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Dale Jackson

Personal Finance Columnist, Payback Time


The world of exchange-traded funds just got a little brighter for retail investors. Starting this September, ETF providers are required to provide more information on their funds.

The initiative is part of an effort by the Canadians Securities Administrators (CSA) to open the books on the increasingly popular investment products. As of this summer, the amount of money in ETFs listed on the Toronto Stock Exchange topped $130 billion. Most of that is institutional money but it’s not hard to see their appeal for average investors.

Conventional ETFs track indices, such as the S&P 500. Holdings in the fund mimic holdings in the index right down to their weightings. When the value of the holdings change, the ETF changes.

One of the greatest attributes of ETFs is their transparency – actually, the transparency of the underlying index. In most cases, you can watch the value of the index and holdings change in real time. To determine performance, simply subtract the annual fee – normally well under half of a per cent.

Now, the ETF provider must provide those details in a two-page fact sheet on their websites, and update them regularly. They must also list how risky they are on a scale from low to high based on past performance.

Most important, the ETFs must list all fees such as the management expense ratio (MER) and any commissions.

The ETF disclosure initiative is part of an ongoing effort. By late next year, ETF dealers will be required to deliver an ETF Facts document to investors within two days of the purchase.