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Vanguard files final prospectus for high quality, low-cost ETFs

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Vanguard Investments Canada has filed a final prospectus for its first suite of Canadian-domiciled exchange-traded funds (Vanguard ETFs) with the securities regulatory authorities. Vanguard expects to list six ETFs on the Toronto Stock Exchange (TSX) subject to meeting all regulatory and TSX requirements.

The range of Vanguard ETFs will feature a low average management fee of 0.24%. The ETF industry average Management Expense Ratio (MER) is nearly four times higher, at 0.88%. It is important to note that management fees are one component of MERs, which also include certain other operating expenses (but do not include brokerage commissions and other trading expenses). Although the official MERs for the Vanguard ETFs will not be calculated until after their first year-end, Vanguard expects the MERs of its ETFs to be substantially similar to their management fees, as the Vanguard ETFs should incur only nominal other costs that would be included in the MER calculation.

The expected cost differential between the Vanguard ETF range and other investment options is even more dramatic when compared with the average Canadian mutual fund MER of 2.04%. This means that the average mutual fund manager must consistently outperform the fund’s benchmark by more than 2% simply to match the market’s returns.

"Research by Vanguard, Morningstar and others has shown time and again that costs are the key determinate of mutual fund or ETF performance. By controlling costs, investors are on better footing towards reaching their long-term investment goals because they keep more of their returns," says Atul Tiwari (pictured), Managing Director of Vanguard Investments Canada Inc.

The six new ETFs are: Vanguard MSCI Canada Index ETF; Vanguard MSCI U.S. Broad Market Index ETF; Vanguard MSCI EAFE Index ETF (CAD-hedged); Vanguard MSCI Emerging Markets Index ETF; Vanguard Canadian Aggregate Bond Index ETF; and Vanguard Canadian Short-Term Bond Index ETF

 

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