# Vanguard Canada MER



## larry81 (Nov 22, 2010)

We can all be grateful that our friends at Vanguard decided to setup an operation in Canada a few years ago. The "vanguard effect" lowered fees of ETF's across.

But what about VUN ? The ETF is nearing 1B in asset and fees are still a staggering 0.16% ? Ishares XUU is at 0.07% !

I wish Vanguard Canada would pass some savings to investing by lowering the MER <0.10%.

Anyone else in the same boat?


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## andrewf (Mar 1, 2010)

Vanguard Canada is not owned by Canadian unitholders, it is owned by unitholders of Vanguard USA ETFs. So, Vanguard Canada does not directly work for Canadian unitholders. I don't know if that will mean any difference in behaviour. Maybe they will try to extract more of a profit from the Canadian operation to send back to the US parent.


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## AltaRed (Jun 8, 2009)

Except Vanguard Canada has been instrumental in coming to Canada with lower MERs that has in turn forced Blackrock and BMO to 'match'. 

That said, Blackrock has made a strategic decision to develop their "core" suite of ETFs for "Core" portfolios and all their core ETFs are at the very low end of MERs. Even if a few of them may not be profitable (covering costs only) to complete that core strategy, it is worth their while to position themselves accordingly. May well be a strategic move to mitigate the 'robo' market? Either way, I like it.

https://www.ishares.com/us/strategies/build-your-core


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## latebuyer (Nov 15, 2015)

XUU has certainly rapidly built up assets. I think it and VUN are at 1 billion now but VUN was started at least a year earlier. Hopefully once XUU drastically outpaces VUN in assets they will have to decrease the mer on VUN. As a VUN holder I hope this happens. I've been tempted to invest any new money in XUU but I haven't decided yet.


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## My Own Advisor (Sep 24, 2012)

Are many investors really concerned about 0.10% vs. 0.07% or other? That difference is $300 per year for every $1 M invested in the fund. 

I would guess, although I can't say for sure, someone that has $1 M invested in that fund is not really worried about spending/losing $300 per year. I could be wrong of course! 

"We can all be grateful that our friends at Vanguard decided to setup an operation in Canada a few years ago. The "vanguard effect" lowered fees of ETF's across." Absolutely!!


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## fplan (Feb 20, 2014)

larry81 said:


> We can all be grateful that our friends at Vanguard decided to setup an operation in Canada a few years ago. The "vanguard effect" lowered fees of ETF's across.
> 
> But what about VUN ? The ETF is nearing 1B in asset and fees are still a staggering 0.16% ? Ishares XUU is at 0.07% !
> 
> ...


If vanguard introduces core index funds ( CAN,US,INT,Bond) .. they will sure get lot of business from big banks..may be its cost intensive operation to have funds vs ETFs..not sure


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## AltaRed (Jun 8, 2009)

I am guessing they are happy with their suite of index ETFs. Why get into the regulated mutual fund business here? Especially if they have no storefront identify?


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## larry81 (Nov 22, 2010)

My Own Advisor said:


> Are many investors really concerned about 0.10% vs. 0.07% or other?


I am 

I personally take great pleasure seeing my portfolio MER go lower, every 0.01% cout !

I hope vanguard will start lowering their MER when funds reach a certain AUM. 

On the US side, VTI is a 62B and 0.04% MER


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> Are many investors really concerned about 0.10% vs. 0.07% or other? That difference is $300 per year for every $1 M invested in the fund.


Wow, heh - good point!

The competitive pressure is great. iShares recently cut some of its bond ETF fees as well (link to announcement). This is notable because they did this on their flag ship bond funds. This is the management fee portion, MER will be a bit higher as usual,

XBB fee was 0.30%, now 0.09%
XSB fee was 0.25%, now 0.09%

This makes it a no-brainer to use XBB & XSB. For example XBB is now cheaper than VAB. It already had the longest track record, great performance, and definitely the best liquidity.

Blackrock is losing significant revenue by doing this. The difference between the old fees and new fees on these two funds works out to $8 million less revenue per year for Blackrock.


