A HISA is a high interest savings account offered by a Canadian deposit institution. This institution can be a chartered bank or trust, in which case deposits are insured by the Canada Deposit Insurance Corporation (CDIC), or a Caisse Populaire or credit union, in which case they are insured by the relevant provincial deposit insurance.
HISA rates are generally higher than those of checking and savings accounts. A given financial institution may offer HISA mutual funds through various distribution channels, each with a different interest rate. For example, Class F funds, which offer higher interest rates than most other types of HISAs, are not accessible to retail do-it-yourself investors. Sample rates for Royal Bank of Canada (RBC) chequing, savings, and HISA accounts are available in Table 1.
Table 1 – Deposit rates at RBC on 09/20/2022
| Chequing account | 0.00% |
| Savings account | 0.01% |
| HISA (direct) | 1.10% |
| HISA (Class A mutual fund) | 2.80% |
| HISA (Class F mutual fund) | 3.05% |
Five Canadian dollar HISA ETFs and two US dollar HISA ETFs are available in Canada. The oldest, Purpose High Interest Savings ETF, was launched in 2013 in CAD and 2016 in USD, while all others were launched in 2019 or more recently. All these ETFs pay monthly income and trade at a price at or slightly above their issue price ($50 for Canadian dollar HISA ETFs and $100 for US dollar HISA ETFs). Generally, the price increases throughout the month due to accrued interest and drops back close to $50 after each monthly distribution, as illustrated in Figure 1.
There are three HISA ETFs with assets above $1 billion, the largest being the CI First Asset High Interest Savings ETF with over $3 billion in assets under management (AUM). All HISA ETFs have similar management expense ratios (MER), hovering around 0.16% on average. The main characteristics of all Canadian-listed HISA ETFs are recapped in Table 2.
Table 2 – Key characteristics of Canadian HISA ETFs
| Name | Ticker | Currency | Distributions | Provider | AUM (million) | MER | Inception |
| High Interest Savings Account Fund | HISA | CAD | Monthly | Evolve ETFs | $1,631 | 0.17% | 2019-11-21 |
| CI First Asset High Interest Savings ETF | CSAV | CAD | Monthly | CI First Asset | $3,400 | 0.16% | 2019-06-18 |
| Horizons High Interest Savings ETF | CASH | CAD | Monthly | Horizons | $460 | 0.13% | 2021-11-02 |
| Purpose High Interest Savings ETF | PSA | CAD | Monthly | Purpose | $2,552 | 0.16% | 2013-10-10 |
| Ninepoint High Interest Savings Fund – ETF Series Units | NSAV | CAD | Monthly | NinePoint Partners | $150 | 0.16% | 2020-11-17 |
| High Interest Savings Account Fund | HISU.U | USD | Monthly | Evolve ETFs | $32 | NA | 2022-08-23 |
| Purpose US Cash Fund | PSU.U | USD | Monthly | Purpose | $462 | 0.18% | 2016-02-23 |
The biggest difference between HISA mutual funds and HISA ETFs is that ETFs are not CDIC-insured. This occurs because HISA mutual funds allow investors to be registered with the deposit institution as individual depositors, whereas a HISA ETF bundles the sums provided by all investors and invests the proceeds in the ETF’s name. However, HISA ETFs mostly invest with systemically important financial institutions (SIFIs), which are subject to greater regulatory requirements than non-systemically important ones. In Canada, we have three types of SIFIs.
Table 3 – Types of SIFIs in Canada
| Type | Institution | Regulatory requirements |
| Global systemically important banks | RY, TD | Highest |
| Domestic systemically important banks | RY, TD, BMO, BNS, CM, NA | |
| Quebec systemically important financial institutions | Desjardins Group | |
| Other financial Institutions | Lowest |
Three HISA ETFs representing the bulk ($7.5 billion) of the assets managed by the sector invest with the Bank of Montreal, Scotiabank, the National Bank of Canada, and the Canadian Imperial Bank of Commerce. However, many HISA ETF prospectuses keep the door open to invest with other federally or provincially regulated financial institutions and with high-quality money market securities. The deposit institutions underlying all HISA ETFs are displayed in Table 4.
