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moneysense.ca, 29/05/07
A Tour of ETFs: Vanguard Europe Pacific ETF
MarketWatch.com is reporting that Vanguard has filed a registration statement with the SEC for a new ETF that will seek to track the MSCI EAFE Index. Pending approval the ETF will be available in the third quarter of 2007.
Unlike the flood of ETFs that are being introduced all the time, the new ETF will be of interest to long-term investors as it competes with the more popular iShares MSCI EAFE Index fund on price. The MER for the new fund is expected to be 0.15% or about 20 bps lower than the iShares fund.
The new fund will allow Canadian investors to build their entire foreign equity exposure using Vanguard ETFs: VTI (entire US market with a MER of 0.07%), the Europe Pacific ETF (international developed markets with a MER of 0.15%) and VWO (emerging markets for a MER of 0.30%).
Update: The ticker symbol for the Vanguard Europe Pacific ETF is VEA.
moneysense.ca, 29/05/07
That’s interesting, I was going to use VGK & VPL to replicate the EAFE but I guess this new ETF will do the same job with a little less hassle.
Mike
Very interesting indeed. Could have saved me buying the two Vanguard ETFs that Mike notes.
Actually, I’ve been hoping that EFA would cut the MER (to compete with VGK & VPL) but unfortunately, ETFs seem to be field where the first mover has a tremendous advantage (compare the volume of EFA vs. VGK). Barclays did not have much incentive to cut their fees so far and the new ETF provides some welcome competition.
CC,
I’m just in the process of moving from an account with an “advisor” to an ETrade account to set up my own “sleepy” profilio, mostly with ETF’s. You seem to like the Vanguard offerings but doesn’t the effect of currency swings concern you at all? Perhaps you could expand on your thinking in this area. I’ve been doing some reading but am still fairly new to all of this and any input would be greatly appreciated.
C3: I’ve written many posts on this topic which you can find by searching for “currency”. The summary is that currency should not be a huge concern for ETFs like EFA and VWO, which are denominated in a basket of currencies like Euro, Yen, Pound etc.
Currency could be a consideration for US-based assets but even here I take the position that it is impossible to tell how rates will vary over 10+ years. Though it is painful to see the soaring loonie clipping the returns of your portfolio, I look at the bright side: I can purchase more US assets for my loonies today.
Related posts:
Don’t Sweat the Dollar
To Hedge or Not to Hedge
[...] The Vanguard Europe Pacific ETF (Ticker VEA), which tracks the MSCI EAFE Index started trading today. I’ll be replacing EFA (MER is 0.35%) with VEA (MER of 0.15%) in our personal portfolios. [...]
[...] TD Waterhouse also allows you to sell a US-listed stock and buy another US-listed stock on the same day without incurring foreign exchange transaction fees. The broker does this automatically by buying and selling US dollars at the same exchange rate and no action is required on your part. This was particularly useful when I recently substituted EFA with VEA. [...]
Portfolio Update: Switched from iShares’ XIN to Vanguard’s VEA…
On Friday it was time for another ETF purchase as about $2500 had built up in one of our RRSPs. According to the actual allocations and the expected/desired/original allocations, the area we were most deficient in was International equities. I decided …
thanks for mentioning the vanguard alternatives and I am also considering switching to ETF but one question I have which I have not got the chance to check: Are these Vanguard funds “qualified property” for RRSPs? Though the foreign property restriction is gone, RRSP can only hold a prescribed class of properties.
thanks
SK: Yes. I personally hold these ETFs in our RRSP accounts.
thanks Canadian Capitalist. I went to the Vanguard website and found they actually have a lot of ETFs available, need to do some more work before deciding what to buy.
thanks again
I was just on the Vanguard site. The MER’s appear to almost double that cited in the article above (eg: 27 bps, not 15 bps for the European). What gives?
Hi SES: You may have looked at the Vanguard Mutual Funds, which have a higher MER because you don’t have to pay commissions to buy. Canadians cannot purchase these mutual funds even if we want to.
If you look for the fund in the ETF section, you’ll find that the MER is 0.15%. You do need a brokerage account to buy the fund (ticker symbol is VEA) and you’ll pay brokerage commissions. Hope this helps.
[...] Vanguard introduced the Europe Pacific ETF (VEA) and injected much needed competition to the iShares MSCI EAFE Index Fund (EFA). [...]
I have account with TDWH and lately been looking at VGK and VWO to replace my mutual funds positions. Though I always place limit order and don’t really take into account the bid ask spread.
Anyone can help me understand why the bid ask spread is so wide on VGK/VWO while the spread on XIC or XFN is reasonable /normal?
I could only check at night when I am home (can’t do it at work). Is the spread more reasonable during the day?
[...] allows them to get exposure to every major world market instead of buying three ETFs separately – Vanguard Europe Pacific ETF (VEA), Vanguard Emerging Markets ETF (VWO) and iShares MSCI Canada Index Fund [...]
[...] Vanguard Europe Pacific ETF (VEA) or iShares MSCI EAFE Index Fund (EFA) [...]
[...] expensive: Canadian investors can get exposure to the entire world through a combination of VTI, VEA and VWO for a composite MER of 0.12% or so. At 0.25%, VT is almost twice as [...]
[...] / 14.55% — Vanguard Europe Pacific Index (VEA) 40% / 9.7% — Claymore International Fundamental Index [...]
[...] but instead uses a sampling technique to select a representative subset of stocks. ETFs such as the Vanguard Europe Pacific ETF (VEA) also employ statistical methods to sample the index. Sampling can sometimes result in quite large [...]
[...] a new ETF to our portfolios was way back in 2007 when Vanguard introduced what was then called the Europe-Pacific ETF (VEA) to replace our holdings in the iShares EAFE Index Fund (EFA). While new products and more [...]