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## larry81 (Nov 22, 2010)

james4beach said:


> Wow, heh - good point!
> 
> The competitive pressure is great. iShares recently cut some of its bond ETF fees as well (link to announcement). This is notable because they did this on their flag ship bond funds. This is the management fee portion, MER will be a bit higher as usual,
> 
> ...


thanks for the update on XSB/XBB james.

Regarding the "Vanguard effect", i think its incredible that we now have access to high quality ETF with MER below 0.10%... but except VCE/VCN, none of them are vanguard funds !!!


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## AltaRed (Jun 8, 2009)

See my earlier post on iShares strategy to build "core portfolio" options. They seem to want the portfolio business to make going with their ETFs more 'sticky'. Not unlike what Tangerine and Wealthsimple do. A good tactic in my opinion.


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## Ihatetaxes (May 5, 2010)

Larry I share your pain with VUN and agree something closer to VTI (0.04%) would be great. iShares have dropped some fees (XSB) but XEF and XAW both have MERs of 0.22%. Would love to see those drop. MER on my whole portfolio currently is 0.11%


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## larry81 (Nov 22, 2010)

Ihatetaxes said:


> Larry I share your pain with VUN and agree something closer to VTI (0.04%) would be great. iShares have dropped some fees (XSB) but XEF and XAW both have MERs of 0.22%. Would love to see those drop. MER on my whole portfolio currently is 0.11%


My portfolio MER is 0.19%, i really wish vanguard would lower the MER on VUN, my largest holding !

HBB	Horizons CDN Select Universe Bond ETF	0.24%
VCN	Vanguard FTSE Canada All Cap Index ETF	0.06%
VEE	Vanguard FTSE Emerging Markets Index ETF	0.24%
VIU	Vanguard FTSE Developed All Cap ex North America Index ETF	0.23%
VUN	Vanguard US Total Market Index ETF	0.16%
ZRE	BMO Equal Weight REITs Index ETF	0.61%


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## james4beach (Nov 15, 2012)

AltaRed said:


> See my earlier post on iShares strategy to build "core portfolio" options. They seem to want the portfolio business to make going with their ETFs more 'sticky'. Not unlike what Tangerine and Wealthsimple do. A good tactic in my opinion.


I agree it's a good move from Blackrock. Plus they really were the first and a move like this will preserve XSB & XBB as top bond funds in Canada. Even I am immediately shifting my previous opinion (VAB endorsement) to an XBB endorsement.

I really like the ETFs available in Canada, no complaints about the offering. And if you want to get a bit more exotic, there are some interesting ones (like ZLB) for a slightly higher fee, which I also think is justifiable.


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## latebuyer (Nov 15, 2015)

My Own Advisor said:


> Are many investors really concerned about 0.10% vs. 0.07% or other? That difference is $300 per year for every $1 M invested in the fund.
> 
> I would guess, although I can't say for sure, someone that has $1 M invested in that fund is not really worried about spending/losing $300 per year. I could be wrong of course!
> 
> "We can all be grateful that our friends at Vanguard decided to setup an operation in Canada a few years ago. The "vanguard effect" lowered fees of ETF's across." Absolutely!!


It annoys me to pay more for something when I believe vun and xuu are close to identical. Is there any advantage to VUN over XUU? I know i'm grasping at straws. I looked at morningstar and they look almost the same. I don't feel i should have to pay more because the vanguard name has more cache.

I'm not quite sure if i can articulate what i'm thinking but it seems easy to disregard the money we are losing in an investment account as it seems less concrete then cash. The fact is if i found $20.00 on the street i'd actually be pretty happy. Why should i treat my investment account any differently?


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## AltaRed (Jun 8, 2009)

It depends. If you have a lot of unrealized cap gains in your ETF in your taxable account, there is simply nothing cost effectively to do about it. And recent investors don't have the perspective that us older folks do... from the days of $30 commissions, 50bp or higher MER ETFs, never mind 1% MER index mutual funds or 2.5% actively managed mutual funds. It is really easy to get caught up (obsessed) with decimal points in the grand scheme of things. That said, if there is a way to cost effectively make changes, then just do it.

