# XIU discount to NAV, not tracking?



## james4beach (Nov 15, 2012)

Originally brought up by gibor in http://canadianmoneyforum.com/showthread.php/13945-ETF-Recommendations/page2

Basically, the oddity is that at end of November, XIU closed at significant discount to NAV. See iShares XIU page

30-Nov-2012
NAV: $17.69
Close: $17.58 or -0.62% below NAV

This is the most liquid ETF in Canada, and there should be plenty of institutions arbitraging the price to keep it close to NAV. Has anyone seen this large a divergence before?


----------



## gibor365 (Apr 1, 2011)

XIC that also track whole TSX was unchaged when TSX was up 0.3%.... Here the picture with NAV a little bit different:
NAV 19.61
Price 19.30
And where is arbitraging ?
And those the biggest Canadian ETF! What a suckers! Better to buy TDB900 (e-series), no trading fees, track index perfectly and outperforming both XIU and XIC.

BTW, checked US ETF:
SPY and VTI - on both difference between price and NAV just 1 cent
ex. SPY NAV 142.14 and price 142.15


----------



## GoldStone (Mar 6, 2011)

As I wrote in the other thread:

The divergence happened in the last 2-3 minutes of trading at the end of the month. Over 2 million shares traded in 2 minutes. It's a weird end of month effect. Many institutional investors hold XIU because it's so liquid. For example, mutual fund managers use XIU to park cash while they look for opportunities. My guess is, an institutional investor dumped their shares so they don't show up on the end of month report.

Premiums/discounts to NAV are only a problem if they persist for a long time. This one won't. It will disappear in the first minutes of trading on Monday.


----------



## GoldStone (Mar 6, 2011)

XIC as of Nov 30:

http://ca.ishares.com/product_info/fund/overview/XIC.htm

Market price: $19.30
NAV: $19.35

Discount: -0.26%

One day discount DOES.. NOT.. MATTER. It can swing back to premium on Monday.

The only thing that matters is the long term tracking error. It is based on NAV, not market price.


----------



## GoldStone (Mar 6, 2011)

As to XIC vs. TDB900, MERs are very close:

XIC: 0.27%
TDB9000: 0.33%

ZCN tracks the same index and has a lower MER of 0.15%. It tracked a different index prior to October, so long term track record is lacking. Based on MER alone, it's a better choice than XIC.


----------



## GoldStone (Mar 6, 2011)

gibor said:


> Better to buy TDB900 (e-series), no trading fees, track index perfectly and outperforming both XIU and XIC.


Comparison to XIU is irrelevant. Total market vs. large caps. Apples and oranges.

TDB900 vs. XIC is relevant. I looked at the numbers. I cannot tell which one performed better. TD reports one decimal digit. iShares reports two. The numbers are extremely close.

*The bottom line:*

You are making a mountain out of a molehill.


----------



## gibor365 (Apr 1, 2011)

Still 1 year return: TDB900 +7.67, XIC +6.69 , 
3 year TDB900 +9.02% , XIC + 7.09%


----------



## GoldStone (Mar 6, 2011)

No idea what data provider you use. My numbers are straight from the horse mouth:

http://ca.ishares.com/product_info/fund/performance/XIC.htm

http://www.tdassetmanagement.com/Co...p_FundCard.asp?FID=3261&TAB=PRICE&PID=10&SI=3

As of Oct 30:

1yr

XIC: 4.19%
TDB: 4.2%

1yr numbers are impossible to compare. One decimal digit vs. two.

3yr

XIC: 7.07%
TDB: 7.0%

5yr

XIC: -0.56%
TDB: -0.6%

MER difference is 0.6%. It shows up as expected in the longer term results.


----------



## gibor365 (Apr 1, 2011)

I used google finance


----------



## GoldStone (Mar 6, 2011)

Now you know that Google Finance is not a dependable source of data for Canadian ETFs and mutual funds.


----------



## james4beach (Nov 15, 2012)

GoldStone said:


> The divergence happened in the last 2-3 minutes of trading at the end of the month. Over 2 million shares traded in 2 minutes . . .
> Premiums/discounts to NAV are only a problem if they persist for a long time. This one won't. It will disappear in the first minutes of trading on Monday.


I pulled up my detailed charts and I agree, there was heavy end of day trading and this may have dislocated the price temporarily.

I also agree with you that it's no big deal, so long as the price pops back to the NAV. I'll watch in the next few days. But this thing is so liquid, its price should always be within 1 penny of NAV (imo, from watching this for years).


----------



## james4beach (Nov 15, 2012)

gibor said:


> I used google finance


One reason you can't use google or yahoo finance for such comparisons, is that ETFs (like mutual funds) have a variety of distributions including dividends and reinvested distributions. It gets messy. Actually stockcharts.com works well (because they consider dividends) but that still misses reinvested distributions.

