Updated:
Comparison · 2026
Exempt market vs ETF
Private securities (exempt market) vs exchange-traded funds (ETFs) — not rivals, but two layers of a diversified portfolio
ETFs are the foundation of modern passive investing: cheap, liquid, diversified. Exempt market is a different layer: private securities that don't trade on an exchange. A smart strategy uses both at different levels of the portfolio.
Exempt market
ETF
Where it trades
Doesn't trade on an exchange (private placement)
On an exchange (TSX, NYSE) — any trading day
Liquidity
Low: redemption windows, lock-ups
High: instant sale
Access
Eligible/Accredited Investor only (NI 45-106)
Anyone, $0 minimum
Correlation with stock market
Low (real estate, private debt, development)
High (it IS the market)
Target historical return
7-12% (MICs/REITs), 15-22% (development LPs)
Market (~7-10% broad-market historical)
Fees
Embedded management fee + carry (higher)
0.05-0.30% MER (very low)
Transparency
Offering memorandum, quarterly/annual reporting
Daily NAV, full public reporting
Minimum to start
$5-30K per offering (typical)
$1 (price of 1 share)
Role in portfolio
Diversifier (15-25% of net worth)
Core holding (60-80%)
When exempt market makes sense
- Liquid ETF core already built (TFSA/RRSP filled)
- You're an Eligible Investor
- You want to reduce portfolio correlation with the stock market
- Comfortable with illiquidity for a higher target return
- Seeking real estate / private debt exposure
When ETFs make sense (almost always, as the base)
- Building your core portfolio — ETFs are the default first step
- You value liquidity + low fees
- You want broad-market diversification in one instrument
- Not an Eligible Investor (ETFs are your only path)
- Tax-efficient placement (US ETF in RRSP, CA ETF in TFSA)
FAQ
Do I need exempt market if I already have ETFs?
Not necessarily. An ETF core is enough for most people. Exempt market is an optional diversifier for Eligible Investors who've already built a liquid core and want to reduce correlation + add real estate/private debt exposure. If you're still building your first $50-200K, focus on ETFs.
Exempt market offers a higher return — so why hold ETFs?
Target return ≠ guaranteed return, and exempt market is illiquid + higher risk. ETFs give liquidity, transparency, low fees, and broad-market diversification for 0.2%. Exempt market isn't 'better', it's 'different': higher target for higher risk + illiquidity. That's why it's a diversifier, not a replacement.
What % of a portfolio in exempt market is reasonable?
General framework: 15-25% of net worth for Eligible Investors with a built liquid core. The other 60-80% stays in liquid public-market ETFs. The specific % depends on your horizon, liquidity needs, and risk tolerance — determined in a Suitability Assessment, not by a blanket rule.
How do I start with ETFs as a newcomer?
Wealthsimple/Questrade self-directed, broad-market ETF (XEQT, VEQT, VFV) in a TFSA. Placement matrix: /en/blog/etf-placement-rrsp-tfsa-fhsa-strategy. Exempt market comes later, once you're an Eligible Investor + the core is built.
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