Table 4 – Deposit institutions underlying HISA ETFs
| Name | Ticker | Currency | Underlying Canadian Banks | Prospectus |
| High Interest Savings Account Fund | HISA | CAD | NA, CM, BMO, BNS | Canadian charted banks, credit unions or trust companies |
| CI First Asset High Interest Savings ETF | CSAV | CAD | NA, CM, BMO, BNS | Canadian chartered banks, credit unions or trust companies |
| Horizons High Interest Savings ETF | CASH | CAD | Not disclosed | Canadian chartered banks and may also invest in high-quality, short-term (one year or less) debt securities, including treasury bills and promissory notes issued or guaranteed by Canadian governments or their agencies, and bankers’ acceptances. |
| Purpose High Interest Savings ETF | PSA | CAD | NA, CM, BMO, BNS | Chartered banks and/or Canadian credit unions |
| Ninepoint High Interest Savings Fund – ETF Series Units | NSAV | CAD | BMO | Schedule 1 Canadian banks |
| High Interest Savings Account Fund | HISU.U | USD | Not disclosed | Canadian chartered banks, credit unions or trust companies, and may also invest in high-quality, short-term debt securities (with a term to maturity of 365 days or less) with a designated rating, including treasury bills and promissory notes issued or guaranteed by Canadian governments or their agencies, and bankers’ acceptances. |
| Purpose US Cash Fund | PSU.U | USD | NA, CM, BNS | Canadian chartered banks and/or Canadian credit unions. The fund can also invest in US dollar denominated high-quality, short-term (one year or less) debt securities, including treasury bills and promissory notes issued or guaranteed by foreign or Canadian governments or their agencies, bankers’ acceptances, asset-backed commercial papers and US dollar denominated commercial papers issued by foreign or Canadian chartered banks, loan companies, trust companies and corporations, and US dollar denominated Canadian money market funds. Investments made by the fund will be in the top two ratings categories of any of the designated rating organizations (as defined in NI 81-102). The fund may enter into securities lending transactions to generate additional income. |
When looking at safety, we also must keep in mind that deposits in a HISA, whether held by an individual, a corporation or an ETF, are a top-ranking liability on a financial institution’s balance sheet. For example, on RBC’s balance sheet (ref. Table 5), deposits are listed above bankers’ acceptances, which are generally considered rock solid. In my opinion, uninsured HISA deposits are likely to be fully reimbursed in the event of a deposit financial institution failure, unlike the lower ranking subordinated and regulatory capital debt of the same institution.
Table 5 – RBC’s liabilities as of October 31, 2021
HISA ETFs can accommodate large sums of money, which is especially useful when these sums far exceed the CDIC limits. HISA ETFs are also highly liquid, at T+1 (settlement the next day).
HISA ETFs also tend to deliver higher returns than the HISA mutual funds in our sample. To test that, we compared the returns on RBC and Scotiabank HISA Class F mutual funds,[1] and we compared them to the return of the only HISA ETF with a long track record, the Purpose High Interest Savings ETF. We found that the ETF outperformed the HISAs by 10 basis points on average, as depicted in Figure 2.
[1] RBC and Scotiabank are the only sources of historical HISA interest rates that we have found. For the Scotiabank HISA, we only had historical interest rates for the Class A HISA. We added 0.15% to the historical rates (which is the current spread between Classes A and F) to estimate the returns of the Class F fund.
Figure 2 – Return difference between the Purpose HISA ETF and the Class F HISAs from RBC and Scotiabank, January 2014 – August 2022
HISAs ETFs also earn a wide premium (on average of 46 basis points, see Figure 3) above Canadian government treasury bills in return for their higher risk. Of course, it is not guaranteed that HISA ETFs will always benefit from higher interest rates than treasury bills. Nevertheless, HISA ETFs can be expected to outperform treasury bills most of the time, because the banks’ cost of funds is generally higher than the interest rate on less risky Canadian treasury bills.
Figure 3 – Return difference between Purpose HISA ETF and one month canadian treasury bills, January 2014 – August 2022
First and foremost, HISA ETFs are not insured by the CDIC. These funds pool together hundreds of millions of dollars, so an insurance for $100,000 per eligible account is not meaningful.
Second, we do not know for sure how the price of a HISA ETF would react in a high-stress market environment. As discussed below, selling shares of a HISA ETF at a price below its net asset value (NAV) reduces its return. However, it is very unlikely that the underlying banks would refuse to reimburse deposits to customers, even under a high stress environment. Thus, HISA ETF redemptions under volatile market conditions should not be a problem. For example, in March 2020, which was an extremely high stress period in the capital markets, all outstanding HISA ETFs were stable and traded at or above their issue price ($50 for Canadian dollar HISA ETFs, $100 for US dollar HISA ETFs).[1]
Investors should also consider that they must trade HISA ETFs through an IIROC dealer, which may be more complicated than the process for HISA investors who deal directly with their bank.
