Posts Tagged "index funds"

Almost $250 Billion Invested in Closet Index Funds in Canada

Posted by Preet on May 24, 2010 | 5 comments

Who would’ve thought that almost 40% of mutual fund assets in Canada were indexed? Definitely not the people selling them since these are all supposedly actively managed funds. (The Investment Funds Institute of Canada reports that as of April 2010, mutual fund assets in Canada are $620.4 billion.) What Is A Closet Index Fund? A closet index fund is a term given to an actively managed fund that looks so similar to the benchmark you’re left wondering why you are paying the higher costs of active management for it. If the fund’s holding looks really similar to the benchmark index, this is a closet index fund. One way of trying to sort through the...

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Index Fund Tracking Error Sources

Posted by Preet on Mar 24, 2010 | 2 comments

NOTE: I’m scrambling to write this before I get on a plane and my laptop battery is near death, so pardon any typos for the time being – I’ll edit it tomorrow, and may even re-write it! It’s good to be my own editor…. :) Not all index funds are created equal. Some actually track their indices pretty well, and some do a poor job. Most people think that tracking an index would be a relatively simple thing but you know what they say, “in theory, theory and practice are the same but in practice they are not.” Some sources of index fund tracking errors: 1. Resampling (Or Optimization) If an index has 500 constituents, then it is...

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Tax Efficiency of Vanguard ETFs Follow Up

Posted by Preet on Sep 21, 2009 | 2 comments

Last week I had mentioned that Vanguard ETFs had slightly different tax considerations than most other ETFs due to their unique structure (they are actually a separate share class of Vanguard index mutual funds.) Larry MacDonald from Canadian Business Magazine has added some more information to the mix in his most recent blog post. He even provides a short side by side comparison of the capital gains distributions of a traditional ETF and the Vanguard commensurate ETF. The differences are quite large in some cases/years. There were also some follow up questions on my original blog post, the answers to which may be of interest to other readers so I’m including it...

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