Mere months after TD Bank announced that it is exiting the ETF business, Claymore Investments is introducing the FTSE RAFI Canadian Index Fund (TSX: CRQ) that tracks a Fundamental Index, which uses factors like sales, cash flow, book value and dividends to determine the rank and weight of the component stocks. RAFI claims that Fundamental Indices produce consistently higher returns with slightly less risk when compared to traditional market-capitalization weighted indices and should theoretically avoid overvalued equities in market bubbles. Note that PowerShares FTSE RAFI 1000 (PRF) already trades in the US.
It is not clear what expenses are charged by the new ETF but it will probably be higher than the iUnits ETFs. The PRF, for instance, has an expense ratio of 0.60%, compared to a rock-bottom 0.09% for the iShares S&P 500 Index fund. David Jackson of ETF Investor also points out that Fundamental Indices don’t necessarily outperform their traditional counterparts.
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1 Investing Intelligently » Blog Archive » New Non-Market Cap Weighted Canadian ETF // Feb 22, 2006 at 2:02 am
[...] Thanks to the Canadian Capitalist for pointing this out to me in a recent comment to my blog post about non-market cap weighted indexes. He originally blogged about it here. [...]
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