Yesterday, Vanguard Canada filed preliminary prospectus for six Exchange-Traded Funds (ETFs). You can view the preliminary long form prospectus here. The ETFs will cover Canadian bonds, Canadian equities and International equities asset classes. The management fees and the ticker symbols for the ETFs are not known at this point.

Canadian Bonds

Vanguard Canadian Aggregate Bond ETF and Vanguard Canadian Short-Term Bond ETF are the two ETFs under this category. The Vanguard Aggregate Bond ETF will be comparable to the iShares DEX Universe Bond ETF (TSX: XBB) and the Vanguard Short-Term Bond ETF will be comparable to the iShares DEX Short-Term Bond ETF (TSX: XSB).

Canadian Stocks

Vanguard MSCI Canada Index ETF will track the MSCI Canada Index, a free float-adjusted market capitalization weighted index comprised of 100 stocks. This ETF will be comparable to the iShares S&P/TSX 60 ETF (TSX: XIU) or the BMO Dow Jones Canada Titans 60 ETF (TSX: ZCN).

International Stocks

The three international stock ETFs will cover U.S., Europe-Australia-Far-East (EAFE) and Emerging Markets. Two of them – the Vanguard MSCI US Broad Market ETF (CAD-Hedged) and the Vanguard MSCI EAFE ETF (CAD-Hedged) – are currency hedged. The Vanguard MSCI Emerging Markets ETF will cover emerging markets.

Bottom Line

The Vanguard MSCI Emerging Markets ETF will be interesting if the fees are comparable to the US-listed VWO. The other International stock ETFs in the initial line-up are likely to be disappointing for investors wanting currency unhedged exposure to US and EAFE markets. Personally, I was hoping Vanguard would introduce cheaper alternatives to existing REIT and dividend ETFs. Hopefully, these ETFs will be launched in a second wave.

This article has 7 comments

  1. I was somewhat disappointed as well in the offerings corresponding to the US and EAFE markets. I had hoped that they would offer some cheap unhedged alternatives to what’s currently listed in Toronto. Oh well. I wonder how much cheaper they will turn out to be than their iShares counterparts…

  2. The 100 stocks Canadian equity fund is an intriguing addition – much broader representation of the TSX than the iShares or BMO 60 holding funds. With a low MER, as one would expect from Vanguard, it will be attractive.

  3. @CanadianInvestor: I did a quick check, and the top 100 stocks make up about 86% of the holdings in XIC. By comparison, the top 60 stocks in XIC, which is exactly XIU (I think), is about 76% of the holdings in XIC. So changing from the top 60 to the top 100 does not make that much of a difference in your holdings — which I guess can be expected, as Canada is quite a small place.

  4. @Raman: Vanguard’s press release says this line-up is the “first suite of Canadian-domiciled
    exchange-traded funds (ETFs)”, so I’m hopeful for more interesting offerings as well.

    @CanadianInvestor: Unfortunately, I hold all my XIU in taxable accounts, so switching is out of question. If Vanguard’s MER is competitive, the Canada Stock ETF will definitely be in the running to replace XIU for future additions.

    @Raman: Actually, that’s true of other markets as well. IIRC, S&P 500 coverage of the total stock market is something like 80%. All things being equal, passive investors will prefer the most diversified index possible. The TSX Composite is more diversified than the MSCI Canada Index, which in turn is more diversified than the TSX 60 index. But, the trouble is in the real world all things are not equal. There are fees and tracking errors to consider. If Vanguard can keep fees low and TEs negligible then their ETF will be a strong consideration as a replacement for XIU. I guess we’ll have to wait and see.

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  6. I am a 70yr senior with a wife and have just sold our business for $500,000 (nett) and would like to invest with Vanguard ETFs to provide us a good monthly income (about $3000) as we don’t have any other income besides a total of $1000 (CPP+OAS), should I just buy something like the XDV with a yield of 7.33% ie about $3054 monthly. But what is Vanguard’s equivalent to XDV? Could anyone let me know, please.

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