Exchange-traded funds are often low-cost instruments for investors to track popular indexes or leverage experienced manager choices to beat the market. The best ones serve as low-cost building blocks in a portfolio, and unlike open-end mutual funds, all ETFs are traded throughout the day on an exchange.
In 2025, the worst-performing ETFs included us small/mid cap equity fund Dynamic Active US Mid-Cap ETF DXZ and Canadian long-term fixed-income fund BMO Long Federal Bond Index ETF ZFL. Data in this article is sourced from Morningstar Direct.
Screening for the Worst-Performing ETFs
When evaluating ETFs, investors should focus on long-term returns across multiple years and market cycles. However, short-term returns can provide valuable information about biases within strategies.
To find the year’s worst-performing ETFs, we screened equity, allocation, and fixed-income funds that trade within Canada for those that have at least C$10 million in total assets. We narrowed the list to only ETFs with parent pillars for their Morningstar Medalist Ratings of average or above, meaning our analysts believe they’re backed by industry-standard asset management companies. We also excluded exchange-traded notes.
The 10 Worst-Performing ETFs for 2025
- Dynamic Active US Mid-Cap ETF DXZ
- BMO Long Federal Bond Index ETF ZFL
- TD Canadian Long Term Federal Bond ETF TCLB
- Invesco Long Term Government Bond Index ETF PGL
- Vanguard Canadian Long-Term Bond Index ETF VLB
- BMO Long Provincial Bond Index ETF ZPL
- iShares Core Canadian Long Term Bond Index ETF XLB
- BMO US Preferred Share Hedged to CAD Index ETF ZHP
- TD US Long Term Treasury Bond ETF TULB
- Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged) VBG
Metrics for the Worst-Performing ETFs
Dynamic Active US Mid-Cap ETF
- Morningstar Rating: ★★★
- Expense Ratio: 0.83%
- Morningstar Category: US Small/Mid Cap Equity
The C$29.3 million Dynamic Active US Mid-Cap ETF was the worst-performing ETF in 2025, with a 7.12% loss. The actively managed Dynamic Funds ETF fell further than the 2.01% loss on the average fund in Morningstar’s us small/mid cap equity category for the year. Over the last three years, the fund has gained 6.31%, underperforming the 8.06% gain on funds in its category, placing it in the 83rd percentile for the period.
The Silver-rated Dynamic Active US Mid-Cap ETF launched in September 2017.
BMO Long Federal Bond Index ETF
- Morningstar Rating: ★★
- Expense Ratio: 0.22%
- Morningstar Category: Canadian Long Term Fixed Income
The C$1.3 billion BMO Long Federal Bond Index ETF ranked second for the year, falling 4.83%. The BMO ETF, which is passively managed, fell further than the 1.85% loss on the average Canadian long-term fixed-income fund. Over the past three years, the fund has risen 0.05%, underperforming the 1.98% gain on funds in its category, placing it in the 100th percentile for the period.
The Neutral-rated BMO Long Federal Bond Index ETF launched in May 2010.
TD Canadian Long Term Federal Bond ETF
- Morningstar Rating: ★★★
- Expense Ratio: 0.23%
- Morningstar Category: Canadian Long Term Fixed Income
The third-worst-performing ETF in 2025 was the C$288.7 million TD Canadian Long Term Federal Bond ETF. The actively managed TD ETF declined 3.19%, falling further than the average Canadian long-term fixed-income fund, which dropped 1.85%. Over the last three years, the fund has climbed 1.01%, underperforming the 1.98% gain on funds in its category, placing it in the 100th percentile for the period.
The Gold-rated TD Canadian Long Term Federal Bond ETF launched in November 2019.
Invesco Long Term Government Bond Index ETF
- Morningstar Rating: ★★★
- Expense Ratio: 0.28%
- Morningstar Category: Canadian Long Term Fixed Income
The C$80.4 million Invesco Long Term Government Bond Index ETF was the fourth-worst-performing ETF in 2025, with a 2.24% loss. The passively managed Invesco ETF fell further than the 1.85% loss on the average fund in Morningstar’s Canadian long-term fixed income category for the year. Over the last three years, the fund has gained 1.86%, underperforming the 1.98% gain on funds in its category, placing it in the 75th percentile for the period.
The Neutral-rated Invesco Long Term Government Bond Index ETF launched in June 2011.
