Introduction
The Vanguard FTSE Developed All Cap ex North America Index ETF (ticker: VIU.TO) is a popular choice for investors seeking broad exposure to developed markets outside of North America. This ETF, offered by Vanguard Canada, is designed for investors looking to diversify their portfolios internationally. Let’s delve into what makes VIU.TO a noteworthy option.
ETF Overview
VIU.TO aims to track the performance of the FTSE Developed All Cap ex North America Index. It provides exposure to large-, mid-, and small-cap companies in developed markets, excluding the United States and Canada.
Investment Strategy
VIU.TO employs a passive management strategy, aiming to replicate the performance of its benchmark index. This includes investments across Europe, Asia, and Australia, providing a diversified international exposure. The strategy is suitable for investors looking to complement their North American holdings.
Performance Analysis
The performance of VIU.TO, compared to similar ETFs like XEC.TO, ZEA.TO, and VEE.TO, shows a strong and consistent pattern:
- VIU.TO has shown a respectable performance with a YTD return of 13.54%, a 3-year average return of 4.42%, and a 5-year average return of 6.85%. This indicates steady growth and resilience over varying market conditions.
Fees and Costs
With a Management Expense Ratio of 0.23%, VIU.TO is competitively priced compared to similar ETFs. It’s important to consider these fees, as they can impact long-term returns. There are no significant transaction costs outside of the usual brokerage fees.
| Actual Management Fee | 0.20% |
|---|---|
| Actual Mgmt. Expense Ratio (MER) | 0.23% |
Holdings and Sector Allocation
VIU.TO’s top holdings typically include major companies in sectors like financials, healthcare, and technology. The ETF’s broad sector allocation aligns with its strategy to provide diversified exposure across various industries in developed markets.
| Country | Fund |
|---|---|
| Japan | 23.9% |
| United Kingdom | 14.6% |
| France | 9.8% |
| Switzerland | 8.5% |
| Germany | 7.4% |
| Australia | 7.3% |
| Holding Name | % of Market Value | Sector |
|---|---|---|
| Novo Nordisk A/S | 1.72% | Pharmaceuticals |
| Nestle SA | 1.65% | Food Products |
| ASML Holding NV | 1.35% | Production Technology Equipment |
| Samsung Electronics Co. Ltd. | 1.35% | Telecommunications Equipment |
| Shell plc | 1.24% | Integrated Oil and Gas |
Tax Considerations
For Canadian investors, foreign dividend income from VIU.TO is subject to withholding tax. However, this can be partially offset in taxable accounts. It’s advisable to consult with a tax professional for personalized advice.
Liquidity and Trading
VIU.TO is characterized by a high trading volume and a narrow bid-ask spread, making it easily tradable. This liquidity is a plus for investors looking for flexibility and ease in managing their investments.
Pros and Cons
Pros:
- Diversification across developed international markets
- Low fees compared to actively managed international funds
- Strong liquidity
Cons:
- Exposure to currency risk and geopolitical uncertainties
- Potentially lower growth compared to emerging markets
Who Should Consider This ETF?
VIU.TO is ideal for long-term investors seeking international diversification in developed markets. It can complement a portfolio heavily weighted in North American stocks, offering a balance and potentially reducing overall portfolio risk.
Conclusion
Vanguard’s VIU.TO offers a cost-effective and diversified way to invest in international developed markets. While it comes with its set of risks, its advantages make it an attractive option for suitable investors. As always, it’s crucial to align any investment with your overall portfolio strategy and risk tolerance.
Additional Resources
FTSE Developed All Cap ex North America Index ETF (VIU) | Vanguard Canada