Example for XIU using 2011-10-31 to 2012-10-31
iShares site: 4.88% total return
stockcharts: 4.89%
finance.google: -0.17% (it can't even align to 10/31 start date)
finance.yahoo: +2.0%

The stockcharts calculation totally corroborates iShares' calculation. Reinvested distributions are not an issue since XIU hasn't had one since 2008. This also shows that google and yahoo's are all over the place, should not be used.


----------



## james4beach (Nov 15, 2012)

Today XIU's NAV and closing price are equal, at $17.58


----------



## Barwelle (Feb 23, 2011)

GoldStone said:


> MER difference is 0.6%. It shows up as expected in the longer term results.


Small correction: MER difference is actually 0.06%.


----------



## GoldStone (Mar 6, 2011)

Barwelle, right you are. :encouragement:


----------



## Barwelle (Feb 23, 2011)

Hah... That is too funny. I am indeed an errorist. A faulty one though, because I make typos too. 

I should say something on topic... Ok I second that google finance is unreliable. For example, I hold some stocks (on the TSX) that I track with google finance. Some of the dividends are paid in $US, but Google doesn't convert the currency... So the total portfolio value isn't correct. It's a small difference, but it's there.


----------



## HaroldCrump (Jun 10, 2009)

Barwelle said:


> I hold some stocks (on the TSX) that I track with google finance. Some of the dividends are paid in $US, but Google doesn't convert the currency... So the total portfolio value isn't correct. It's a small difference, but it's there.


Have you tried the following options in Google Finance:


----------



## Barwelle (Feb 23, 2011)

Yup, default currency is CAD and I have dividend reporting checked. 

To be specific, the problem is with ECA. My symbols don't show up with TSE: in front of them, but it is TSE:ECA and not NYSE:ECA.


----------



## HaroldCrump (Jun 10, 2009)

Barwelle said:


> Yup, default currency is CAD and I have dividend reporting checked.


But you don't want CAD, right? You want to see USD.
Click on that currency drop down and select USD instead of CAD.

So you will have to create two separate watchlists based on the currency of the dividends.
This should reflect your real holding account at your bank as well i.e. hold USD dividend paying stocks in a USD account and CAD dividend paying stock in a CAD account.



> To be specific, the problem is with ECA. My symbols don't show up with TSE: in front of them, but it is TSE:ECA and not NYSE:ECA.


Are you using Google.ca or Google.com?
TSE:ECA works for me.
What happens if you put just ECA?
Which one does it pull up?


----------



## Barwelle (Feb 23, 2011)

I do want to see CAD. I'm holding a TSE stock in a CAD account which pays a dividend in USD. The brokerage converts the dividend into CAD when it is paid out. 

Well, really, it doesn't matter if I see CAD or USD in the GF portfolio, as long as it's keeping track properly.

I am using google.ca. If I type in just ECA, a pop up box gives me several options, but the default is TSE:ECA.

OK I played around with it a bit... 
If I call it a CAD account and buy TSE:ECA, no conversion. If I call it a USD account and buy TSE:CAD, there is a conversion. Both of these are incorrect.

If I call it a USD account, and buy NYSE:ECA, no conversion. If I call it a CAD account and buy NYSE:ECA, there is a conversion.

So it is ignoring the fact that TSE:ECA pays its dividend in USD.

I don't see a way to work around this... I could (in Google Finance) say I own NYSE:ECA in a CAD account. Then the dividend would be more accurate. But then the share price would be wonky.


----------



## HaroldCrump (Jun 10, 2009)

Barwelle said:


> I'm holding a TSE stock in a CAD account which pays a dividend in USD. The brokerage converts the dividend into CAD when it is paid out.


Right, and that is where the problem is.
Since ECA is traded on the NYSE as well, you are better off keeping everything in the USD account.

There are stocks that trade only on TSX but pay dividends in USD.
With those, you have to pick your haircut - do you want to take a big currency conversion hit when buying/selling, or lots of smaller hits every quarter for dividend conversion.

Death by a thousand cuts or a single chop of the Guillotine - your choice.



> OK I played around with it a bit...
> If I call it a CAD account and buy TSE:ECA, no conversion. If I call it a USD account and buy TSE:CAD, there is a conversion. Both of these are incorrect.
> If I call it a USD account, and buy NYSE:ECA, no conversion. If I call it a CAD account and buy NYSE:ECA, there is a conversion.
> So it is ignoring the fact that TSE:ECA pays its dividend in USD.


You can't have it both ways.
You can't ask Google to report your price in one currency and your dividends in another.
The currency is applied at the portfolio level, just exactly the way it is in real life.



> I don't see a way to work around this... I could (in Google Finance) say I own NYSE:ECA in a CAD account. Then the dividend would be more accurate. But then the share price would be wonky.


But that is exactly the way it is in reality.
You are holding a TSX listed security with USD dividends in a CAD account - either of those will always be "wonky".
The correct solution is to hold the stock in a USD account.
Then your problem with Google will fix itself.


----------



## Barwelle (Feb 23, 2011)

Yup, I understand that I can take the expense of currency conversion either at dividend time, or when buying/selling. But that's not the point of this discussion. The point is that Google Finance isn't keeping track of my portfolio correctly.



