Q: Good day. XML is the Canadian hedged EFAV. It holds nothing but EFAV. But EFAV is up 17% ytd while XML is only up 9.7%. Could you explain why there is such a gap? Surely hedging can't cost that much.
5i Research Answer:
The move in CAD/USD is about 4% over that period. So that closes the gap a bit, but there is still another 3%. Liquidity is very low in the CAD hedged version, like 1000 units a day. So some difference is likely due to slippage/inefficiency due to low liquidity. With much lower assets, trading and admin costs will also be higher.