Vanguard Canadian Long-Term Bond Index ETF
- Morningstar Rating: ★★★★
- Expense Ratio: 0.17%
- Morningstar Category: Canadian Long Term Fixed Income
The C$295.9 million Vanguard Canadian Long-Term Bond Index ETF ranked fifth for the year, falling 1.10%. The Vanguard ETF, which is passively managed, edged out the 1.85% loss on the average Canadian long-term fixed-income fund. Over the past three years, the fund has risen 2.99%, outperforming the 1.98% gain on funds in its category, placing it in the 25th percentile for the period.
The Gold-rated Vanguard Canadian Long-Term Bond Index ETF launched in January 2017.
BMO Long Provincial Bond Index ETF
- Morningstar Rating: ★★★
- Expense Ratio: 0.28%
- Morningstar Category: Canadian Long Term Fixed Income
The sixth-worst-performing ETF in 2025 was the C$309.3 million BMO Long Provincial Bond Index ETF. The passively managed BMO ETF declined 0.96%, falling less than the average Canadian long-term fixed-income fund, which dropped 1.85%. Over the last three years, the fund has climbed 2.73%, outperforming the 1.98% gain on funds in its category, placing it in the 50th percentile for the period.
The Bronze-rated BMO Long Provincial Bond Index ETF launched in March 2013.
iShares Core Canadian Long Term Bond Index ETF
- Morningstar Rating: ★★★★
- Expense Ratio: 0.2%
- Morningstar Category: Canadian Long Term Fixed Income
The C$832.8 million iShares Core Canadian Long Term Bond Index ETF was the seventh-worst-performing ETF in 2025, with a 0.95% loss. The passively managed iShares ETF edged out the 1.85% loss on the average fund in Morningstar’s Canadian long-term fixed-income category for the year. Over the last three years, the fund has gained 3.08%, outperforming the 1.98% gain on funds in its category, placing it in the 25th percentile for the period.
The Silver-rated iShares Core Canadian Long Term Bond Index ETF launched in November 2006.
BMO US Preferred Share Hedged to CAD Index ETF
- Morningstar Rating: ★
- Expense Ratio: 0.51%
- Morningstar Category: Preferred Share Fixed Income
The C$23.7 million BMO US Preferred Share Hedged to CAD Index ETF ranked eighth for the year, falling 0.88%. The BMO ETF, which is passively managed, lagged the 13.94% gain on the average preferred share fixed-income fund. Over the past three years, the fund has risen 3.61%, underperforming the 12.96% gain on funds in its category, placing it in the 100th percentile for the period.
The Neutral-rated BMO US Preferred Share Hedged to CAD Index ETF launched in February 2017.
TD US Long Term Treasury Bond ETF
- Morningstar Rating: ★
- Expense Ratio: 0.23%
- Morningstar Category: Global Fixed Income
The C$128.3 million TD US Long Term Treasury Bond ETF was the ninth worst-performing ETF in 2025, with a 0.12% gain. The actively managed TD ETF lagged the 2.75% gain on the average fund in Morningstar’s global fixed income category for the year. Over the last three years, the fund has gained 0.77%, underperforming the 3.56% gain on funds in its category, placing it in the 92nd percentile for the period.
The Bronze-rated TD US Long Term Treasury Bond ETF launched in November 2019.
Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged)
- Morningstar Rating: ★★★
- Expense Ratio: 0.4%
- Morningstar Category: Global Fixed Income
The C$1.2 billion Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged) ranked tenth for the year, returning 0.13%. The Vanguard ETF, which is passively managed, lagged the 2.75% gain on the average global fixed-income fund. Over the past three years, the fund has risen 2.87%, underperforming the 3.56% gain on funds in its category, placing it in the 68th percentile for the period.
The Bronze-rated Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged) launched in June 2014.
What Are ETFs?
Exchange-traded funds are investments that trade throughout the day on stock exchanges, much like individual stocks. They differ from traditional mutual funds—known as open-end funds—which can only be bought or sold at a single price each day. Historically, ETFs have tracked indexes, but in recent years, more ETFs have been actively managed. ETFs cover a range of asset classes, including stocks, bonds, commodities, and most recently cryptocurrency.
The Best ETFs: More Ideas to Consider
- Read the latest articles on ETFs.
- Use the ETF screener to find the best ETFs according to your specific criteria. You can search for funds based on their fees, Morningstar Medalist Ratings, manager tenures, and more.
