After previously exiting the ETF sector in 2006 amid weak trading volumes and the inability to grow assets under management, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) quietly re-entered the space in 2016.
It introduced six different ETFs. Two tracked the S&P 500, with one offering Canadian Dollar hedging and the other not. It also offered two similar international equity ETFs, again with one hedging the currency exposure and another that didn’t. It also offers a TSX Composite ETF and a Canadian Bond Index ETF.
One of the first things that investors might notice are the very competitive management rates. The TD S&P/TSX Capped Composite ETF (TSX:TTP) has a management fee of just 0.07%. That’s comparable to other similar ETFs with much higher assets. TD’s other ETFs are a little more expensive, but not much.
Some skeptics argue TD came out with these ETFs to retain wealth management assets that would have gone to ETFs anyway. This might be true, but if that was the case I doubt management fees would be so competitive. Saying that, TD hasn’t really made an effort to promote these new products.
These ETFs do have one significant disadvantage to their larger peers. The TD Canadian Aggregate Bond Index ETF (TSX:TDB) has just $44.4 million in fund assets. It often trades only a few thousand shares per day. The comparable iShares bond ETF trades more than 50,000 shares on average. The other funds are comparatively illiquid.
Ultimately, the core six TD ETFs are decent products, but with nothing really differentiating them from funds offered by larger competitors. Thus, investors should probably just stick with bigger ETFs with more liquidity.
