# Vanguard to finally enter Canadian ETF Market?



## bltman (Aug 12, 2010)

> The Vanguard Group Inc. is looking to expand its non-U.S. exchange-traded-fund business in the next five years. Specifically, the firm intends to enter Hong Kong and Canada next year, said F. William McNabb II, president and CEO.


http://www.investmentnews.com/article/20101203/FREE/101209970


----------



## CanadianCapitalist (Mar 31, 2009)

bltman said:


> http://www.investmentnews.com/article/20101203/FREE/101209970


That would be excellent news. It would be interesting to see their line up if and when they launch here.


----------



## Sustainable PF (Nov 5, 2010)

CanadianCapitalist said:


> That would be excellent news. It would be interesting to see their line up if and when they launch here.


Agreed! Down with MER!


----------



## larry81 (Nov 22, 2010)

Good news, this will put pressure on ishare to lowe their fee. In the end, the customers will win !


----------



## Belguy (May 24, 2010)

From the Globe and Mail, 'Vanguard topples iShares':

http://www.theglobeandmail.com/glob...res/article1823557/singlepage/#articlecontent


----------



## Four Pillars (Apr 5, 2009)

Given that Canadians can already buy Vanguard ETFs, I'm not sure how beneficial this will be.

I suppose it will save on currency exchange fees and perhaps there might be more Canadian products (ie dividend ETFs).


----------



## Rysto (Nov 22, 2010)

Four Pillars said:


> Given that Canadians can already buy Vanguard ETFs, I'm not sure how beneficial this will be.
> 
> I suppose it will save on currency exchange fees and perhaps there might be more Canadian products (ie dividend ETFs).


A cheaper TSX Composite ETF would be welcome. Current ETFs just barely beat out TD's eSeries Canadian Index Mutual Fund.


----------



## Belguy (May 24, 2010)

Here is information on the cheapest Canadian ETF tracking the TSX 60 with a MER of just .07%!! How much lower do you want them to go--manage it for free???

http://finance.yahoo.com/news/Horizons-BetaPro-Launches-cnw-776011472.html?x=0&.v=1


----------



## Four Pillars (Apr 5, 2009)

Belguy said:


> Here is information on the cheapest Canadian ETF tracking the TSX 60 with a MER of just .07%!! *How much lower do you want them to go--manage it for free??*?
> 
> http://finance.yahoo.com/news/Horizons-BetaPro-Launches-cnw-776011472.html?x=0&.v=1


Not good enough. I want them to pay me to own it!


----------



## Rysto (Nov 22, 2010)

Belguy said:


> Here is information on the cheapest Canadian ETF tracking the TSX 60 with a MER of just .07%!! How much lower do you want them to go--manage it for free???
> 
> http://finance.yahoo.com/news/Horizons-BetaPro-Launches-cnw-776011472.html?x=0&.v=1


I said TSX Composite, not TSX 60.

Edit:


Four Pillars said:


> Not good enough. I want them to pay me to own it!


I see that you're a dividend investor.


----------



## Doug (May 31, 2009)

The ETF you mention does not physically hold shares. With an ETF that holds shares, you take on equity risk. With synthetic ETFs, you take on additional risk, some of which may be unknown. Are you adequately compensated for those risks?


----------



## andrewf (Mar 1, 2010)

That ETF holds cash and a swap on the equity portfolio. There is counterparty risk, but it seems reasonably managed.


----------



## Park (Sep 11, 2010)

Has anyone heard any further news about Vanguard entering the Canadian ETF market?


----------



## Bupp (Nov 13, 2009)

I love how the last 5 years has seen lehman, bear stearns and aig blow up but people are willing to take on counterparty risk for a few basis points in lower management fees.


----------



## Rysto (Nov 22, 2010)

By my understanding of the how the total return swap agreement works, had the fund been in existence in 2008 and Lehman had been the counterparty, the fund would have lost nothing when Lehman went bankrupt.

The counterparty is responsible for paying the return of the index. The principle is held by the fund. In 2008, the index was going down, so the counterparty wouldn't have owed the fund anything(I imagine that the fund actually would have owed the counterparty). In order for the counterparty risk to hurt you, the counterparty would have to default while the market is rising. That strikes me as being substantially more unlikely that a failure by the counterparty.


----------



## Bupp (Nov 13, 2009)

the counterparty is national bank. The perfect storm would involve the stock market going up due to high resource prices at the same time that a housing correction occurs + national bank facing some random class action law suit which guts the company.


----------



## Bupp (Nov 13, 2009)

Another way of putting it is that you are saving only 8 basis points.

On $100,000 that means an extra 80 dollars a year in fees. In return you are taking on a 10% or $10,000 counterparty risk.

