# Vanguard to launch six ETFs in Canada



## larry81 (Nov 22, 2010)

> U.S. investment fund goliath Vanguard Group Inc. has filed a preliminary prospectus to launch six exchange-traded funds (ETFs) in Canada.
> 
> The stock ETFs include Vanguard MSCI Canada and the Vanguard MSCI Emerging Markets, as well as the Vanguard MSCI U.S. Broad Market and Vanguard MSCI EAFE, which will both be hedged to Canadian dollars. The bond category includes Vanguard Canadian Aggregate Bond and Vanguard Canadian Short-Term Bond ETFs.


http://www.theglobeandmail.com/glob... RSS/Atom&utm_source=ETFs&utm_content=2138650


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## andrewf (Mar 1, 2010)

Boo to hedging. We need those ETFs without the hedging. The estate tax consideration is a big enough concern to justify holding a Canadian-domiciled ETF that is a straight wrapper for the US version of the fund.


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## leoc2 (Dec 28, 2010)

andrewf said:


> Boo to hedging. We need those ETFs without the hedging. *The estate tax consideration is a big enough concern to justify holding a Canadian-domiciled ETF that is a straight wrapper for the US version of the fund*.


Andrew please explain.


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## larry81 (Nov 22, 2010)

andrewf said:


> Boo to hedging.


same feeling here !


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## CanadianCapitalist (Mar 31, 2009)

I agree that unhedged foreign stock ETFs would have been nice especially if they held stocks directly (and not simply a wrapper around US ETFs such as VTI or VEA).

On my wishlist was cheaper REIT and dividend ETFs. Alas, they are not in the lineup at this time.


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## CanadianCapitalist (Mar 31, 2009)

leoc2 said:


> Andrew please explain.


If you as a Canadian resident holds US assets including US stocks, US ETFs etc. you may be liable to pay US Estate Taxes even if you not a US citizen or resident. 

http://www.canadiancapitalist.com/should-us-estate-taxes-affect-the-choice-of-investments/


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## andrewf (Mar 1, 2010)

CanadianCapitalist said:


> I agree that unhedged foreign stock ETFs would have been nice especially if they held stocks directly (and not simply a wrapper around US ETFs such as VTI or VEA).
> 
> On my wishlist was cheaper REIT and dividend ETFs. Alas, they are not in the lineup at this time.


I think you had better keep dreaming. Given the number of holdings, I just don't see it being economic to buy them all directly rather than through the US fund. Any savings from avoiding the MER on the US fund would likely be eaten up in the trading and admin costs.

Using the US fund allows the liquidity benefit to be largely passed through. Market-makers ought to be willing to provide small spreads.

Agreed on cheaper REIT and dividend ETFs. The REIT space is the most egregious example.


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## rajaijah (Aug 21, 2011)

CanadianCapitalist said:


> If you as a Canadian resident holds US assets including US stocks, US ETFs etc. you may be liable to pay US Estate Taxes even if you not a US citizen or resident.
> 
> http://www.canadiancapitalist.com/should-us-estate-taxes-affect-the-choice-of-investments/


I read the http://www.bdo.ca/library/publications/tax/documents/USestatetax08-Masthead-Final.PDF.

so if someone invest in US stocks (in rrsp or non-reg accounts), there will be estate tax upon death if the person does not convert them to cash (sale) and transfer to canada before death?

How about roth ira and iras? I left the US last year and settled in Canada. But still have my roth ira and reg-IRA. Is it better to transfer them now (and take the 10% or so early withdrawal hit +tax on IRA)?

Please do explain or please direct to other info source.

Thanks.


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## bloschuk (Jul 20, 2011)

andrewf said:


> Boo to hedging. We need those ETFs without the hedging. The estate tax consideration is a big enough concern to justify holding a Canadian-domiciled ETF that is a straight wrapper for the US version of the fund.


estate tax consideration not a big enough concern if you add in that they're hedging though? are the big concerns with hedging the tracking error and higher mer because of more work to do to hedge?


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## andrewf (Mar 1, 2010)

You can avoid the hedging by buying the US domiciled ETFs that track the same index, but then you're exposed to estate tax in the event of your death.


