Broad Canadian equity exposure at a low cost

This ETF well represents the Canadian equity market but investors should be aware of its risks.

Anum Siddiqui 8 November, 2016 | 6:00PM

 Vanguard FTSE Canada All Cap Index ETF (VCN) offers broad, market-cap-weighted exposure to Canadian equities at a razor-thin management expense ratio of 0.06%. The fund accurately represents the Canadian equity market and offers a sizable cost advantage against its peers, which makes it a compelling option within the Canadian equity universe and warrants a Morningstar Analyst Rating of Gold.

The fund's market-cap-weighting approach leads to the majority of its holdings landing in the giant- and large-cap bucket. However, this well-diversified portfolio of more than 200 stocks does have an allocation to both mid- and small-cap companies. The FTSE Canada All Cap Canada Index offers broader exposure of the Canadian stock market and better diversifies risk than the FTSE Canada Index, which is more concentrated and has a greater large-cap bias.

The fund has a relatively short track record. While it has tracked its index well thus far, the fund has underperformed the category average by 23 basis points annualized from its inception in September 2013 through September 2016. This underperformance is partially due to the exchange-traded fund's stock exposure within the energy sector as well as its higher exposure to both the energy and materials sectors.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bank of Nova Scotia54.29 CAD-6.51
Canadian Natural Resources Ltd13.32 CAD-9.08
Enbridge Inc38.87 CAD-7.32
Royal Bank of Canada82.54 CAD-4.48
Suncor Energy Inc16.43 CAD-8.57
TC Energy Corp58.21 CAD-4.59
The Toronto-Dominion Bank56.77 CAD-5.78

About Author

Anum Siddiqui

Anum Siddiqui  Anum Siddiqui is an analyst on Morningstar Canada’s manager research team.