VFV vs ZSP: A Look at US Equity ETFs in Canada

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The Vanguard S&P 500 Index ETF (VFV) is managed by Vanguard while the BMO S&P 500 Index ETF (ZSP) is managed by BMO Global Asset Management.

Beyond the separate managers though, the main difference between the two is that the VFV simply holds its US counterpart (the VOO ETF) as a ‘wrapper’.

Conversely, the ZSP ETF has a different approach where all 500 of the S&P 500 index stocks are purchased individually in their corresponding proportions.

While this (theoretically) does not make a difference in terms of gross performance, differences can arise in net performance due to fees and expenses paid for each ETF.

For the same reason, there may also be slight weighting differences in individual securities between VFV and ZSP depending on the timing of the purchase.

The S&P 500 is a market capitalization-weighted index that is designed to mirror the returns of the 500 largest companies traded on stock exchanges in the US.

In essence, that means that the higher the market capitalization of a company, the greater its influence on the total return of the index.

As one of the most cited and closely monitored indices in the world, the S&P 500 offers a good proxy for the performance of the overall US equity market.

For that reason, the index is also the most commonly-used benchmark for stocks, ETFs, and other assets.

Both the VFV and ZSP ETFs are denominated in CAD and are suitable for long-term investors who hold a bullish view on the American equity markets.

VFV

Launched in 2012, the Vanguard S&P 500 Index ETF (VFV) tracks the performance of the broad US S&P 500 equity index.

Through the ETF, investors get indirect exposure to the growth and returns of the 500 most valuable companies in America.

As a long-term core holding, VFV allows investors to capture the US economy’s natural tendency to move upwards over time without the need for active participation, i.e., buying and selling at frequent intervals.

The VFV ETF is rated as medium risk given that it is entirely comprised of 100% equities, which are classified as ‘risk assets’.

However, the underlying equities in the S&P 500 are diversified by sector, region and customer base, thereby reducing the overall risk of any one company or sector on total returns.

For investors seeking an investment that leverages the potential of the American economy, VFV offers a solid option that has historically delivered strong capital gains with modest dividends (paid on a quarterly basis).

Since inception, VFV has delivered 15.53% annualized growth with a 5-year annual performance of 11.77% (as of October 31, 2023).

As at the same date, VFV had total assets of $9 billion.

ZSP

The BMO S&P 500 Index EF (ZSP) was launched in November 2012 and also replicates the performance of the S&P 500 index.

Unlike the VFV, the ZSP opts to individually purchase and periodically rebalance the 500 underlying stocks encompassed in the ETF.

By purchasing the ZSP, investors receive indirect exposure to 500 of the largest and most liquid stocks in the American equity markets within a single security.

The ZSP is ideal for young and middle-aged Canadian investors with a longer time horizon for goals such as retirement and a bullish view of the American economy.

As of October 31, 2023, the ETF had $10.5 billion in assets under management.

Since its inception, the ZSP ETF has delivered 15.89% annualized returns with a 5-year return of 11.79%.

VFV vs ZSP Performance

VFV Annualized Performance (as of October 31, 2023):

  • 3-Year: 11.46%
  • 5-Year: 11.77%
  • 10-Year: 13.97%
  • Since Inception: 15.53%

ZSP Annualized Performance (as of October 31, 2023):

  • 3-Year: 11.48%
  • 5-Year: 11.79%
  • 10-Year: 13.94%
  • Since inception: 15.89%

 

VFV vs ZSP Fees

VFV offers a Management Expense Ratio (MER) of 0.09% which is largely comprised of its 0.08% management fee.

ZSP also offers a Management Expense Ratio (MER) of 0.09%.

VFV vs ZSP Holdings

Below were the top security holdings within VFV (top 10 holdings as a % of asset value)

  • Microsoft Corp. (7.1%)
  • Apple Inc. (7.1%)
  • Amazon.com Inc. (3.4%)
  • NVIDIA Corp. (2.8%)
  • Alphabet Inc. (2.1%)
  • Meta Platforms Inc. (1.9%)
  • Alphabet Inc. (1.8%)
  • Berkshire Hathaway Inc. (1.8%)
  • Tesla Inc. (1.6%)
  • UnitedHealth Group Inc. (1.4%)

As of October 31, 2023


 

Within VFV, sector and industry concentration recently is as follows:

  • Information Technology (27.49%)
  • Health Care (13.37%)
  • Financial Services (12.75%)
  • Consumer Discretionary (10.68%)
  • Communication Services (8.87%)
  • Industrials (8.31%)
  • Consumer Staples (6.57%)
  • Energy (4.72%)
  • Materials (2.45%)
  • Utilities (2.42%)
  • Real Estate (2.37%)

As of September 30, 2023


 

The top security holdings within ZSP (top 10 holdings as a % of asset value) were recently as follows:

  • Apple Inc. (7.0%)
  • Microsoft Corp. (6.5%)
  • Amazon.com Inc. (3.2%)
  • NVIDIA Corp. (3.0%)
  • Alphabet Inc. (2.2%)
  • Tesla Inc. (1.9%)
  • Meta Platforms Inc. (1.9%)
  • Berkshire Hathaway Inc. (1.8%)
  • Exxon Mobil Corp. (1.3%)

As of October 31, 2023
 

Within ZSP, sector and industry concentration recently is as follows:

  • Information Technology (27.3%)
  • Health Care (13.5%)
  • Financial Services (12.9%)
  • Consumer Discretionary (10.6%)
  • Communication Services (8.9%)
  • Industrials (8.3%)
  • Consumer Staples (6.6%)
  • Energy (4.8%)
  • Materials (2.4%)
  • Utilities (2.4%)
  • Other (2.4%)

As of October 31, 2023

Frequently Asked Questions

  • Does ZSP pay dividends?
  • Does ZSP have withholding tax?
  • Yes, ZSP also incurs withholding tax given that it is a Canadian fund that directly holds US stocks.

Harshil Dhanky

Harshil Dhanky is a financial services professional based out of Toronto, Ontario with extensive experience in the Canadian banking industry across Toronto, Calgary, and Vancouver in the capital markets, asset management, and lending sectors.

In the past, Harshil has worked with a range of consumer lending websites, personal finance advisors, investment managers, insurance companies, and other financial institutions to write and edit whitepapers, articles, blog posts, and other collateral read by consumer audiences to help them make better financial decisions.

His work spans a wide range of Canadian personal finance topics including savings and retirement programs, debt management tips, mortgages and personal loans, and other key financial issues for Canadian consumers at each stage of their life.
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