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## Park (Sep 11, 2010)

The currency hedging of their EAFE and US ETFs is very disappointing. Vanguard must know that currency hedging will decrease returns. The longer the investor holds an ETF, the less that currency risk is an issue. Does Vanguard want investors or traders? In fact, investing in securities denominated in foreign currencies diversifies portfolios. Swensen says having up to 25% of one's portfolio in foreign currencies acts as a diversifier. The 25% number presumably refers to American investors; I don't know what the relevant number is for Canadian investors.

The counterargument from Vanguard would be that if you don't want currency hedging, buy their American domiciled ETFs. But that increases complexity and results in currency exchange costs. One loses the foreign tax credit on their EAFE fund. It also exposes Canadian investors to the caprices of the SEC and IRS. Admittedly, US estate tax is an minor issue for most Canadian investors. But will it be in 20 years? And who know what new problems will arise. US domiciled ETFs are accountable to American, not Canadian interests. 

From what I understand, their Canadian index fund will have about 100 stocks in it. This is considerably less than XIC, which is in the 200-240 stock range. Once again, I am disappointed. Vanguard is a leader in indexing, and they very well know that when it comes to indexing, the broader the index the better. In fact, they are known to advocate a broad market index approach (at least in America), as opposed to the slice and dice that some advocate. Something is wrong when Blackrock is providing a significantly broader Canadian stock index fund than Vanguard. My guess is that Vanguard looked at the relative success of XIU and XIC, and came to the conclusion that XIU was the better model.

I do notice that each proposed Vanguard ETF has an iShares counterpart. Vanguard looks like it wants to get into the ring with Blackrock; the MERs of the Vanguard ETFs may indicate how much Vanguard is looking for a fight. With the size of the Canadian market, one can't be sure that all of Vanguard's and Blackrock's ETFs will come out of the ring. If that happens, there may be capital gains taxes to pay if an ETF closes. Choose your ETFs carefully.

Overall, I am saddened by what Vanguard has proposed. Since Jack Bogle has left Vanguard, there has been a slow but steady change in the culture of Vanguard. What Vanguard is offering here is another manifestation of that change. When each proposed Vanguard ETF has an iShares counterpart, does that mean Blackrock is the role model for Vanguard in Canada? If the answer is yes, that is troubling. Vanguard had a well deserved reputation for putting the investor's interests first; Blackrock has a different reputation. 

Another manifestation of this change is advertising. Compared to when Jack Bogle left, Vanguard's advertising budget has skyrocketed. I presume he thought advertising wasn't that important. If Vanguard provided good financial services, the investors would come. And they did. Who is paying for these ads? Vanguard investors are. I heard a rumor that Vanguard was setting up a hedge fund domiciled in Ireland (search Bogleheads forum on that).


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## CanadianCapitalist (Mar 31, 2009)

Wow. I'm very interested in two of the new Vanguard ETFs. The Canadian Equity ETF is priced at just 9 basis points (6 basis points cheaper than XIU) and the short-term ETF is priced 10 basis points cheaper. 

http://wheredoesallmymoneygo.com/vanguard-announces-canadian-etf-pricing/

Now bring on some cheaper REIT and dividend ETFs!


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## andrewf (Mar 1, 2010)

Did you catch the caveat about these being the management fees, not the MER?


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## Rommel (Nov 1, 2010)

CanadianCapitalist said:


> Wow. I'm very interested in two of the new Vanguard ETFs. The Canadian Equity ETF is priced at just 9 basis points (6 basis points cheaper than XIU) and the short-term ETF is priced 10 basis points cheaper.
> 
> http://wheredoesallmymoneygo.com/vanguard-announces-canadian-etf-pricing/
> 
> Now bring on some cheaper REIT and dividend ETFs!


That is great news!!!

I am wondering when this will happen. I know regulatory requirements take a while but with initial news reports from May and action in August... I can't wait much longer


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## Sampson (Apr 3, 2009)

CanadianCapitalist said:


> Now bring on some cheaper .... dividend ETFs!



Wow! First documented departure from the 'pure' index-tracking ETFs. I knew after 3+ years you would finally slip up.


