Barclays Global Investors Canada Ltd. is again expanding the ranks of exchange-traded funds, maybe trying to cash in on anyone looking for a last-minute Christmas stocking stuffer for the investor in the family.
The firm has put together four new iUnits index funds -- bringing its Canadian ETF contingent to 16 --that are set to start trading today on the Toronto Stock Exchange. They are designed, respectively, to replicate as much as possible the S&P/TSX capped materials index, the S&P/TSX capped income trust index, the Dow Jones Canada select dividend index and the Scotia Capital real-return bond index.
Exchange-traded funds have been growing in popularity, not least because they are cheaper to own, generally featuring management expense ratios (MERs) that are much lower than those of actively managed funds.
The new Barclays Global funds were "ceded" to designated brokers at $20 a unit except for the income trust fund, which went at $15, spokeswoman Geri James said.
The iUnits materials sector index fund, which will trade under the symbol XMA, is being sold with an MER of 0.55 per cent. It will track an index that has generated a return of 11.2 per cent over the past year, led by FNX Mining Co. Inc. at nearly 149 per cent. Including FNX, the fund includes shares of nearly 60 companies in such fields as precious and base metals mining, diamonds, steel and forestry. Its largest holdings include Alcan Inc., with a 10-per-cent weighting, Falconbridge Ltd. (7.3 per cent) and Placer Dome Inc. (6.6 per cent).
Base and precious metals have undergone a massive boom, along with many other commodities over the past three to five years, much of which is stimulated by voracious demand from China. But this fund could be at risk if the classic commodities bust follows this boom.
The iUnits income trust sector index fund (XTR) also features an MER of 0.55 per cent and is based on an index that has produced a 22.4-per-cent return in the past year, with Canadian Oil Sands Trust heading the pack at 92.2 per cent. Canadian Oil Sands also heads the new fund, with a weighting of 9.5 per cent, followed by Enerplus Resources Fund at 5.5 per cent and Fording Canadian Coal trust at 5.2 per cent.
The trust sector avoided a bullet this fall when the federal government backed away from ending the tax advantages trusts enjoy over the corporate structure. However, there is a growing school of thought that if the Liberals are re-elected, they may reconsider this decision.
The iUnits dividend fund (XDV), meanwhile, has an MER of 0.50 per cent. It will track an index that, Ms. James said, generated a return of 26.5 per cent in the year ended Nov. 30 and is made up of 30 Canadian large-capitalization, high-yielding stocks that have consistently paid dividends. Canadian Imperial Bank of Commerce carries the heaviest weighting, at 7.3 per cent, followed by Royal Bank of Canada and Manitoba Telecom Services Inc., both at 6.8 per cent.
At 0.35 per cent, the iUnits real-return bond index fund (XRB) has the lowest MER of the new funds. It is mostly made up of Government of Canada bonds, and has been designed to track an index that, according to Ms. James, rose 14.7 per cent in the year ended Nov. 30.
Real-return bonds, she said, pay a regular coupon, plus an additional amount to cover inflation, based on changes in the consumer price index. The advantages for individual investors of buying bonds through the index fund rather than directly, Ms. James said, include the fact that "in one trade, you can buy a portfolio of bonds."
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.