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Cdn Listed ETFs vs US Listed ETFs

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  • Mar 12th, 2019 7:42 am
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[OP]
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Feb 1, 2006
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Cdn Listed ETFs vs US Listed ETFs

I was considering switching my US listed ETFs to Cdn listed ones but now I'm having doubts. The US listed ones are much larger, with more liquidity and lower fees. They are also excellent at tracking their respective benchmarks. I have some question marks about Cdn listed ones. Exchanging between USD and CAD is not an issue for me as I can do so at virtually spot prices with Interactive Brokers.

I noticed two suspicious things when looking at Cdn listed S&P 500 ETFs:

1. I don't understand why they all seem to use different benchmark returns when they should be tracking the same benchmark

2. I don't understand why their returns deviate so much from each other when US listed ETFs do not

First, here are the published benchmark returns for three Cdn listed S&P 500 ETFs and three US listed S&P 500 ETFs:

% 2014 2015 2016 2017 2018

VFV 23.76 20.22 8.46 13.61 3.35
Benchmark (BM) 23.58 19.99 7.93 13.38 3.24

XUS 23.41 21.02 7.88 13.35 3.75
Benchmark (BM) 23.18 20.83 7.38 13.15 3.62

ZSP 23.75 20.21 8.19 13.57 3.41
Benchmark (BM) 23.93 21.59 8.09 13.83 4.23

VOO 13.63 1.35 11.93 21.78 -4.42
Benchmark (BM) 13.69 1.38 11.96 21.83 -4.38

IVV 13.62 1.34 11.90 21.79 -4.42
Benchmark (BM) 13.69 1.38 11.96 21.83 -4.38

SPY 13.53 1.34 11.80 21.69 -4.45
Benchmark (BM) 13.69 1.38 11.96 21.83 -4.38

I'm baffled by the reported performance and benchmark returns of these Cdn listed S&P 500 ETFs compared to their US listed counterparts.

First, why do all three Cdn listed ETFs have slightly different benchmark returns? Isn't a benchmark return supposed to be the same across ETF providers when using the same benchmark? It's clear that all three use
exactly the same benchmark, the S&P 500 Index (CAD). The three US listed ETFs use the same benchmark, the S&P 500 Index (USD) and report exactly the same benchmark returns.

Second, while the US listed ETFs report very similar returns to the benchmark and to each other, the Cdn listed ETFs can vary by a wide margin. Specifically, the US listed ETFs are usually within a few basis points (0.01%) of each other and the index. The Cdn listed ones can have tracking error of up to 138 basis points and variance of up to 101 basis points in calendar year return between them.

These puzzling differences do not leave me with a lot of confidence in the Cdn listed ETFs. It seems that US listed ETFs are lower cost, better at tracking their benchmarks and more transparent about which benchmark they are using. Am I missing something here?

All of these ETF and BM figures were taken from each respective ETF provider's website. I did not do any calculations myself.
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4 replies
Sr. Member
Feb 26, 2017
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The effect of CDN dollar vs US currency is causing the returns to be different.

I wouldn't change your US index funds to Canadian due to how you are going to be paying commissions to make the switch. If its in your RRSP there is a bit of a benefit to owning US ETFs as the withholding tax not being taken off (the withholding tax is 15% on the dividend).
[OP]
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Feb 1, 2006
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Chance7652 wrote:
Mar 8th, 2019 12:01 pm
The effect of CDN dollar vs US currency is causing the returns to be different.

I wouldn't change your US index funds to Canadian due to how you are going to be paying commissions to make the switch. If its in your RRSP there is a bit of a benefit to owning US ETFs as the withholding tax not being taken off (the withholding tax is 15% on the dividend).
I understand that CAD/USD exchange rate will cause the returns to differ. But I don't understand:

1. Cdn listed using different benchmark returns when they are all benchmarking to S&P 500

2. So much variance between Cdn listed ETFs as opposed to the tight pattern of US listed ETF performance
Cards:HSBC WE MC 1.5%/3% travel 0 FX MC acceptance 31 day med AF $49
CTC WE MC 3% grocery 4% CTC 5 c/L CTC/Husky free roadside 1% on bill pay
Bank: Alterna (2%+, no fees)
Brokers: IB (For. stocks/low comm)/Reg. RBCDI(service, USD)
Member
Oct 21, 2016
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I think you need to learn about the effect of currency on ETF returns
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Aug 1, 2007
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For your point on the benchmark returns, they all use the S&P 500 with the same currency effects so they should all report identical benchmark returns. There could be a timing mismatch or data issue... Not sure without seeing the source.

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