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Buy this…or that? CRQ vs XCV

September 16, 2011 - 0 comments

                                                              on the TSX                 

  Claymore Canadian Fundamental iShares Dow Jones Canada
  Index ETF (CRQ)  
Underlying Index: 


Dow Jones Canada Select Value

Index Weighting Methodology: • Company sales averaged over the • Projected Price-to-Earnings Ratio 
  • Company cash flow averaged over • Projected Earnings Growth 
  • Company cash flow averaged over the prior five years   • Price-to-Book Ratio
  • Company book value at the review date   • Dividend Yield  
  • Total dividend distributions averaged over the last five years  • Trailing P/E
    • Trailing Earnings Growth  

Number of Holdings:   82  70 

Average 3-Yr. Portfolio Turnover Rate (%):  21.36%   40.41%  
Top 10 Holdings Concentration (%):  42.31%  58.54% 

Sector Allocation (%):

Market Cap Allocation (%):

Assets under Management:  $219,480,308  $50,264,432 
MER (%)   0.71%  0.54% 
Lowest 1-Year Return (%):  -35.93%  -41.34% 
11/2006-08/2011  (3/08-2/09)  (3/08-2/09) 
Lowest 3-Year Return (%):  -2.02% -2.99% 
11/2006-08/2011       (7/07-6/10)  (7/07-6/10) 
Annualized Return (%):  4.02%  4.14% 
Annualized Standard Deviation (%):  16.77%  17.68% 

Sources: BlackRock Canada, Claymore Investments, Dimensional Returns 2.2, FTSE, Morningstar EnCorr, S&P 

Sources: Morningstar EnCorr, Claymore Investments, Dimensional Returns 2.2 

Index Weighting Methodology: I always tend to favour indices that in no way attempt to forecast any inputs used for their weighting methodology. The Dow Jones Canada Select Value Index relies on projected price-to-earnings ratios as well as projected growth values to weight their index, while the FTSE Canada Index obtains all their data from the companies’ annual statements.

Number of Holdings: CRQ is the marginal winner here, with a basket of 82 holdings - versus XCV with only 70 holdings.

Average 3-Yr. Portfolio Turnover Rate: With an average portfolio turnover rate of nearly half of XCV, CRQ is the first choice (21.36% versus 40.41%), especially when holding the ETF in a non-registered account.

Top 10 Holdings Concentration: Fortunately, the Dow Jones Canada Select Value Index has a cap of 10% per security, or else the security concentration could be an even bigger concern. With CRQ having much less single security risk than XCV, it is the preferred choice for the investor looking for greater diversification.

Sector Allocation: Both CRQ and XCV are concentrated heavily in the Financials sector – with XCV being the biggest culprit, at nearly 53% of the overall portfolio.

Market Cap Allocation: Similar for both CRQ and XCV.

Assets under Management: Although the risk is small that BlackRock Canada would shut down XCV, CRQ dwarfs it by over 4 times the amount of assets under management.

MER: Here’s where both ETFs (especially CRQ) could use some improvement. Passive investment works when the investment vehicles are low-cost – with an MER of 0.71%, or even 0.54%, serious thought should be given in determining if the high fee justifies the expected higher returns from a value-based stock selection approach.

Annualized Returns: XCV has a slightly higher return since November 2006 than CRQ (4.14% compared to 4.02%).

Annualized Standard Deviation: CRQ had lower volatility than the XCV since November 2006 (16.77% compared to 17.68%). 


Although the MER is too high in my opinion (I would ideally prefer to invest in a value-based index ETF or mutual fund with a cost of 0.40% or below), CRQ may be appropriate for investors seeking a higher long-term expected return for a portion of their portfolio’s Canadian equity allocation, especially when holding it in a non-registered account.

By: Justin Bender with 0 comments.
Filed under: Funds
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