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High interest rates have elevated exchange-traded funds used for parking cash to superstar status on the sales charts.

High-interest savings account ETFs plus money-market and T-bill funds offer minimal risk and returns right around 5 per cent. In a stressful world, this resonates.

The best-selling ETF of the first seven months of the year was the CI High Interest Savings ETF (CSAV), and competitors ranked third, 11th and 18th. That’s the background behind this special edition of the 2023 Globe and Mail ETF Buyer’s Guide looking at HISA and money market ETFs.

You’ll notice that the pioneer ETF in this category, the Purpose High Interest Savings Fund, has been around since 2013. Most others have come along recently to seize on the opportunity presented by high interest rates.

The ETF guide usually requires that a fund have a history of at least three to five years for inclusion, but an exception was made here in the interest of helping investors get a sense of what’s available. A couple of funds without even a single year of history are included because they have already attracted significant assets.

HISA and money-market ETFs are designed as a vehicle for holding cash in a portfolio. Investors use them for parking accumulated cash, and as a supplement to bond holdings. Savers can use them as well as a higher-yielding alternative to bank savings products.

As with all ETFs, there may be brokerage commissions to buy and sell HISA and money-market ETFs. Check your broker or trading app. Note that HISA ETFs are currently being scrutinized by banking regulators. These funds invest their assets in big bank savings accounts paying juicy wholesale rates. Regulators are asking what might happen to these banks if investors en masse cashed out of their HISA funds. Note as well that HISA ETFs are not covered by deposit insurance.

The growing number of T-bill and money-market funds is the ETF industry’s way of hedging against changes to HISA funds that, by one estimate, could reduce yields by 0.5 of a percentage point. HISA ETFs offer the best rates, though. Their yields are directly influenced by the Bank of Canada’s overnight rate, both on the up and downside.

Money market and T-bill funds reflect rates for short-term borrowings by corporations and government. Short rates in 2023 have been higher than long-term rates, an anomaly that won’t last.

HISA ETFs are available widely from brokers and trading apps, with a couple of notable exceptions in BMO InvestorLine and TD Direct Investing. RBC Direct Investing offers these funds after previously blocking clients from buying them.

Almost all the funds listed here pay out monthly interest, which is taxed as regular income in a non-registered account. For that reason, these funds work well in tax-free savings accounts, first home savings accounts, registered retirement savings plans and registered retirement income funds.

Click here to download an Excel version of the guide.

Notes: * management fee only; the more all-encompassing MER will be slightly higher

Market data as of Aug. 28, 2023. Returns to July 31, 2023.

Sources: Rob Carrick; ETF company websites;, TMX Money

Now, for a look at the data points used in this edition of the ETF guide:

Assets: Shown to provide an indication of how popular a fund is with investors and advisers.

Management expense ratio (MER): The cost of owning a fund. The MER is deducted from gross returns to produce the net returns shown on ETF company websites and elsewhere, including this guide.

Price: The custom with HISA and T-bill ETFs is to peg the unit price at a base of $50 or $100, which is the price shown in this guide. The unit price will edge higher through the month to reflect the expected interest payment, then fall back to the base level. The ideal time to buy is after the monthly payout, when the unit price is back to $50.

Yield after fees: Fund profiles for HISA ETFs often show the gross yield. The net yield shown here reflects the impact of the MER.

Average 50-day volume: Shown to compare the market acceptance of funds. Higher volumes mean more investor interest and usage.

Holdings: Money market funds may hold short-term corporate borrowings plus government treasury bills. T-bill funds are more focused – obviously, on T-bills. HISA ETFs hold their assets in big bank savings accounts that pay a higher rate of interest than is available to retail clients.

Annualized returns: Most funds in the HISA and T-bill categories have been around for only a year or so, which means there isn’t any long-term data to assess.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/04/24 11:50am EDT.

SymbolName% changeLast
BMO Money Market Fund ETF
CI High Interest Savings ETF
High Interest Savings Account Fund ETF
Horizons High Interest Savings ETF
Horizons 0 To 3 Month T Bill ETF
Ishares Premium Money Market ETF
Ninepoint High Interest Savings Fund
Purpose High Interest Savings ETF
Purpose Cash Management Fund ETF

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