Tips for Canadians investing in U.S. ETFs

Article Excerpt

The U.S. is the world’s largest ETF market, with a wide range of funds—from those focused on domestic or global equities to those focused on bonds, commodities and even hedge fund strategies. Canadians investing in U.S.-listed ETFs must keep several factors in mind: • In the case of U.S.-listed ETFs that hold international assets, the foreign currency exposure of those holdings may be hedged back to the U.S. dollar or left unhedged. • In most cases, Canadian investors carry currency risk from the movement of the Canadian dollar against the U.S. dollar. That may work for or against them, depending on whether the U.S. dollar moves up or down. Many of the popular U.S.-listed ETFs holding international assets are also listed in Canada. That means investors must check if a fund’s currency exposure is hedged back to the Canadian dollar. That may influence investment returns. Note, though, that we see U.S. dollar exposure as a long-term plus for Canadian investors—a valuable form of diversification. Gains…

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