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Vanguard VIU ETF Review 2021: Invest Beyond North America

Last updated Mar 25, 2021

Are you an investor in search of branching out of investing in Canadian and American stocks? The Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) could be an ideal solution for you.

Vanguard is one of the pioneering providers of Exchange-Traded Funds (ETFs) in Canada. It is arguably leading the charge when it comes to facilitating passive investing.

The Vanguard FTSE Developed All Cap ex North America Index ETF presents Canadian investors with a broader scope for investing outside the standard North American stocks. 

In this Vanguard VIU ETF review, I will take a closer look at the product to help you understand why it might be an ideal pick for you.

Vanguard has a total of US$ 6.2 trillion in Assets Under Management (AUM) as of January 31, 2020.

Our Verdict
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Vanguard VIU

ex-North American ETF

Allows you to diversify your investments in developed economies worldwide besides Canada and North America.

Pros of Vanguard VIU

  • Diversified exposure beyond Canadian and American stocks
  • You don’t need to monitor individual equities
  • Manages your funds to track the performance of developed markets beyond North America
  • Follows a passively managed full-replication approach

Cons of Vanguard VIU

  • Cannot leverage growth in North American market movements

What is the Vanguard FTSE Developed All Cap ex North America Index ETF?

The Vanguard FTSE Developed All Cap ex North America Index ETF is a Canadian ETF offered by Vanguard Canada since December 1, 2015. VIU ETF is regarded as one of the best ways for Canadian investors to diversify their portfolio to developed markets outside the Canadian and American stocks they may already own through individual equities or other funds.

VIU is not an all-in-one ETF portfolio. All-in-one ETF portfolios are a portfolio of several ETFs that are designed to align with particular investment goals. Rather, VIU ETF is a single fund that invests in a portfolio of stocks. It seeks to invest in companies of small, mid, and large market capitalizations. The ETF invests in stocks from only developed nations worldwide, not in any emerging markets. The ETF also excludes North America.

Many all-in-one portfolios trading on the TSX have some holdings from VIU. Tracking the FTSE Developed All Cap ex North America Index to the extent possible, VIU employs a full-replication strategy that is passively managed. It uses cost-effective and efficient index management techniques to align with investing goals. VIU’s net assets as of October 31, 2020, are $1.5 billion.

What does Vanguard VIU Invest in?

Vanguard VIU tracks, as closely as possible, the FTSE Developed All Cap ex North America Index before fees and expenses. The Index is a broad and internationally diversified equity index that includes companies of all market capitalizations from developed nations besides Canada and North America.

The index effectively allows Canadian investors to truly bank on the international market movements of developed countries without exposure to North American markets. It can be an ideal solution for investors who may already have investments in Canadian and American equities and diversify their investments further.

Vanguard VIU uses a cost-effective strategy to very closely track the performance of the FTSE Developed All Cap ex North America Index.

Vanguard VIU ETF Sector Weighting

The Vanguard VIU ETF has a portfolio of investments diversified across market capitalizations and various sectors of the economy. While Industrials account for the most significant portion of its sector weighting, it is followed closely by Financials, Consumer Discretionary, and then Health Care sectors.

Here is a better look at its Vanguard VIU’s sector weighting as of close October 31, 2020.

Vanguard VIU ETF Market Allocation

Vanguard VIU ETF provides investors with highly diversified exposure to developed markets worldwide. Its most significant exposure is in Japan, followed by the UK, and then Switzerland. Here is a better look at Vanguard VIU’s market allocation as of October 31, 2020.

Vanguard VIU MER

Vanguard VIU has a management fee of 0.20% and a Management Expense Ratio (MER) of 0.22%. The MER is much lower with Vanguard VIU compared to any traditional mutual fund products offered by large financial institutions. Despite the lower management expense ratio, VIU ETF offers you a professionally managed strategy to track the performance of international markets.

Vanguard VIU Dividends

As of October 31, 2020:

  • 12-month trailing yield: 2.20%
  • Distribution yield: 2.44%
  • Dividend schedule: Quarterly

Vanguard VIU ETF Performance

Vanguard VIU ETF tracks the performance of the FTSE Developed All Cap ex North America Index as closely as possible. The fund has a very low tracking error margin of 0.18% and has managed to track the index very closely since its inception. The performance has been up and down over the five years of the fund since its inception.

Here is a better look at the fund’s performance based on the growth of $10,000 invested in the ETF since its inception to October 31, 2020.

The ETF has generally performed well and provided investors with decent returns over the years. However, Vanguard VIU did see a period of drastic volatility recently, with international markets being affected by the pandemic.

Vanguard VIU ETF Holdings

Vanguard VIU ETF’s top ten holdings make up approximately 11% of its total holdings as of close October 31, 2020. Its most significant holding is Nestle SA, followed closely by Samsung Electronics Co. Ltd., and then Roche Holding AG.

Here is a better look at Vanguard VIU ETF’s top ten holdings.

Who should buy VIU?

There are several reasons you could consider buying the Vanguard VIU ETF, including:

  • You are seeking a low-fee passive investing solution that has nothing to do with the Canadian or American stock markets.
  • You understand that the ETF might not help you leverage the growth of local markets when other markets are performing poorly compared to North American stock markets.
  • You want to invest solely in markets from developed economies worldwide.

How to Buy VIU ETF in Canada

My two favourite ways to buy VIU ETF in Canada are the following:

Conclusion

Vanguard VIU ETF is one of the many unique funds from Vanguard that does what it says: It tracks the FTSE Developed All Cap ex North America Index. If you are a passive investor who wants to diversify beyond equities that you may already own individually or through other funds, VIU could make an excellent pick.

I personally like Vanguard VIU for that very reason. As good as it is to have exposure to the Canadian and American equities, I feel it is important to diversify my investment beyond the borders to developed economies elsewhere.

I hope my Vanguard VIU ETF review helped you learn something. Let me know in the comments below if you’re going to give it a go!

Vanguard VIU ETF Review
Christopher Liew, CFA

Christopher Liew, CFA

Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

2 Comments

  1. Niran

    Hi Chris

    Excellent review and i have placed a limit order for VIU ETF. Your analysis confirms my own research on the ETF. i would like you do a review of VEE etf which includes my birth country of India. My plan is pair VIU with VEE.

    Reply

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