# Do you have questions for Vanguard Canada?



## CanadianCapitalist (Mar 31, 2009)

I'll be chatting with folks from Vanguard next week. Are there any questions you'd like asked?


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## longinvest (Sep 12, 2012)

If you have time to ask them about it, it would be nice to know if they plan to add an unhedged version of VEF to their lineup.


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## Sampson (Apr 3, 2009)

1. Could you ask whether they plan to begin offering brokerage services, or offer DRIP programs through transfer agents.

2. Do they have plans to enter the more competitive corporate pension plan market?

Not sure if these are questions, or rather requests/suggestions.


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## CanadianCapitalist (Mar 31, 2009)

Good questions guys. Vanguard already offers a DRiP program. Details here:

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


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## kyboch (Dec 23, 2011)

I would like to know why their website doesn't show the holdings of their new REIT and Dividend ETFs.


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## maxandrelax (Jul 11, 2012)

I would like to know if they will offer commission free purchases and top ups like they do in the U S and A.


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## GoldStone (Mar 6, 2011)

kyboch said:


> I would like to know why their website doesn't show the holdings of their new REIT and Dividend ETFs.


I can answer that! They show each ETF's holdings as of end of the previous month. The two ETFs you are interested in are less than month old. End of November holdings should be available next week.


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## andrewf (Mar 1, 2010)

Shouldn't the holdings of creation units be disclosed publicly? Transparency is one of the inherent features of ETFs.


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## GoldStone (Mar 6, 2011)

What are Vanguard's plans to minimize foreign withholding taxes for Canadian investors?

VUS, VFV, VSP are wrap ETFs, i.e. they hold US-domiciled Vanguard ETFs. The core US-based ETF has to withhold taxes before distributing dividends to the wrap ETF. The taxes are recoverable in a taxable account - provided Vanguard tax receipts show them correctly. The taxes are lost in an RRSP or TFSA.

VEF and VEE are worse. If held in a taxable account, you can recover US withholding taxes on international dividends, but not international taxes. If held in an RRSP or TFSA, both US and international withholding taxes are lost.

*** If anyone is confused, study the links below. The last one (DFA PDF) has excellent diagrams.

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

http://canadiancouchpotato.com/2012/09/20/foreign-withholding-tax-which-fund-goes-where/

https://www.pwlcapital.com/pwl/medi...n Bender Assets/Foreign_Withholding_Taxes.pdf


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## james4beach (Nov 15, 2012)

I would like to know what policies or caps they will have with respect to *securities lending* (where some of the assets are loaned to an investment bank/hedge fund). I would love to see some clearly defined maximum, say 10%, of the net assets which can be loaned out.

Both iShares and BMO engage in securities lending, which isn't a surprise. But what does concern me as an analyst is how much of the assets are often out on loan. There are many ETFs which have loaned out one-third of their net assets which is A LOT. If the collateral being held (usually recycled into money market funds) becomes illiquid, the shareholders can face losses. This has indeed happened in Europe, so it's not hypothetical at all.

I love ETFs, but the rampant securities lending makes me nervous. If Vanguard is willing to set conservative caps on their lending, they may gain a lot of business. I certainly would choose theirs over competing iShares and BMO


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## slacker (Mar 8, 2010)

I would like to ask more about the ownership structure of Vanguard Canada. I understand that Vanguard (US) is set up as a mutual company, where Vanguard, is owned by the Vanguard funds, which will align the interest of Vanguard with investors of Vanguard funds.

If this structure is not replicated in Canada, how can investors be assured of the same level of governance?


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## CanadianCapitalist (Mar 31, 2009)

Thanks for your input guys. I'll be sure to ask Vanguard these questions and post their response.

I'm going to ask Vanguard about VEF and VEE but I've asked this question of Claymore in the past. The response was cost. It would be interesting to learn if Vanguard plans on holding the assets directly when the assets reach a certain size.