HaroldCrump said:


> You can't ask Google to report your price in one currency and your dividends in another.


Why not? The stock itself is in one currency while its dividend is in another.

I can see the problem with converting the dividend: Different brokers will have different conversion fees. But it seems odd that they have no provision whatsoever for accounting for this issue. What if the CAD was worth $0.50 USD? Then Google Finance would be telling me that I'm receiving _half_ the dividend I actually am. It would be US$0.20/sh, yes, but it would show up in the Google Portfolio as CAD$0.20 when it really would be CAD0.40 less exchange fee.



HaroldCrump said:


> The correct solution is to hold the stock in a USD account.
> Then your problem with Google will fix itself.


I agree, it would solve the currency conversion error. But again, Google is missing something because it ignores the fact that some dividends aren't paid in the same currency.

Here's a carverman-esque analogy, before we get too serious here. Imagine, you import a car from the States. Back in Canada, the speed limit is 100 (km/h, of course), so you set your speed where your speedometer says 100 (mph, of course). Cop pulls you over for speeding. "But sir... the signs say 100... and my car says I was going 100! Why should I have to convert... Google Finance doesn't!"


----------



## Barwelle (Feb 23, 2011)

As an aside... I'm not against owning interlisted stock in US$, I may very well have it journaled over or whatever some day. I'm just pointing out a flaw in Google Finance. And I'm not sure why they aren't addressing it when these US$ dividends exist for CAD stocks, and vice versa.


----------



## HaroldCrump (Jun 10, 2009)

Barwelle said:


> Why not? The stock itself is in one currency while its dividend is in another.


Which mirrors exactly what happens in a real brokerage account, sans the currency conversion.
Your brokerage automatically converts the dividends and the stock price to the currency of the account, but it is still a single currency.
Your brokerage does not show your stock and your dividend _in the same account_ as two different currencies.

I am not saying that Google Finance is doing the right thing.
But it is doing what your brokerage does, except that it does not auto-convert the currency.
Which is good, in fact, because it has no way of knowing what my effective conversion rate will be.



> Here's a carverman-esque analogy, before we get too serious here. Imagine, you import a car from the States. Back in Canada, the speed limit is 100 (km/h, of course), so you set your speed where your speedometer says 100 (mph, of course). Cop pulls you over for speeding. "But sir... the signs say 100... and my car says I was going 100! Why should I have to convert... Google Finance doesn't!"


That was the Mini Cooper commercial, wasn't it?
I remember it from 2002 or 2003, when the Cooper first came to North America.

Anyhow, you extend your analogy...the car is doing the right thing.
Does your car auto-adjust as you move between borders?
Is it expected to know that you are now in Canada, now in the US?

_You_ are supposed to keep track of it - not the car.

I am sure that day is not far when all cars will have built-in GPSes and automatically adjust the speedometers.
In fact, the cars will be able to read the speed limits off the road signs by scanning the 2D bar codes and auto-adjust your speed, or warn you.
Surely that day is not far.
But, by then, Google Finance would also have adjusted its website to track price and dividends separately.

And let us not forget that Google Finance is giving us full value for our monthly fee :biggrin:


----------



## HaroldCrump (Jun 10, 2009)

HaroldCrump said:


> That was the Mini Cooper commercial, wasn't it?
> I remember it from 2002 or 2003, when the Cooper first came to North America.


I knew I'd find it...

http://www.youtube.com/watch?v=chL0q_RAoFg


----------



## Barwelle (Feb 23, 2011)

I'm still of the mind that portfolio-tracking software should have some way to properly track these US$ dividends. As you turned the analogy around on me, yes I am supposed to keep track of it... but GF doesn't allow me to. Even if I created a separate portfolio within GF for the CAD stocks that pay US dividends, the cash balance would not be correct whether I selected the portfolio currency as CAD, or USD.

I would have to create two portfolios, really, for one stock: One, in CAD, to track the stock price (ignoring the cash balance), and one, in USD, to track the dividends (ignoring the stock price) then convert to USD, and account for my brokerage's conversion fee. Then one more portfolio for CAD-div-paying CAD stocks and the CAD cash balance in your account. One more portfolio if you hold USD-div-paying-USD stocks. Then if you have some RRSPs, TFSAs, and unregistered accounts, there are more portfolios yet....

They could have a daily conversion rate that they use, and then have an option for you to modify that rate +/- X% or $X to allow for fees. 
OR, if they would allow you to choose to manually enter/adjust dividends... that would solve the problem.

Bottom line for me: It's great that they have created this free portfolio tracking software/program. But it's wrong. And they don't let you manipulate it in any way. You have to go in a very roundabout way to correct the error that adds complexity to the whole thing. 

Oh well. As you point out, you get what you pay for! I'm sure they'll fix it some day. The programmers are too busy right now taking advantage of the mini-putt/gyms/nap rooms/social areas/whatever all those nice things are that trendy tech companies provide in their offices! :rolleyes2:

I'm curious now how paid-for portfolio tracking software does this.


----------

