# iShares REIT ETF Excessive Management Fee?



## Park (Sep 11, 2010)

I'm starting a new thread on this topic, because I want to publicize this issue. iShares has an index ETF that covers the Canadian stock market: about $1 billion in assets, 228 stocks and a management fee of 0.25%. iShares also has an index ETF that covers Canadian REITs: about $1 billion in assets, 11 stocks and a management fee of 0.55%. Perhaps managing a REIT ETF has costs that necessitate a management fee that is more than double the fee for a total market ETF that has more than 20 times as many stocks. Perhaps not...


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## ChrisR (Jul 13, 2009)

I suspect the MERs have more to do with beating the MERs of competing products than the cost of running the fund.

XIC has a lot of competition from big bank index funds (like TD's Canadian index e-series), so it needs to have a relatively low MER. 

XRE is a specialty product that really doesn't have much competition, so it can have a higher MER. BMO's REIT ETF also has an MER of 0.55%.


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## furgy (Apr 20, 2009)

It could have something to do with the distributions paid by REITs , XRE produces about twice as much income per share than XIC (even more if you figure it out dollar to dollar invested , than share to share) , I guess management would want a piece of that.

I don't know a lot about ETFs , but perhaps the only way they are able to get that share , is to up the MER.

With the income of XRE being roughly double that of XIC (per share) , they probably figure that people will gladly pay an extra .25% to make another 50%.

That's Just a guess , if you were to phone their investor relations or even email them , they would tell you their side of the story , I've found iShares to answer emails promptly.


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## FrugalTrader (Oct 13, 2008)

As the reit index is small, owning the top 3 holdings would track XRE fairly well... all without the fee.


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## Park (Sep 11, 2010)

Yes, BMO has a REIT ETF, with a management fee of 0.55%. It has 17 stocks and total assets of $24 million. iShares has a REIT ETF with a management fee of 0.55% also. However, it has 11 stocks and total assets of about $1 billion.


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## andrewf (Mar 1, 2010)

Lack of competition. If/when the Canadian ETF market heats up, MERs ought to fall. Any time we see competition between similar ETFs in the US, MERs have fallen. See the battle over gold bullion etfs in the US, for instance.


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## davext (Apr 11, 2010)

I've owned this ETF for a while and I'm up 10%. I didn't see any problems with the MER but that is a difference worth pointing out. 

CDN ETFS in general are overpriced compared to the US. It's the cost of investing as a Canadian that I've come to expect even though I complain relentlessly.


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