Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Exchange-traded funds have built a huge and growing franchise on their low fees, but there are some higher-cost outliers you should watch out for.

Some are niche products issued by companies that seem to be hoping investors bent on chasing a particular trend will forgive the high cost. And some are foundational funds that simply haven’t benefited from the long-term trend toward lower ETF costs.

Two examples of this latter type of expensive ETF were inadvertently revealed in some news from BMO ETFs about changes in the underlying index tracked by some of its bond funds. The BMO Government Bond Index ETF (ZGB-T) and BMO Corporate Bond Index ETF (ZCB-T) are among a group of funds moving to benchmark FTSE Canada bond indexes from similar Bloomberg-Barclays indexes.

Story continues below advertisement

The switch means that ZGB and ZCB will track the same index as competing products from BlackRock’s iShares family. In each of these two cases, the iShares counterpart carries a fee that seems out of step with today’s ETF pricing.

ZGB’s management expense ratio is 0.17 per cent, while the iShares Canadian Government Bond Index ETF (XGB-T) comes in at 0.39 per cent. ZCB’s MER is also 0.17 per cent, while the iShares Canadian Corporate Bond Index ETF (XCB-T) has an MER of 0.44 per cent.

These iShares funds are by no means tiny. Together, XGB and XCB have assets of about $2.4-billion. A lot of investors seem fine with the fees for these funds, even as low yields reduce the income flow from bond ETFs. Low fees have never been more important than they are today in choosing bond ETFs.

The iShares ETF franchise has done a lot to push the cost of ETF investing lower over the years and its products are generally priced very competitively. XCB and XGB are cost outliers that offer an important lesson. Even in ETF-land, you have to be vigilant about how much you pay for a fund.

One more example comes from BMO itself – the BMO Equal Weight Banks Index ETF (ZEB-T), with an MER of 0.61 per cent and $1.4-billion in assets. That’s a hefty price to pay for an ETF holding six bank stocks.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies