The ETF I have in mind is an S&P500 index in Canada called "vfv.to. It started in Nov. 2012 and has gone up over 100% in value up until today while the actual S&P has only gone up a little over 60% over the same time? Now if I was an investor at the start I certainly wouldn't be complaining but I'm just wondering why this is the case. Thanks.

  • This is purely down to the fact that VFV is not currency hedged, so investors will have benefited from the big decline in the Canadian dollar vs the US dollar. If you look at a currency hedged version of an S&P500 ETF on the TSE, such as XSP, then you will see that it tracks the S&P500 "exactly". JoeTaxpayer's answer makes this point, however note that VFV does pay out its dividends, just like XSP and the other TSE listed S&P500 ETFs, so dividends are not part of the difference here. – Nick R Nov 2 '16 at 1:04
  • Funds attempt to track the index but may not react to S&P's delisting and adding of specific companies at the same price. When XYZ is cut from S&P 500, the last fund to unload their shares probably does a lot worse that week than the first. I'm willing to believe somebody, by hook or by crook, seeks first mover advantage. – user662852 Nov 2 '16 at 2:50

First - The S&P index doesn't include dividends. So, over 10 years, the index might go from say 1000 to 2000, but I expect my investment to go from $1000 to closer to $2600 as a mutual fund or ETF would reinvest the dividends, typically. From Jan 2013 to Dec 2015, the S&P (with dividends) grew 53%. With the year to date return, we are close to 60% higher during this time.

Also, I'll guess that you are looking at the Canadian-Denominated return. The Canadian dollar fell from US$1.003 to US$0.748 during this time, so the shares have gone up more in $CD than in $US. Combine these 2 factors and you have you answer, almost precisely.

(Note - it may more more sense to flip the exchange rates. The $US bough .9975 $CD in 2012, and now buys CD$1.338. This accounts for a 34% rise just from the exchange rate.)

Edit - per @NickR's comment on the question, it appears dividends are paid out from the ETF, so the total difference for this answer is based on exchange rates.

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