Vanguard Begins Canadian Trading

Terry Flanagan

Buy-side giant Vanguard takes first products to trade on the Toronto Stock Exchange.

Valley Forge, Pennsylvania-based Vanguard began looking north to expand its asset management business. In June 2011, Vanguard Investments Canada was established, with an initial focus in to offer low-cost, exchange traded funds (ETFs) to Canadian investors via investment advisors.

The firm’s Canadian platform will be grounded in Toronto, and led by Atul Tiwari. The initial six new Vanguard ETFs have closed the initial offering of their units and will begin trading on Toronto Stock Exchange (TSX), December 6.

The Vanguard MSCI Canada Index ETF will track the MSCI Canada Index; the Vanguard MSCI U.S. Broad Market Index ETF (CAD-hedged will track the MSCI US Broad Market 100% Hedged to CAD Index; the Vanguard MSCI EAFE Index ETF (CAD-hedged) will track MSCI EAFE 100% Hedged to CAD Index; the Vanguard MSCI Emerging Markets Index ETF will track the MSCI Emerging Markets Index; the Vanguard Canadian Aggregate Bond Index ETF will track the Barclays Capital Global Aggregate Canadian Float Adjusted Bond Index, and finally, the Vanguard Canadian Short-Term Bond Index will track the Barclays Capital Global Aggregate Canadian Government/Credit 1-5 Year Float Adjusted Bond Index.

A common criticism for Canadian investing is its stronghold on only three major industries, i.e. energy, materials and financial services. Thus, such a lack of diversification may pose concern for ETF investors that are tracking benchmarks.

“The Canadian market is what it is; over 80% is concentrated in energy, materials, and financial services, so one of the things we did was that we chose the MSCI Canada Index as a benchmark for our Vanguard MSCI Canada Index ETF,” Tiwari told Markets Media. “There’s more diversification in terms of sectors represented, and thus, less volatility for our investors.”

While its representation is largely Canadian, the MSCI Canada Index has roughly a 2% representation from other regions with companies that focus largely on Canada, according to MSCI.

Vanguard manages $1.64 trillion CAD in global assets, and is coined as “the first retail index mutual fund three decades ago.”

“Our ETFs will provide investors with low-cost options amid a sea of high-cost investments, and, along with their straightforward and easy-to-understand approach, represent an unmatchable value,” Tiwari said.

At this time, Vanguard does not have any plans to launch any active product suites to the Canadian market, but will focus efforts on broadening its ETF product suite.

Though, Tiwari told Markets Media, “I can’t say that for the long-term that there will or won’t be another product.”

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