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## CanadianCapitalist (Mar 31, 2009)

Sampson said:


> Wow! First documented departure from the 'pure' index-tracking ETFs. I knew after 3+ years you would finally slip up.


The reality is a lot of investors are looking at dividend ETFs. At least if they were much cheaper than what's available currently, most of the extra dividend boost will stay in investors' pockets.



andrewf said:


> Did you catch the caveat about these being the management fees, not the MER?


Yes. Most ETFs these days quote the management fee anyway. I expect the MER will be about 10% higher for these ETFs.


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## fatcat (Nov 11, 2009)

is there any reason to think that ishares and the rest won't match these prices ?

that xiu is likely to come down to match vanguard ?

when bmo priced their new all high cap canada they priced it at .15 to beat xiu at .17 (slightly different indexes yes)


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## andrewf (Mar 1, 2010)

I'm not sure iShares has incentive to drop their fee just yet. The liquidity advantage they have now probably outweighs any fee difference for now. Once these competitor funds gain a critical mass of AUM (maybe $1 billion), they will start to feel pressure to bring their fees down.

Sampson, I think it is fair to applaud the introduction of better products, even if you don't use them.


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## leoc2 (Dec 28, 2010)

*Vanguard canada*

Vanguard Canada is trading today! See link for ETF information.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> The liquidity advantage they have now probably outweighs any fee difference for now.


Looks like Vanguard ETF spreads are very high right now. I'll be waiting and watching because the MER differences will be eaten up by spreads (at least as things stand right now):

http://www.canadiancapitalist.com/bid-ask-spreads-of-new-vanguard-etfs/


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## leoc2 (Dec 28, 2010)

Vanguard Investments Canada Inc. plans to broaden its family of low-cost, high-quality exchange-traded funds to 11 with the addition of five new ETFs

http://www.theglobeandmail.com/glob...e=+20120905&archive=bwire&slug=20120905006824


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## slacker (Mar 8, 2010)

Sweet Canadian REIT and unhedged S&P 500 !! I can't wait to unload the 0.60% XRE.


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## andrewf (Mar 1, 2010)

No word yet on MERs, it seems.


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## mrPPincer (Nov 21, 2011)

leoc2 said:


> Vanguard Investments Canada Inc. plans to broaden its family of low-cost, high-quality exchange-traded funds to 11 with the addition of five new ETFs
> 
> http://www.theglobeandmail.com/glob...e=+20120905&archive=bwire&slug=20120905006824


Ah! Thanks! I was ready for some good news after hearing on another thread last night that TDW seems to be dinging me twice with FX fees on my US dividend drips (still have yet to phone them myself to confirm and to end those drips).

If the MERS are right I'll possibly be interested in the Dividend Yield Index etf and the short-term corporate bond one.
Good to see there's gonna be some competition to our canadian reit etfs too, but I've already gone with individual reits on the canadian side.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> No word yet on MERs, it seems.


Look up Sedar for management fees.

Vanguard FTSE Canadian High Dividend Yield Index ETF - 0.30%
Vanguard FTSE Canadian Capped REIT Index ETF - 0.35%
Vanguard S&P 500 Index ETF - 0.15%
Vanguard S&P 500 Index ETF (CAD-Hedged) - 0.15%


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## CanadianCapitalist (Mar 31, 2009)

I think the new ETFs are great news for investors because they fill some important holes in current ETFs.

1. The dividend ETF will be significantly cheaper than current alternatives such as XDV or CDZ.
2. The REIT ETF will also be significantly cheaper but I think unbundling still makes sense for REITs because you can sample the index for about $50 per year or so.
3. The S&P 500 ETF will be wonderful addition for Canadian investors. It gets rid of the need for currency conversion and helps one avoid US estate tax considerations.

That's the tldr; version of my post here: 

Vanguard’s Dividend, REIT and S&P 500 ETFs are great news for ETF Investors


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## fatcat (Nov 11, 2009)

i'm mainly interested in the dividend fund
will be very interested to see what they have in there


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## leoc2 (Dec 28, 2010)

> 3. The S&P 500 ETF will be wonderful addition for Canadian investors. It gets rid of the need for currency conversion and helps one avoid US estate tax considerations.


