iShares Canada is finally introducing two new ETFs that provide exposure to foreign stocks: iShares CDN Emerging Markets ETF (XEM) and iShares CDN MSCI World ETF (XWD). Both ETFs started trading on the Toronto Stock Exchange yesterday.
XEM simply holds the iShares MSCI Emerging Markets ETF (EEM), which in turn tracks the MSCI Emerging Markets Index. The total MER for XEM is 0.82%, which includes EEM’s MER of 0.72%. XEM has plenty of Canadian competition now: the Claymore Emerging Markets ETF (CWO, MER of 0.65%) and the soon-to-be launched BMO Emerging Markets ETF (MER of 0.535%). The Vanguard Emerging Markets ETF (VWO) remains the cheapest way to get exposure to emerging markets — the MER is 0.25% and there is no extra performance drag due to withholding taxes.
XWD tracks the MSCI World Index, which despite its name excludes emerging markets. It tracks stocks in the developed markets of Canada, United States and the traditional EAFE markets. The MER of the ETF is 0.45%. XWD is likely to be uninteresting for investors because, for one thing, it holds Canadian stocks. It is also unattractive from a fee perspective: VTI plus VEA has a blended MER of less than one-quarter the cost of XWD.
PS: If you switched to RBC Direct Investing last fall to take advantage of the 1% bonus offer, check your accounts. The bonuses are being paid out this week.
PPS: Don’t forget to participate in the Thrill of a Lifetime giveaway. The odds are still attractive and the contest closes in less than 2 days.