Example: Ex and I both have huge unrealized gains in XWD in taxable accounts. It was the only game in town then. Along comes XAW some years later. Should we lose sleep over the disparity in MER (0.47 vs 0.22)? Hardly... it's not good for the arteries to fret over it. The gains have been lovely. Que sera sera.


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## larry81 (Nov 22, 2010)

VUN AUM finally reached 1B this month, MER is still 0.16%...

iShares XUU at 0.07% MER is quite a deal


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## larry81 (Nov 22, 2010)

Bumping an old thread...

VUN AUM reached 3B this month, the MER is still 0.16%...

The underlying ETF (VTI) is now 0.03% !


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## gingymarathoner (Oct 1, 2020)

larry81 said:


> Bumping an old thread...
> 
> VUN AUM reached 3B this month, the MER is still 0.16%...
> 
> The underlying ETF (VTI) is now 0.03% !


And that's why I hold VTI in my RRSP and XUU in my taxable account.


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## larry81 (Nov 22, 2010)

VUN AUM reached 5B this month, the MER is still 0.16%...


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## latebuyer (Nov 15, 2015)

Apparently in 2020 XUU had a bad tracking error. It as referred to here Best U.S. ETFs for 2021 - MoneySense While this article is about xaw it describes the problem with xuu’s 3 fund structure. Global ex Canada Equity ETFs - VXC vs. XAW – Canadian Portfolio Manager Blog This makes me feel better that i own vun. I may be irrational but i just like to see how much money i’ve made with vun over the years.


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## GreatLaker (Mar 23, 2014)

Rational Reminder (podcast of Ben Felix and Cameron Passmore of PWL Capital Ottawa) also uses VUN as the US component of its ETF portfolios. 



Rational Reminder said:


> 30% VUN. Now this is an important change actually. In our previous model portfolio, we had XUU. One of the things that's come up with PWS research team recently is the way that BlackRock has decided, or I-Shares has decided to execute on XUU is by using three underlying ETFs. It owns three U.S. listed ETFs of small-cap, mid-cap, and large-cap stocks. That sounds fine, right? If you can pull it off efficiently but it's actually had pretty significant tracking error relative to its benchmark. This is something that was flagged this year by our research team and basically it hasn't been super impressive execution by I-Shares
> ...
> XUU returned 14.12%, it's benchmark return 15.42%. It's pretty serious. Anyway, in speaking with our research team, the suggestion was even though VUN has a higher MER, XUU at seven basis points, VUN is at 16. Their suggestion was based on the continued concerns with execution of market exposure based on the way they've decided to construct that fund And what's been happening recently that it makes more sense to go with VUN.


You can read the rest of the discussion if you search for "VUN" in the podcast transcript here:
Episode 129: Five Factor Investing with ETFs — Rational Reminder 

VUN and XUU cannot be directly compared because they don't follow the same index (CRSP US Total US Market for VUN vs. S&P Total Market Index for XUU). As of Nov 30, XUU has significantly better 1 year performance, but VUN beats it for 3 and 5 years. VUN has fairly low tracking error for 1, 3 and 5 years. XUU actually beat its benchmark for 1 year by almost 1%, and its 3 and 5 year tracking error are not too bad now. So maybe XUU's reported high tracking error was a one-time event.

Seems to me like differences are somewhat random and change over time making it hard to really say one is a better hold than the other. It still hurts to see that MER knowing the cap gains I would realize if I swapped it to something else in my nonreg account.


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## larry81 (Nov 22, 2010)

VUN ETF is now 5.5B AUM and still at 0.16% MER !!!


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## Thal81 (Sep 5, 2017)

Maybe complain to Vanguard Canada instead? Somehow they have double the AUM than their competitor XUU, so I doubt they see an incentive to reduce profits...


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## larry81 (Nov 22, 2010)

Thal81 said:


> Maybe complain to Vanguard Canada instead? Somehow they have double the AUM than their competitor XUU, so I doubt they see an incentive to reduce profits...


i write them every year or so, never received a reply...


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