Comments on: Currency Neutral Funds Performed Poorly (Again) in 2008

By: Plainrider

Plainrider — Tue, 24 Mar 2009 23:46:42 +0000

I do not quite understand the discussions above about the relative merits of XSP vs IVV by focusing on tracking errors and MERs.
The reality over the kast year is that IVV performed about 20% better than XSP simply due to the depreciation of the C$ vis a vis the US$.
So…, if the CS$ might appreciate against the US$ over the next year or two (as occurred not too long ago), then XSP would do better in proportion to IVV (notwithstanding the MER and tracking error issues).

By: jim

jim — Tue, 20 Jan 2009 23:07:18 +0000

It’s actually not that bad; look at TD:TSE vs TD:NYSE… at the peak for 5 yrs the US traded was up 142% while the CAN edition was up only 65%… this is a common theme across many stocks I look into but at the end of the day by the I can’t say that buying in US dollars is a good idea as the forex fee eats a couple percent and you never know where the USD will be when you need money

By: Four Pillars Investing

Four Pillars Investing — Fri, 16 Jan 2009 10:02:53 +0000

[...] Canadian Capitalist reports that currency neutral funds are no bargain. [...]

By: Canadian Business Blog » Blog Archive » Currency-hedged investments

Canadian Business Blog » Blog Archive » Currency-hedged investments — Mon, 12 Jan 2009 14:30:48 +0000

[...] 500 Index Fund (IVV). The MER for XSP is 0.15% higher, which doesn’t look too bad. But then, as Canadian Capitalist calculated, the XSP trailed IVV by -1.73%, -2.30% and -3.5% in 2006, 2007, and 2008, [...]

By: The Well-Heeled | Creating Wealth Through Knowledge

The Well-Heeled | Creating Wealth Through Knowledge — Fri, 09 Jan 2009 18:36:34 +0000

[...] The Canadian Capitalist: Currency Neutral Funds Performed Poorly [...]

By: Canadian Capitalist

Canadian Capitalist — Fri, 09 Jan 2009 17:02:03 +0000

chum: Thanks for the additional data point. I checked ETFConnect and the annual returns reported for IVV agrees more closely with my calculations (shown in brackets):

2008: -36.94% (-36.64%)
2007: 5.44% (5.30%)
2006: 15.68% (15.78%)

http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=45251

I’m convinced now that the tracking errors reported by the iShares tracking error tool wildly underestimates the actual tracking error.

By: chum

chum — Fri, 09 Jan 2009 15:56:51 +0000

CC – You mention calculating the return for XSP and IVV? The ishares websites post the yearly return on Dec 31 for 2008:
http://ca.ishares.com/product_info/fund_returns.do?ticker=XSP
XSP = -40.45
http://us.ishares.com/product_info/fund/returns/IVV.htm
IVV = -36.94

I guess the IVV return for a Canadian investor would be slightly lower (unless you had an account that let’s you keep USD), since the dividends will be converted to CND and then reconverted to USD when reinvested.

By: Canadian Capitalist

Canadian Capitalist — Fri, 09 Jan 2009 14:50:31 +0000

Larry: I double checked my calculations and think they are correct. The reason why the tracking error chart shows wildly different values is that while their numbers agree with my computations for XSP, the returns for the benchmark index are very different. My suspicion is that the tracking error chart did not include dividends and hence their total return for the index is inaccurate. I’ll elaborate on my findings in a post next week.

By: Dividend Growth Investor

Dividend Growth Investor — Fri, 09 Jan 2009 14:38:03 +0000

I was wondering why would you want to pay to be hedged, when that way you detract from the “foreign diversification performance” part of your portfolio.

By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com

A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com — Fri, 09 Jan 2009 02:48:28 +0000

[...] Canadian Capitalist explains that the 15 bps (0.15%) extra fee on currency hedged versions of some iShares ETFs pale in comparison to their drag from high tracking errors. [...]