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Investors Are Migrating To This Canadian ETF

ETF Professor

For more than two decades, the iShares MSCI Canada ETF (NYSE: EWC) was the primary game in town for U.S. investors looking to access Canadian stocks via the exchange traded funds wrapper. From its debut in March 1996 until the third quarter of 2018, EWC essentially had the U.S. market for Canada ETFs to itself.

What Happened

EWC gained significant competition in August 2018 in the form of the JPMorgan BetaBuilders Canada ETF (CBOE: BBCA). BBCA posed an immediate threat to EWC's market share because the former charges 0.19 percent per year, or $19 on a $10,000 investment, while the iShares fund carries an annual expense ratio of 0.47 percent.

The two Canada ETFs are not mirror images of each other. EWC tracks the MSCI Canada Custom Capped Index and holds 91 stocks while BBCA, the JPMorgan product, follows the Morningstar Canada Target Market Exposure Index and has 100 holdings.

Why It's Important

This year, the differences between the two Canada ETFs are on full display. EWC entered Monday with a year-to-date gain of 18.78 percent. While impressive, that trails the 19.36 percent returned by BBCA this year.

Investors are taking notice. As of April 25, investors had added $1.3 billion to BBCA since the start of the second quarter, good for the seventh-best total among all ETFs trading in the U.S. To put BBCA's second-quarter inflows into context, the addition of $1.3 billion to that fund is almost half the $2.62 billion in assets under management at the rival EWC.

The BBCA-EWC rivalry is further proof that when it comes to ETFs with similar exposures and investment objectives, fees are often the deciding factor for advisors and investors. Year-to-date, BBCA has added $1.36 billion in new assets while investors have yanked $130.66 million from the pricier EWC.

What's Next

BBCA now has $3.73 billion in assets under management, easily making it the largest Canada ETF trading in New York, a status attained by that fund in less than a year on the market.

Nearly 90 percent of BBCA's holdings also reside in EWC and the overlap by weight between the two Canada ETFs is 94 percent.

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