E Point Perfect

What seasoned investors look for in an ETF prospectus


All ETFs aren’t created alike. Differences can include the management style (for example, active versus passive), investment objective (income versus total return), benchmark index (broad market versus narrow market) and even regulatory structure.

In Canada, ETF providers must prepare and file a four-page “ETF Facts” sheet, as well as a long-form prospectus, for each fund they offer. These documents are filed with Canadian Securities Administrators and made available on SEDAR (the electronic filing system for public securities documents in Canada), as well as the fund providers’ websites.

Most investors can get the information they need about an ETF from its fact sheet. It’s a plain-language summary of the fund where investors can find the following key information:

  • Investment objective
  • Holdings
  • Past performance
  • Risk rating
  • Total fees

You’ll also find quick facts such as the ETF’s inception date, its current assets under management (AUM), its management expense ratio (MER), the name of the fund manager, how often distributions are paid, the fund’s ticker symbol, the stock exchange on which it trades, and the currency in which it trades.

ETF Facts sheets are required to be filed and posted at least annually and every time there is a material change to the fund. Investment dealers are also required to deliver the ETF Facts sheet to you no later than midnight on the second business day following the purchase of ETF securities.

Here’s an example of an ETF Facts document from National Bank Investments, showing the first of four pages, including the “Quick Facts” summary:

A "quick facts" section from an ETF Facts document from National Bank Investments

What is an ETF prospectus?

There’s only so much information that can be shared in the four-page fact sheet. A long-form prospectus can give investors a better look underneath the hood, especially for an ETF that uses a complicated investment strategy.

All ETFs are required to provide a long-form prospectus. This document includes information including basic disclosures, fees, expenses, returns, legal structure, investment objectives, investment strategies, an overview of the investment structure, an overview of the sectors the fund invests in, risk factors, distribution policy and income tax considerations (to name a few).


Source link

Related posts

How to use equity to buy a second home

Should you transfer property to a child and then rent it from them?

Is it better to list a beneficiary on registered investments or have the account go to the estate?

6 strategies for teaching kids about money

How does life insurance work?

What are the taxes on transferring real estate to your kids?