What we're looking at
Exchange-traded funds are the frugal investor's best friend because they're cheap to own, but there's still a wide variation in fees among ETFs. Here, we look at the highest-cost ETFs and how they have performed over the past year.
We present a list of the costliest to own ETFs listed on the Toronto Stock Exchange, as measured by management expense ratio. To put the fees of these funds in perspective, we have provided MER and return data for comparable mutual funds. Note, leveraged and inverse ETFs have been excluded here. More on them Friday.
What we found
With some modestly judicious fund picking, you could build a portfolio of ETFs with an overall MER of less than 0.5 of a percentage point or so. All of the ETFs on this list are well above that level. Does mean investors should avoid them?
One-year returns are by no means a reliable gauge of performance, but here they suggest that high-cost ETFs can deliver. In fact, many of the funds on our list rank in the first or second quartile over the past year. Quartiles divide funds in a category into four groups by performance - one is best and fourth is worst.
Comparatively high ETF fees are unavoidable if you're looking at niches like commodities or emerging markets, or if you want actively managed ETFs. Several of the Horizons ETFs on this list dispense with the traditional index-tracking function of ETFs and instead employ a manager who selects securities.
Just remember that low fees are by far the biggest benefit of investing in ETFs. Diluting this advantage with high-cost ETFs shouldn't be done lightly.
|Fund||Ticker||MER (%)||1 year annual return to Feb. 29 (%)||1-year return quartile||Category||Median MER for comparable mutual funds (%)||1 year avg. return for comparable mutual funds (%)|
|Horizons Income Plus ETF||HAP-T||1.51||1.5||2||Alternative Strategies||2.39||-4.9|
|Horizons Gartman ETF||HAG-T||1.31||-16.7||4||Alternative Strategies||2.39||-4.9|
|Horizons S&P/TSX 60 130/30 ETF||HAH-T||1.08||-5.5||3||Alternative Strategies||2.39||-4.9|
|Horizons Seasonal Rotation ETF||HAC-T||1.04||7.3||1||Alternative Strategies||2.39||-4.9|
|iShares Cdn. Financial Monthly Income ETF||FIE-T||1.00||-3.4||3||Cdn. Equity Balanced||2.34||-2.3|
|Horizons Balanced ETF||HAA-T||1.00||-2.1||2||Cdn. Equity Balanced||2.34||-2.3|
|Horizons North American Growth ETF||HAW-T||1.00||7.2||1||U.S. Equity||2.46||2.5|
|Horizons Global Dividend ETF||HAZ-T||1.00||7.0||1||Global Equity||2.59||-2.3|
|Horizons Dividend ETF||HAL-T||1.00||0.4||2||Cdn. Div'd/Income Eqty||2.17||-1.1|
|Horizons North American Value ETF||HAV-T||1.00||5.5||2||U.S. Equity||2.46||2.5|
|iShares S&P CNX Nifty India Index Fund||XID-T||0.99||-7.1||n/a||Misc. - Geog. Equity||2.63||-7.1|
|Horiz. Betapro S&P 500 VIX Short Term Futures||HUV-T||0.97||-13.1||n/a||Miscellaneous - Other||0.90||-9.0|
|iShares Managed Futures ETF||CMF-T||0.95||Alternative Strategies||2.39||-4.9|
|iShares Broad Commodity ETF||CBR-T||0.93||-4.0||n/a||Misc. - Commodity||0.84||1.1|
|iShares Natural Gas Commodity ETF||GAS-T||0.90||-52.0||n/a||Misc. - Commodity||0.84||1.1|
|Horizons Gold Yield Fund||HGY-T||0.90||12.4||n/a||Misc. - Commodity||0.84||1.1|
|Horizons Enhanced Income Gold Prod. ETF||HEP-T||0.87||Alternative Strategies||2.39||-4.9|
|iShares China Index Fund||XCH-T||0.85||-2.8||1||Greater China Equity||2.69||-6.3|
|Horizons Enhanced Income Energy ETF||HEE-T||0.84||Alternative Strategies||2.39||-4.9|
|Horizons Enhanced Income Int'l Equity||HEJ-T||0.84||Alternative Strategies||2.39||-4.9|
|Horizons COMEX Copper ETF||HUK-T||0.84||-17.2||n/a||Misc. - Commodity||0.84||1.1|
|iShares Balanced Growth CorePortfolio ETF||CBN-T||0.84||-1.6||1||Global Equity Balanced||2.48||-1.7|
|iShares Global Mthly Advantaged Dividend ETF||CYH-T||0.83||0.1||1||Global Equity||2.59||-2.3|
|Horizons Enhanced Income US Equity USD ETF||HEA.U-T||0.83||Alternative Strategies||2.39||-4.9|
|iShares MSCI Emerg. Markets Index Fund/Cda||XEM-T||0.82||-0.7||2||Emerg. Markets Equity||2.76||-2.5|
|Source: National Bank Financial, Bloomberg, Morningstar|
© 2007 The Globe and Mail. All rights reserved.
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