In a recent column, Jon Chevreau reported that Vanguard Canada “will probably be selling ETFs trading on the TSX”. It is instructive to take a look at Exchange-Traded Funds Vanguard offers in Australia (thanks to reader Raman for the link) for clues into what to expect here. Vanguard’s Australian ETF line-up is refreshingly simple — one REIT ETF, four stock ETFs and two international ETFs and all charge very low fees.
The REIT ETF that Vanguard offers in Australia charges a management fee of just 0.25%. If Vanguard can introduce a REIT ETF with comparable fees here, it would be a significant improvement over the 0.55% fees that both the iShares S&P/TSX Capped REIT ETF (TSX: XRE) and BMO Equal Weight REITs Index ETF (TSX: ZRE) charge.
One of the stock ETFs that Vanguard offers in Australia is a dividend ETF that also charges a management fee of just 0.25%. A comparable offering at a similar price point in Canada would again be a significant improvement over both the iShares Dow Jones Canada Select Dividend ETF (TSX: XDV) and the Claymore S&P/TSX Canadian Dividend ETF (TSX: CDZ). XDV sports a MER of 0.54% and CDZ is slightly more expensive at 0.66%.
The two international ETFs that Vanguard offers in Australia are local versions of the Vanguard Total Stock Market ETF (VTI) and Vanguard FTSE All-World Ex-US ETF (VEU). The Australian versions charge the same fees as VTI and VEU: 0.07% and 0.22% respectively. A Canadian version of VTI will be a preferable choice in taxable accounts because an investor can avoid currency conversions when purchasing or selling VTI. In a RRSP account, it will still be advantageous to hold VTI because an investor can avoid withholding taxes paid by Canadian domiciled funds but not registered accounts. At a 2% dividend yield, owning VTI directly will save 0.30% in withholding taxes in a registered account.