Detective Work Uncovers Excess Fund Fees in Canada

Today I came across another example of the ridiculous excess of fees charged to Canadian investors by fund companies, this time by Barclays Global Investors and its ETF arm, iShares Canada.

If you look up iShares Canada in the Morningstar.ca website, you will find therein a mutual fund called iShares CDN S&P 500 Index C$, which tracks the S&P 500 US stock index and is hedged in Canadian dollars. It's code is BGII500R. This is the self-same thing as the Exchange Traded Fund (ETF) called iShares CDN S&P 500 Index under the ticker XSP trading on the TSX. You will note in Morningstar that the Objective text for BGII500R says "XSP is ..." and the MER is only 0.15%. Morningstar also says that BGII500R is offered by Barclays Global Investors Canada. Funny, I thought, I've never heard of a mutual fund version by Barclays, maybe they are getting smart and beginning to offer ETF and mutual fund versions of the same thing as Vanguard has started to do in the US. It looked even better when I remembered that the MER for XSP is 0.24%.

Just to be sure I tried calling iShares Canada to confirm BGII500R's existence but the rep there said he didn't know anything about it since it isn't an ETF and they don't deal with mutual funds, then he gave me a number for BGI USA that turned out to be a wrong number (great customer service iShares!). I tried looking up BGII500R on my BMO Investorline mutual fund lookup and sure enough it is there. There's got to be a catch I thought, this "looks too good to be true". We've all heard the warnings about that expression, right? Well, so it is. Here is the explanation I got from BMO Investorline (kudos to the rep who took the trouble to make an enquiry). BGII500R is indeed available but it is only offered to US investors! (Just for fun, I tried to put in an order on the BMOIL system but it told me the mutual fund code BGII500R is invalid). That's right, a US stock index hedged in Canadian dollars sold only to US folks. Is that 'cause they're planning to retire here? Do they know something we don't about the US$?

And why should we Canadians pay more MER for the identical thing? And it's our hedged dollar too!