ETF TrendTracker Review

Unfortunately, it’s not all that obvious when new ETFs appear. Papers like the Globe and Mail have dropped their full listings (I had hoped they would continue in the Saturday edition at least); and unlike shares like income trusts that have a fixed suffix (”.UN” in that case), ETFs don’t. That means you need to find a financial web site with a special ETF section (like Yahoo! Finance or GlobeInvestor), or stumble on a press release or newspaper article that covers new ones. We’ll do our best to do that for you, but don’t be surprised if we don’t catch them all right away.

There were three new ETFs from Barclays Global Investors Canada that began trading on the TSX last week (Friday I believe).

Two address the SmallCap market… something I’ve frequently said is long overdue. There’s an iShares CDN SmallCap Index Fund (symbol: XCS), which attempts to emulate the S&P/TSX SmallCap Index, and an iShares CDN Russell 2000 Index Fund (symbol: XSU), intended to mimic the performance of the most popular US smallcap index, the Russell 2000. The latter is claimed to be hedged to the Canadian dollar. The MER for the Russell ETF is 0.35%, whereas the MER for the XCS is 0.55%. Both were initially priced at $20 and started with a net asset value of $30M each.

The third new ETF is the iShares CDN Jantzi Social Index Fund (symbol: XEN). The fund picks stocks to mimic the Jantzi Social Index, which applies a number of environmental, social and governance ratings in the selection of its constituents (60 companies in total). The MER is 0.50%, and it also starts with a net asset value of $30M and a unit value of $20.

I personally have two problems with “ethical investing”… (1) To the best of my knowledge there is no “ethical” mutual fund or ETF (or similar vehicle) that has ever outperformed a similar mix of stocks without that extra restriction; and (2) There are no absolutes when it comes to what’s ethical and what’s not, so I prefer to apply my own judgement, rather than have some fund manager do it for me.

Here’s a simple example. Jantzi Research, the creators of the index, exclude any company involved in nuclear power, while considering fossil fuel companies ethical. Although I personally own stocks on both sides of that fence, I’d rather see less CO2 destroying the ozone layer and inviting global warming, and more nuclear power plants which do nothing to damage the atmosphere. But that’s just my call. You’ll have to decide for yourself.

The good news is that with our relative trend analysis™ (RTA) approach, we’ll eventually be able to report on how this new ETF is performing relative to its counterparts. I’ll put together an update in 10-12 weeks, when the data are in.

We’ll leave it at that for this update. As usual you’ll be able to see how the more established Canadian ETFs are doing in the DATA & CHARTS workbook, along with how Canada is doing relative to other countries when tracked via country ETFs.

We hope to officially launch a Premium Service for “power ETF investors” soon. It will eventually contain all ETFs that we can possibly invest in. We’ve got about 350 in the database now, but more are announced almost every week, especially in the US. Once again, we’ll have to wait for the price history in many cases before computing reliable trend and consistency values.

Subscribers to the TSX TrendWatch Premium Service have been getting the full ETF database as a surprise bonus for a few weeks now, and have been providing some excellent feedback. Thanks!