If even once in 125 years national bank goes kaboom, you end up losing more than you save by going with the lower mer.


----------



## windar2001 (Dec 21, 2010)

Correct me if I'm wrong but you have to exchange risk for higher returns. As previously explained, unless the perfect storm arises that risk is very small. Please no black swan analogy, it's getting too much press these days.

Ok so you get free reinvestments, lower mer, etc. What people forget is that you get 0.0000% tax liability every year!?! That's a few percentage points a year where I live for that extra risk. I'll take that any day instead of much greater volatility elsewhere to get the same extra percentage points.


----------



## Park (Sep 11, 2010)

The OP is from December, 4 months ago. The announcement was that Vanguard was going to enter the Canadian market in 2011. Has anyone heard further news about this?


----------



## Financial Cents (Jul 22, 2010)

@Park - I haven't heard anything more (unfortunately). Overall, I think this would be great for Canada and our financial industry.

Some bond products below 0.20% would be nice.

Other than that, I don't see too many advantages? I mean, you can buy VTI, VWO, VEA and others at rock bottom MERs already.


----------



## 50invester (Feb 10, 2010)

On the topic of US ETF's. What are tax implications on interest, dividends and capitol gains in non-registered accounts? ... where does the Foreign Tax credit fit in here? 

Also, if Vanguard does come to Canada, would you be buying there funds in Can dollars? .... wouldn't this allow you to avoid those damn conversion fees?


----------



## Rysto (Nov 22, 2010)

Vanguard is expected to make an announcement tomorrow.


----------



## w0nger (Mar 15, 2010)

i wonder how much of the mutual fund profits will be lost when Vanguard, a low fee mutual fund company comes to Canada and offers much lower MER products, the competition must respond... what will this mean for the banks? their profits? and their loss of the market share...?

Perhaps it'll offer a temporary dip in the financials sector for a buying opportunity of the big5...


----------



## gibor365 (Apr 1, 2011)

The bigget hit will be for canadian mutual fund companies, much less banks. In worst case banks as usual will increase a little bit some fees


----------



## andrewf (Mar 1, 2010)

This is pretty good news. I would be happy enough to be able to hold some of their US products in CAD (no hedging & hedged options) without adding a lot of extra fees. It'd be nice for convenience of rebalancing to have more of my portfolio in CAD. Google Finance doesn't account for currency fluctuations, so I need a spreadsheet to work out the value in CAD.


----------



## Jungle (Feb 17, 2010)

Dont get too excited yet. I was reading another post where Vanguard has funds in Austraila and they start with a marginal MER fee. First 50K is 0.75 % mer, second 50K is 0.50 % mer and the 100k is 0.35 % mer. 

Maybe we will be more lucky.


----------



## larry81 (Nov 22, 2010)

> Vanguard, one of the world’s largest investment management companies, has established a Canadian business: Vanguard Investments Canada Inc. Vanguard’s initial focus in Canada will be to offer investment products to Canadian investors through investment advisors.
> 
> “Extending our reach to the Canadian market in a significant way is an important step in the development of our global business,” said Vanguard Chairman and CEO William McNabb. “Although Canada has a very well-developed asset management market, we believe our unique value proposition of low-costs, client alignment, and enduring investment solutions will resonate with Canadian investors.”
> 
> ...


----------



## webber22 (Mar 6, 2011)

The initial focus will be on investment advisors


----------



## CanadianCapitalist (Mar 31, 2009)

If Vanguard can lower costs for Canadians investing with an advisor (most Canadians invest this way) from their current 2.5% to 1.5% or so, it will be a huge positive.


----------



## Belguy (May 24, 2010)

So, what should those of us who manage our own accounts through a discount brokerage do if we want to invest in Vanguard funds?

It seems to me that we have the choice of either continuing to invest in U.S. based Vanguard ETF's or going out and finding us an advisor so that we can purchase the Canadian based Vanguard funds.

Is that about it?


----------



## Four Pillars (Apr 5, 2009)

At this point, it's mostly speculation since they haven't announced any products or services.

From the "working with advisors" statement, I would assume that they are not going to do the same model they have in the States where investors can open up their own self-directed accounts directly with Vanguard.

Or maybe they are talking about fee-based advisors? 

Here are my thoughts (guesses?):

http://www.moneysmartsblog.com/vanguard-coming-to-canada-cheaper-etfs-and-index-funds/


----------



## Park (Sep 11, 2010)

From what I can see, there hasn't been any further news from Vanguard since early June. I have some money to invest, and am wondering how long I have to wait to hear from Vanguard. Has anyone heard any further news?


----------

