges a 0.19% management fee. The full management expense ratio has not yet been published, but I would expect it to come in well below XUT’s cost.

Canadian REITs

Finally, there is the iShares S&P/TSX Capped REIT Index ETF (XRE). This is a popular ETF with about $1.1 billion in assets under management. It offers a forward distribution yield of roughly 4.5% after accounting for a 0.60% management expense ratio.

However, the portfolio is quite concentrated, with over a third allocated to just three REITs, RioCan, Canadian Apartment Properties, and Granite. In my opinion, a more balanced option is the Global X Equal Weight Canadian REIT Index ETF (REIT).

This ETF uses an equal-weight approach across about 10 holdings, resulting in a much less top-heavy portfolio. While smaller at about $2.8 million in assets under management, it provides more even exposure across the sector.

REIT’s management fee is 0.25%, and while the full management expense ratio is not yet available, I think it will likely come in at around half the cost of XRE.