Vanguard Canada introduces ‘retirement income’ asset allocation ETF

Sep 17th, 2020 | By | Category: Alternatives / Multi-Asset

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


Vanguard has expanded its line-up of asset allocation ETFs in Canada with the launch of an all-in-one income solution for retirees.

Vanguard Canada targets retirees with new asset allocation ETF

Vanguard Retirement Income ETF Portfolio is designed as an all-in-one income solution for retirees.

The Vanguard Retirement Income ETF Portfolio (VRIF CN) has listed on the Toronto Stock Exchange and aims to provide consistent income with the possibility of some capital appreciation.

It targets an annual payout of 4% with income distributed to investors on a monthly basis.

The fund provides globally diversified multi-asset exposure by investing in a mix of eight underlying Vanguard index ETFs while targeting a long-term strategic asset allocation that is evenly split between equities and fixed income.

With reference to equity exposure, the ETF has launched with allocations to the Vanguard FTSE Developed All Cap ex North America Index ETF (22%), the Vanguard US Total Market Index ETF (18%), the Vanguard FTSE Canada All Cap Index ETF (9%), and the Vanguard FTSE Emerging Markets All Cap Index ETF (1%).

On the fixed income side, the ETF is allocated to the Vanguard Canadian Corporate Bond Index ETF (24%), the Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged) (22%), the Vanguard Canadian Aggregate Bond Index ETF (2%), and the Vanguard US Aggregate Bond Index ETF (CAD-hedged) (2%).

The asset mix is monitored continuously and rebalanced as needed to take advantage of tactical opportunities as well as to keep the ETF in line with its long-term strategic allocation.

The ETF comes with a management fee of 0.29% which includes the cost of investing in the underlying Vanguard index ETFs.

According to a recent poll by Vanguard, retirement is the number one investing objective for Canadian investors with 78% listing it among their top two choices, followed by longer-term growth at 67%.

Vanguard also points to a report last year by the World Economic Forum that estimates the average Canadian is expected to outlive their savings by ten years, necessitating the need for prudent, low-cost, and well-diversified portfolios that can provide dependable income.

Kathy Bock, Managing Director and Head of Vanguard Investments Canada, commented, “As they retire, Canadians face a new set of financial challenges including keeping up with inflation, meeting their monthly spending needs, and the risk of potentially outliving their assets. This ETF can help manage some of those risks by providing a predictable stream of income within a simple yet sophisticated all-in-one retirement solution that provides broad diversification and regular rebalancing at a low cost.

“Asset allocation ETFs are one of the fastest-growing investment categories in Canada, having attracted C$4.5bn in under three years. They have been a game-changer for investors and we are pleased to offer that same ease of use, low cost, and disciplined portfolio construction to retirees and others seeking regular monthly income. Another advantage to investors using these ETFs is that they can rely on Vanguard’s global investment experts to monitor and assess the proper asset allocation to meet the return target.”

Scott Johnston, Head of Product, Vanguard Canada, said, “Following one of the sharpest market declines in recent memory earlier this year, Canadian investors and advisors are looking to effectively safeguard and manage their hard-earned assets to meet their retirement needs. For financial advisors, this provides a scalable and transparent solution for clients as a complement to their retirement strategy. For investors, this is a one-stop globally diversified and turnkey option that provides capital appreciation and monthly tax-efficient income.”

Vanguard offers a further five asset allocation ETFs in Canada which have accumulated more than C$3.5bn in assets since launching in 2018.

RBC iShares, Vanguard’s major competitor in the asset allocation ETF space, recently unveiled a new line-up of asset allocation ETFs that incorporate ESG criteria, a first for the Canadian market.

Tags: , , , , , , , , , ,

Leave a Comment