A few months back Vanguard announced that it will be setting shop in Canada by launching six new ETFs. Today, Vanguard provided more details on the new ETFs (the final prospectus is also now available on SEDAR here) that will soon start trading on the TSX:
1. The Vanguard MSCI Canada Index ETF, which tracks the MSCI Canada Index will charge a management fee of 0.09%, which is cheaper than iShares S&P/TSX 60 Index ETF (TSX:XIU) management fee of 0.15%. The ticker symbol is VCE. The ETF will hold all or substantially all of the underlying stocks that make up the index.
2. The Vanguard Canadian Aggregate Bond Index ETF will track an index of Canadian government and investment grade corporate bonds. The management fee is 0.20% and the ticker symbol is VAB. This ETF is cheaper than the comparable iShares DEX Universe Bond Index ETF (TSX: XBB), which has a management fee of 0.30%.
3. The Vanguard Canadian Short-Term Bond ETF will track an index of Canadian government and investment grade corporate bonds with maturities ranging from 1 to 5 years. The management fee is 0.15% and the ticker symbol is VSB. The ETF is also cheaper than the comparable iShares DEX Short Term Bond Index ETF (TSX: XSB), which has a management fee of 0.25%. Both bond ETFs will employ a sampling methodology to track the index.
4. The Vanguard MSCI U.S. Broad Market (CAD-Hedged) ETF will primarily hold the Vanguard Total Stock Market ETF (VTI) and hedge the foreign currency exposure. The management fee is 0.15% and the ticker symbol is VUS.
5. The Vanguard MSCI EAFE (CAD-Hedged) ETF will primarily hold the Vanguard MSCI EAFE ETF (VEA) and hedge the foreign currency exposure of VEA holdings. The management fee is 0.37% and the ticker symbol is VEF. The ETF is cheaper than the iShares MSCI EAFE ETF’s (TSX: XIN) management fee of 0.50%.
6. The Vanguard MSCI Emerging Markets ETF will primarily hold the Vanguard MSCI Emerging Markets ETF (VWO). The management fee is 0.49% and the ticker symbol is VEE. The ETF is considerably cheaper than two alternative products available today: the iShares
MSCI Emerging Markets ETF (TSX: XEM, management fee: 0.82%) and the Claymore Broad Emerging Markets ETF (TSX: CWO, management fee: 0.65%). Just like the other foreign equity ETFs the management fee listed is inclusive of the management fee charged by VWO.
I think these ETFs will attract considerable attention from investors. I personally will be replacing the iShares DEX Short Term Bond ETF (TSX: XSB) with VSB (provided bid-ask spreads are reasonable). I currently hold XIU in a taxable account and it has unrealized capital gains, so switching to VCE is not immediately practical. However, I think VCE will be a strong candidate for future additions to the Canadian Equity portion of the portfolio and if markets take a tumble, switching out of XIU will also become an option. Investors who currently hold foreign equity ETFs such as XSP, XIN and CWO should take a closer look at the cheaper Vanguard alternatives.
