# XSP, iShares Core S&P 500 Index ETF (CAD-Hedged)



## Freedom2022 (Oct 14, 2021)

Over long term. S&P 500 is over 100% ahead of XSP. Is the cost of hedging that high?


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## cardhu (May 26, 2009)

> Over long term. S&P 500 is over 100% ahead of XSP.


No it isn't ... where do you get your info?


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## james4beach (Nov 15, 2012)

Actually it's true that XSP has had a huge performance drag. The founder of this forum (Canadian Capitalist) was one of the first to discover this problem, and wrote extensively about it.

Taking a look at performance on Morningstar, we can see that XSP has returned 6.86% annualized over 15 years.
If it was perfectly hedged, it should duplicate the performance of SPY (US) which was 8.38% annualized.

Some of the performance difference would be withholding tax, but that would only account for about 0.2% difference.

Here you can see that XSP has underperformed its goal by about 1.5% annually. Correcting for the w/h tax and MER difference, it's *underperforming by about 1% CAGR*.

I'd say a 1% annual performance drag is pretty horrible.


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## KaeJS (Sep 28, 2010)

Buy XUS instead.

You should only hedge your emerging markets or international ETFs because those currencies are usually trash and don't perform as well as CAD.

USD trumps CAD and it's a safe haven, so you should never hedge your USD ETFs.

The only exception to this (which I did last year) is when you see an opportunity. When oil started to fly, the CAD started doing well, so I held XSP.

I have since moved XSP back to XUS.


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## Covariance (Oct 20, 2020)

A different perspective. If you are a passive investor then you should be in a passive product. A hedged ETF is not passive. Many of these "innovations" are well intended and interesting, but they really detract from the main strategy, and as it turns out perform poorly.


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## AltaRed (Jun 8, 2009)

Plus hedging is ultimately double jeopardy. Canadians need to be in the pure (non-hedged) product to protect themselves in two ways against the effects of the loonie going into the ditch. If the loonie swoons to 65, or below 60 cents in a rare but possible scenario, they are dragging down their net worth on the world stage by dragging down their hedged US holdings with the falling loonie. Secondly and maybe more importantly, they are exposing themselves to import inflation caused by the declining loonie and much of what a Canadian consumer buys is priced directly, or indirectly, in other currencies. Oil and most foods are two key examples, never mind most of our discretionary purchases such as appliances, electronics, autos, etc.


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## Freedom2022 (Oct 14, 2021)

KaeJS said:


> Buy XUS instead.
> 
> You should only hedge your emerging markets or international ETFs because those currencies are usually trash and don't perform as well as CAD.
> 
> USD trumps CAD and it's a safe haven, so you should never hedge your USD ETFs.


You are right.
XUS overperform XSP.
XUS even overperform SP 500 since US dollar is stronger than Canadian dollar. Double whammy.


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## OneSeat (Apr 15, 2020)

Still glad I changed all my available CADs to USDs when they were last equal about 12-13 years ago. My neighbour now claims that his winter home down south has effectively cost him nothing for same reason - mind you he is an accountant so his arithmetic is different from mine.

Helps my investing a lot - with some head scratching and hiccups.


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