An employee of Vanguard Group Inc. answers calls from investors at the company's headquarters in Malvern, Penn., Feb. 26, 2008.BRADLEY C BOWER
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.
Vanguard, founded by index-investing champion John Bogle and known for its rock-bottom fees, is the latest player to jump into the Canadian ETF market that is dominated by the iShares Canada division of U.S.-based Blackrock Inc.
Royal Bank of Canada, which owns Canada's largest mutual fund player, recently filed a preliminary prospectus to roll out eight target-date maturity corporate bond ETFs.
"Vanguard sees a tremendous amount of interest in ETFs from financial advisers and portfolio managers who are employing broad-based ETFs to build sound, balanced portfolios for their clients," Atul Tiwari, managing director of Vanguard Investments Canada Inc., said Tuesday.
"The underlying story, however, is the increasing popularity of the low-cost index approach, which is winning converts among investors who traditionally favoured individual stocks and actively managed mutual funds," said Mr. Tiwari, a former Bank of Montreal executive who played a key role in that bank's foray into ETFs in June, 2009.
"Investors are increasingly recognizing the negative impact of high fees on long-term returns."
Vanguard, which also sells index and actively managed mutual funds in the United States, has more than $168-billion in ETF assets under management in several countries, including Mexico and Australia. It manages nearly $1.8-trillion in total assets.
Earlier this summer, Dan Hallett, a fund analyst with HighView Financial Group, said he expected that the entry of Vanguard into the Canadian market would spark a "price war," and would be a challenge for some existing players because Vanguard has a strong brand name.
One sign of Vanguard's price advantage is the fact that Claymore Investment Inc.'s Claymore Broad Emerging Markets ETF, which is sold in Canada, invests in the U.S.-listed Vanguard emerging markets ETF, because it costs less than buying the securities in the index.