Canadian Bank ETFs- Stronger Than There Neighbors?

If one is looking for a financial system that is thriving and did not have any exposure to Wall Street’s mess, look no further than to our neighbors to the north. For the most part, Canadian banks avoided the whole financial mess and thus has resulted in Canada not having an economic recession like ours. For one, they have done very little to stimulate their economy. That means no bailouts and no continuous printing of money that devalues their currency. But, unfortunately for many U.S. investors, getting exposure to the major Canadian banks is a bit tough as most trade on the Toronto Stock Exchange.

If you have, or can obtain access to the Toronto Stock Exchange (check with your broker) there is one Canadian Bank ETF you should be particularly interested in. The iShares CDN Financial Sector Index Fund (XFN.TO) seeks to provide long-term capital growth by generally replicating the performance of the S&P/TSX Capped Financials Index through investments in the constituent issuers of such index. The Index is comprised of securities of Canadian financial sector issuers listed on the TSX, selected by S&P using its industrial classifications and guidelines for evaluating capitalization, liquidity and fundamentals. A key note about the Canadian Bank ETF is Canada’s three major banks (Royal Bank of Canada, TD Bank and Bank of Novo Scotia)  comprise 50% of the ETF. If you include the Bank of Montreal, the 4 banks comprise 60% of the ETF. Also, iShares CDN Financial Sector Index Fund gives you exposure the Canadian insurers such as Manulife Financial Corp. (MFC) , Sun Life Financial (SLF), and Power Corp of Canada (POW).

The other Canadian Bank ETF to pay attention to, and it also trades only on the Toronto Stock Exchange, is the Claymore Canadian Financial Monthly Income ETF (FIE.TO) which according to Claymore’s page is investment objectives are to maximize total return to its Unitholders, consisting of distributions and capital appreciation, and to provide its Unitholders with a stable stream of monthly cash distribution of $0.04 per Unit. FIE’s net assets, together with borrowings under its loan facility, are invested in a diversified and actively managed investment portfolio consisting primarily of common shares, preferred shares, corporate bonds and income trust units of issuers in the Canadian financial sector. This Canadian Bank ETF gives you less exposure to the major Canadian banks (37%) but that is offset by the increased exposure to the insurers.

Finally, Canadian ETF Funds are interesting considering some of the different product offerings they have that might not be available in the U.S. contact your broker if they can give you exposure or plan to have exposure in the near future.

Related posts:

1. Canadian ETF Funds- Better Investment Up North?
2. The Benefits OF Investing In Bank ETF’s