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## larry81 (Nov 22, 2010)

Ask them if they plan to offer some kind of 'support' for investors who hold more than X amount (like they do in the US)

https://personal.vanguard.com/us/whatweoffer/personalservices/flagshipandvoyager?Link=facet


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## andrewf (Mar 1, 2010)

Wow, I didn't know they offered those services. I wonder why they aren't gobbling up the industry even faster.


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## Park (Sep 11, 2010)

To repeat some previous posts,

-I'd like to see foreign stock ETFs that aren't currency hedged
-I'd like to see Vanguard optimize the tax efficiency of foreign stock ETFs
-wrap ETFs, which invest outside the USA, have foreign tax withheld
-at present, Vanguard doesn't provide the information required by the CRA to get credit for that foreign tax
-from what I understand, it would be possible for Vanguard to provide the information required by the CRA to give credit for the foreign tax


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## CanadianCapitalist (Mar 31, 2009)

Here's an edited version of the interview with Vanguard:

Q&A with Vanguard Canada


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## longinvest (Sep 12, 2012)

Great interview! Thanks a lot for getting the info on a possible launch of unhedged versions of VEF and VUS in 2013. That would be awesome.


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## james4beach (Nov 15, 2012)

CanadianCapitalist said:


> Here's an edited version of the interview with Vanguard:


Wow, thanks very much. Their answers on securities lending sound *very* positive to me, and quite different (less risky) than what iShares does. Based on this I'm suddenly much more interested in Vanguard's products


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## CanadianCapitalist (Mar 31, 2009)

james4beach said:


> Wow, thanks very much. Their answers on securities lending sound *very* positive to me, and quite different (less risky) than what iShares does. Based on this I'm suddenly much more interested in Vanguard's products


I agree. I walked away with the impression that Vanguard keeps investor needs first and foremost in pretty much everything it does. Also as someone who had been begging for currency unhedged Canadian ETFs, I was pleased to hear that VFV (S&P 500 ETF) has turned out to be really popular.


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## andrewf (Mar 1, 2010)

Popular in which sense? It still has just 2.5 million in AUM.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> Popular in which sense? It still has just 2.5 million in AUM.


VFV is a new fund that launched just last month. We'll have to wait to see what the actual take up. I'm going by trading volume which is already comparable to VCE.


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## Jungle (Feb 17, 2010)

Any news on the possible un-hedged VEF and VUS?


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## webber22 (Mar 6, 2011)

I couldn't find any MER listed anywhere for Vanguard Canada other than some 2011 figures in the prospectus.
Given some funds have been around for over a year, why isn't the MER disclosed ? The management fee does not include commissions, portfolio transaction costs, HST, etc
I bet the reason is since most have very low assets, the mer's are high. 

Example:
VEE FTSE Emerging Markets Index ETF
*Management fee .49%*
*MER 1.43% (2011)*

VCE - MSCI Canada Index ETF
*Management fee .09%
MER .69% (2011)*


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## GoldStone (Mar 6, 2011)

webber22 said:


> I bet the reason is since most have very low assets, the mer's are high.


You don't need to bet.  They disclose the reasons in prospectus. Footnote from Page 30:



> Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) *for the period of November 30, 2011 to December 31, 2011* and is expressed as an annualized percentage of the daily average NAV during this period. The reported management expense ratio for this period includes expenses incurred in relation to the implementation of the Existing Vanguard ETF’s IRC during the two months prior to the Existing Vanguard ETF’s launch. These “accrued” costs were then applied to the Existing Vanguard ETF’s relatively modest level of average net assets during their one month of operation in 2011. The result is an abnormally high management expense ratio. In the future, as the IRC accrual period matches the Vanguard ETF’s operational period and as assets in each Vanguard ETF increase, the Manager expects the management expense ratio to decline.


https://www.vanguardcanada.ca/documents/literature/CanadaProspEN.pdf

Commissions and other portfolio transaction costs are never included in MER. They are part of TER - Total Expense Ratio.


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