Market prices can deviate from the NAV. Investors must trade HISA ETFs carefully and make sure to buy and sell the ETF at the closest possible price to the NAV. HISA ETF NAVs are posted daily on the ETF website as of the previous day. This number must be adjusted upwards for the extra day of accrued interest by looking at how much the share price rises daily. The NAV increases more on the first day of the work week (usually a Monday but it can be a different day due to holidays) since it includes the interest accrued during the weekend. The NAV falls approximately back to the issue price on the day of the monthly distribution. Each penny above the NAV on a purchase or below the NAV on a disposition reduces the return to the investor. The bid-ask spread quoted on a HISA ETF will likely increase this cost, widening the gap between the trade price and the ETF’s NAV. The negative impact of the gap to NAV on the investment’s return is increased if the holding period is relatively short. Table 6 illustrates the reduction in return that results from several hypothetical gaps to NAV, while accounting for the holding period. For example, a total gap of one cent per share on the round-trip transaction (the purchase and the subsequent sale) reduces the return by 0.02% if the fund is held for a full year and by 0.24% if held only for a month.
Table 6 – Reduction in return due to various levels of gap to NAV on a Canadian dollar HISA ETF
| Holding period | ||||
| Gap to NAV | 1 month | 3 months | 6 months | 1 year |
| $ 0.01 | 0.24% | 0.08% | 0.04% | 0.02% |
| $ 0.02 | 0.48% | 0.16% | 0.08% | 0.04% |
| $ 0.03 | 0.72% | 0.24% | 0.12% | 0.06% |
| $ 0.04 | 0.96% | 0.32% | 0.16% | 0.08% |
| $ 0.05 | 1.20% | 0.40% | 0.20% | 0.10% |
Another cost supported by HISA ETF investors is brokerage commissions, which further reduce the return on a HISA ETF. These commissions are also charged to investors who purchase shares of a HISA mutual fund. Table 7 provides examples of the reduction in the return caused by $10 brokerage commissions, depending on the transaction amount and the holding period. For example, for an investor who pays $10 on the buy transaction and another $10 on the sell transaction of $10,000 of a HISA ETF with a holding period of one year, the return is reduced by 0.20%, while the same level of commissions for a holding period of one month reduces the return by 2.40%.
Table 7 – Reduction in return on a Canadian dollar HISA ETF due to a $10 commission ($10 on the buy transaction plus $10 on the sell transaction)
| Holding period | ||||
| Amount | 1 month | 3 months | 6 months | 1 year |
| $ 10,000 | 2.40% | 0.80% | 0.40% | 0.20% |
| $ 100,000 | 0.24% | 0.08% | 0.04% | 0.02% |
| $ 1,000,000 | 0.02% | 0.01% | 0.00% | 0.00% |
| $ 10,000,000 | 0.00% | 0.00% | 0.00% | 0.00% |
Finally, the purchase and subsequent sale of shares in a US dollar HISA ETF may trigger a realized capital gain or loss due to the currency conversion upon the disposition of the security. This will not happen with a direct HISA or a HISA mutual fund investment in US dollars, as the currency gain or loss will only be realized when the investor converts the funds back to Canadian dollars.
HISA ETFs are likely to provide a risk premium that is higher than a direct HISA or a HISA mutual fund investment. We calculated a 0.10% difference with Scotiabank and RBC Class F HISA mutual funds, but HISA rates are scattered across the board depending on each institution’s current need to attract deposits. Meanwhile, HISA ETF providers claim that they offer highly competitive interest rates most of the time, because they negotiate their rates directly with the banks based on high volume. For example, the highest net yield posted by Canadian dollar HISA ETFs at the time of writing was 3.59%, compared to 3.05% at the best paying Class F HISA mutual funds among the banks that we surveyed. HISA ETFs may also provide a solution when facing very large amounts to be invested, although some large bank HISA mutual funds do accept between $25 million and $50 million.
HISA ETFs might provide an appropriate alternative to direct HISAs and HISA mutual funds for investors who are willing to accept a higher risk (since HISA ETFS are not covered by the CDIC insurance) for a higher return. Trading HISA ETFs requires paying attention to the ETF price gap to NAV to minimize its negative impact on the return. HISA ETFs may also not be suitable for small amounts or sums invested for a short period of time, considering that the gap to NAV and the commissions could offset most of their excess expected return.
Because most HISA ETFs were launched since 2019, we have only a short return history for several HISA ETFs. However, we can observe that since 2020, all Canadian dollar HISA ETFs have produced very similar returns, as depicted in Table 8.
Table 8 – Canadian dollar HISA ETF returns – January 2020 to August 2022
| Name | 2020 | 2021 | 2022 YTD (Aug. 31) |
| High Interest Savings Account ETF | 0.90 | 0.57 | 0.97 |
| CI High Interest Savings ETF | 0.92 | 0.57 | 0.94 |
| Horizons High Interest Savings ETF | 0.98 | ||
| Purpose High Interest Savings ETF | 0.93 | 0.59 | 0.96 |
| Ninepoint High Interest Savings | 0.59 | 0.97 |
Among the Canadian dollar HISA ETFs, the CI High Interest Savings ETF (CSAV) seems to be the most sensible choice for the following reasons:
