By Tony Dong, MSc, CETF on April 23, 2026 Estimated reading time: 9 minutes

Do you need market-neutral ETFs in your portfolio?

By Tony Dong, MSc, CETF on April 23, 2026 Estimated reading time: 9 minutes

A data-driven look at how various alternative-strategy ETFs have performed in recent years and where they fit into your investment mix, if at all.

In August 2025, I wrote about a concept that started gaining traction among financial advisors: the 40-30-30 portfolio. This allocation emerged in the aftermath of the 2022 bear market, when rising inflation and aggressive interest-rate hikes caused both stocks and bonds to decline at the same time. That challenged the traditional balanced portfolio and pushed advisors to look for alternatives.

The idea is to reduce exposure to stocks and bonds and allocate a larger portion to alternative assets. Those alternatives can take many forms. Some investors turn to hard assets or digital stores of value like gold or cryptocurrencies. Others look at private markets, including private equity, private credit, and real estate. 

Then there is a third category that tends to get less attention but is increasingly accessible: hedge fund-like alternative or market-neutral strategies designed to generate returns with low correlation to traditional assets. 

Since early 2019, regulatory changes in Canada have expanded access to liquid alternatives in both mutual fund and ETF format. Today, Canadian investors have a small but growing set of options. 

Earn 1.50% tax-free on your cash savings.

Earn a guaranteed 3.50% in your TFSA when you lock in for 1 year.

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Using the Cboe Canada ETF screener, you can currently find six market-neutral ETFs available, with assets ranging from just a few million dollars for the Fidelity Market Neutral Alternative Fund (FMNA) to over $500 million for larger offerings like the Picton Market Neutral Equity Fund (PFMN).

The timing is helpful. Many of these funds launched shortly after the regulatory changes, which means we now have several years of performance data to look back on. That includes periods of market stress like the March 2020 COVID-19 crash and the 2022 bear market. The question to ask now is, “Have these strategies actually delivered on their promise of diversification?”

To answer that, we will look at how market-neutral ETFs work, examine the three largest options available in Canada, and review what the data says about their role alongside traditional stock and bond allocations.

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