ETF investors have plenty of ways to access international exposure in their portfolios. Options range from single-country ETFs to broad-based global indices ETFs. Country-specific ETFs allow investors to focus exclusively on a single country. They diversify portfolios by providing exposure to markets with different growth trends and foreign currencies. Country-specific ETFs own a basket of stocks that are domiciled or largely engage in business activities in a specific nation.

On the flip side, these ETFs are susceptible to their whims, in a similar fashion to any exchange-traded security. Factors that come into play are currency fluctuations, underlying company fundamentals, political environment, economic data, investor fund flows, and many others.

The NEO ETF Screener identifies 242 Canada-specific ETFs listed and trading in Canada, excluding leveraged and inverse ETFs. Assets under management reached CAD$140 billion while attracting CAD$2.7 billion of investors’ money. 

There is a plethora of schemes to slice and dice any investment universe and target a specific country. As such, among the 239 Canada-specific ETFs, 20 ESG ETFs manage CAD$1.9 billion of assets and 2 thematic ETFs with CAD$265 million in AUM. Banks and Financials ETFs stand at 12 ETFs with CAD$10 billion in AUM.

The three biggest Canada-specific ETFs as measured by assets under management:

• iShares S&P/TSX 60 Index ETF (XIU): CAD$11.4 billion
• iShares Core S&P/TSX Capped Composite Index ETF (XIC): CAD$9.8 billion
• BMO S&P/TSX Capped Composite Index ETF (ZCN): CAD$7.3 billion
• BMO Aggregate Bond Index ETF (ZAG): CAD$6 billion
• iShares Canadian Universe Bond Index ETF (XBB): CAD$4.7 billion

iShares S&P/TSX 60 Index ETF (XIU)

Launched on September 28th, 1999, iShares S&P/TSX 60 Index ETF (XIU) is the biggest Canada-specific equity ETF as measured by asset under management. It currently manages CAD$11.4 billion of assets and generated a 3.4% return last month. XIU is a passively managed fund designed to reflect the performance of the S&P/TSX 60 Index. It gives investors exposure to Canada’s 60 largest companies listed on the Toronto Stock Exchange. The equity index is capitalization-weighted and analogous to the S&P500 in the United States. The fund’s 60 holdings are geographically concentrated with 97.36% in Canada. XIU’s top 10 holdings constitute 49.09% of the total. On another level, XIU is diversified across sectors with assets in the Financial sector accounting for 38.06%, followed by the Energy sector at 15.32%, then by the Industrials sectors at 10.61%. The remaining assets are distributed among several sectors such as Materials, Information Technology, Communication, Consumer Staples, Consumer Discretionary, etc. 

XIU is relatively cheaper than the average Canada-specific ETF, with an expense ratio of 0.18% vs. 0.42%. However, this is not the case when compared to the biggest Canada-specific ETFs (see list above). 

The fund charges 0.15% in management fees. XIU distributes income generated by its holdings.

BMO Aggregate Bond Index ETF (ZAG)

BMO Aggregate Bond Index ETF (ZAG) is a passively managed ETF launched on January 19th, 2010. Assets under management reached CAD$6 billion. Last month, it attracted CAD$68 million of investors’ money and generated 1.70% in return. 

ZAG is designed to replicate the performance of the FTSE Canada UniverseXM Bond Index. The index is a broad measure of the Canadian investment-grade fixed income market consisting of Federal, Provincial, and Corporate bonds. It invests in semi-annual pay fixed bonds denominated in CAD. The bonds should have an effective maturity of not less than one year and a minimum credit rating of BBB.

Holdings are 100% concentrated in Canada but distributed among different sectors. Provincial bonds take the lead with 19.39% of the total portfolio, Federal bonds come in next with 33.84%, Corporate bonds third, with 26.51%, and Municipal bonds last, with just 2.18%.

ZAG is much cheaper than its peers with an expense ratio of 0.09% vs 0.42%. The fund charges 0.08% in management fees and follows a distributing dividend policy.