CC do you have a link that describes US estate tax as it applies to owning a US ETF like VTI?


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## CanadianCapitalist (Mar 31, 2009)

http://www.canadiancapitalist.com/h...fect-the-choice-of-international-investments/

Also check out the thread on CMF referred to in that post.


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## leoc2 (Dec 28, 2010)

CanadianCapitalist said:


> http://www.canadiancapitalist.com/h...fect-the-choice-of-international-investments/
> 
> Also check out the thread on CMF referred to in that post.


The link you provide talks about withholding taxes. I am interested in estate taxes. Did I miss something?


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## CanadianCapitalist (Mar 31, 2009)

leoc2 said:


> The link you provide talks about withholding taxes. I am interested in estate taxes. Did I miss something?


D'oh. This is what I meant to link to: http://www.canadiancapitalist.com/u-s-estate-tax-changes-will-affect-canadians/


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## Cal (Jun 17, 2009)

Link to the Vanguard site (which I have been using to see when they update it next)

https://www.vanguardcanada.ca/individual/etfs/etfs.htm


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## Belguy (May 24, 2010)

Vanguard looks to lowering fees on key ETF's:

http://www.theglobeandmail.com/glob...-by-switching-index-providers/article4582317/


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## Belguy (May 24, 2010)

Is anyone considering investing in any of the new Vanguard ETF's?

http://www.moneysense.ca/2012/09/06/vanguard-announces-five-new-etfs/


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## avrex (Nov 14, 2010)

Belguy said:


> Is anyone considering investing in any of the new Vanguard ETF's?


Of the 5 new Vanguards ETFs, I like the following 2 as possible additions to my portfolio:

Vanguard FTSE Canadian Capped REIT Index ETF (MER 0.35%)
Vanguard Canadian Short-Term Corporate Bond Index ETF (MER 0.15%).


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## Sampson (Apr 3, 2009)

I'm also interested in the short-term bond fund.


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## andrewf (Mar 1, 2010)

The unhedged S&P 500 ETF is also nice, for investors who don't want to trade US-listed ETFs.


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## CanadianCapitalist (Mar 31, 2009)

The new Vanguard ETFs started trading today. Vanguard also announced a DRiP program. Ticker symbols and news release can be found here:

https://www.vanguardcanada.ca/documents/nov-fund-launch-press-release.pdf


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## jamesbe (May 8, 2010)

I've never got into something this early. How do they set the price? I can see two scenarios. One where you get in early at a great price and profit.

The one looks like facebook where it just goes into the crapper after a few months ...


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## CanadianCapitalist (Mar 31, 2009)

jamesbe said:


> How do they set the price?


These are ETFs, not stocks that are going IPO. Take the Dividend ETF. It holds a bunch of Canadian dividend paying stocks. The price that the ETF is trading at will be pretty close to the NAV of its holdings.


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## jamesbe (May 8, 2010)

Yeah I just find it odd, they ALL started out at the same $24.xx price range.

I'm looking to add some US diversification to my TFSA and this seems like a good way to do so.

Also I see no info about yields etc in Questrade, probably too early.


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## andrewf (Mar 1, 2010)

They trade at or about NAV. Look for an IPO or a closed end fund if you want to speculate on the first couple of days of trading.


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## kyboch (Dec 23, 2011)

There is no information on the Vanguard Canada site about the holdings of the new ETFs. I am interested in what the new dividend etf holds VDY and the new reits etf VRE. Personally I think the vanguard Canadian site is weak. Ishares and BMO have much better, easier to navigate and more thorough sites. I've looked here:
https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9560
and here:
https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9559

They don't even list how many stocks are in the etfs? Seriously how can Vanguard expect people to buy their products when there is zero information available! I know it's early, but still.....


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## GoldStone (Mar 6, 2011)

VRE tracks FTSE Canada All Cap Real Estate Capped 25% Index.

Index info, including holdings, is available here:

http://www.ftse.com/Indices/FTSE_Canada_All_Cap_Sectors_Capped_Index_Series/Downloads/GPVAN022.pdf

The fact sheet for VDY index is not available. I expect they will fix it shortly.


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