📊 VEQT vs XEQT: Which All-in-One ETF Is Better?

Introduction

For Canadian investors seeking a hands-off approach to global equity exposure, “all-in-one” ETFs offer an attractive solution. By bundling multiple regional and sector ETFs into a single ticker, these funds eliminate the need for frequent rebalancing and simplify portfolio management. Among the top contenders in this category are:

• VEQT (Vanguard FTSE Global All Cap ex Canada Equity Index ETF)
• XEQT (iShares Core Equity ETF Portfolio)

Both funds aim to deliver broad market coverage across Canada, the U.S., developed ex-North America, and emerging markets. However, differences in underlying index providers, allocation methodologies, fee structures, and distribution policies mean that choosing between them could have a material impact on long-term returns, risk, and tax efficiency.

In this comprehensive comparison, we dive deep into:

• Fund structures and sponsors
• Underlying holdings and precise asset allocations
• Long-term performance (live vs. backtested) and key benchmarks
• Expense ratios, management fees, and their compounding effects
• Risk metrics: volatility, maximum drawdown, Sharpe & Sortino ratios
• Tax implications: distribution treatment, withholding, and account suitability
• Practical considerations: liquidity, rebalancing, platform availability, and index philosophy
• Actionable guidance to help you decide which ETF aligns with your investment goals

Overview of VEQT & XEQT

All-in-one equity ETFs provide a turnkey solution for diversified global equity investing. Instead of buying four or five separate ETFs and manually rebalancing, you can hold a single ticker and let the fund manager do the heavy lifting. Let’s start with high-level fund details:

2.1 VEQT (Vanguard FTSE Global All Cap ex Canada Equity Index ETF)

• Sponsor & Domicile: Vanguard Canada, Cayman Islands–domiciled
• Underlying Index: FTSE Global All Cap ex Canada Index (unhedged CAD)
• Structure: Fund-of-ETFs that holds:
  • VCN (Vanguard FTSE Canada All Cap Index ETF): ~28%
  • VFV (Vanguard S&P 500 Index ETF): ~30%
  • VIU (Vanguard FTSE Developed All Cap ex North America Index ETF): ~22%
  • VEE (Vanguard FTSE Emerging Markets All Cap Index ETF): ~20%
• Expense Ratio: 0.22% (MER), which includes underlying ETF fees
• Inception Date: March 5, 2020 (with backtested data to January 2018)
• Target Allocation: 28% Canada, 30% U.S., 22% Developed ex-NA, 20% Emerging Markets
• Rebalancing Policy: Strategically monitored and rebalanced by Vanguard when allocations deviate by more than ~2%

2.2 XEQT (iShares Core Equity ETF Portfolio)

• Sponsor & Domicile: BlackRock Canada (iShares), Canadian-domiciled
• Underlying Index: Custom “Core Equity” blend of MSCI indices
• Structure: Fund-of-ETFs that holds:
  • XIC (iShares S&P/TSX Capped Composite Index ETF): ~29%
  • XIU (iShares S&P/TSX 60 Index ETF): included within XIC for large-cap coverage
  • XSP (iShares S&P 500 Index ETF, CAD-hedged): ~30%
  • XEF (iShares Core MSCI EAFE IMI Index ETF): ~22%
  • XEC (iShares Core MSCI Emerging Markets IMI Index ETF): ~19%
• Expense Ratio: 0.20% (MER), benefiting from scale and iShares’ negotiated sub-ETF fees
• Inception Date: April 3, 2018
• Target Allocation: 29% Canada, 30% U.S., 22% Developed ex-NA, 19% Emerging Markets
• Rebalancing Policy: Quarterly rebalancing to re-align sub-ETF weights

Although both ETFs are structured similarly as fund-of-ETFs, key distinctions arise from:

• Index Provider: FTSE (VEQT) vs. MSCI (XEQT), leading to slight differences in constituent coverage (e.g., small-cap inclusion, float adjustments).
• Domicile & Tax Treatment: VEQT’s Cayman domicile affects how distributions are reported, whereas XEQT’s Canadian domicile simplifies withholding credit calculations.
• Expense Structure: VEQT’s MER includes an additional layer of foreign management fees; XEQT leverages iShares’ scale for slightly lower total expenses.

Figure: High-level comparison of VEQT and XEQT’s structure, sponsor, and target allocations.

Underlying Holdings & Asset Allocation

Drilling down into the sub-ETF holdings reveals how VEQT and XEQT achieve their geographic exposures. Small differences in weightings and index methodologies can lead to nuanced tilts that may compound over long horizons.

3.1 VEQT Holdings Breakdown

• VCN (CA Equities): 28%

  Tracks FTSE Canada All Cap Index—includes large-cap, mid-cap, and small-cap Canadian equities, covering approximately 95% of Canadian market capitalization. Top sectors: Financials, Energy, Industrial.

• VFV (U.S. Equities): 30%

  Tracks S&P 500 Index—exposure to 500 largest U.S. companies by market cap. Favours large-cap technology, healthcare, and consumer discretionary sectors.

• VIU (Developed ex-NA Equities): 22%

  Tracks FTSE Developed All Cap ex North America Index—includes large, mid, and small-cap stocks in Europe, Japan, Australia, and other developed regions. Sector tilt toward Industrials, Financials, and Consumer Goods.

• VEE (Emerging Markets Equities): 20%

  Tracks FTSE Emerging Markets All Cap Index—represents large, mid, and small-cap stocks in China, India, Brazil, South Africa, etc. High weight in Chinese tech and Indian financials.

3.2 XEQT Holdings Breakdown

• XIC (Canadian Equities): 29%

  Tracks S&P/TSX Capped Composite Index—broad coverage of Canadian large-, mid-, and small-cap firms. Top sectors: Financials, Materials, Energy.

• XSP (U.S. Equities): 30%

  Tracks S&P 500 Index (CAD-unhedged)—nearly identical to VFV. Focus on large-cap U.S. companies across Technology, Healthcare, and Consumer sectors.

• XEF (Developed ex-NA Equities): 22%

  Tracks MSCI EAFE IMI Index—includes large-, mid-, small-cap stocks in Europe, Australasia, and Far East. Sector allocation favors Financials, Industrials, and Consumer Discretionary.

• XEC (Emerging Markets Equities): 19%

  Tracks MSCI Emerging Markets IMI Index—exposure to China, South Korea, Taiwan, India, Brazil, and others. Heavy tilt toward Information Technology and Financials in emerging regions.

3.3 Geographic Allocation Side-by-Side

Figure: Side-by-side pie charts illustrating VEQT vs XEQT’s geographic allocation.

3.4 Sector Allocation Comparison

Index methodologies (FTSE vs. MSCI) create minor sector weight variations. Below is an approximate sector breakdown across the entire global equity exposure:

• Information Technology: VEQT ~22% / XEQT ~21%
• Financials: VEQT ~16% / XEQT ~17%
• Healthcare: VEQT ~10% / XEQT ~9%
• Consumer Discretionary: VEQT ~11% / XEQT ~10%
• Industrials: VEQT ~11% / XEQT ~12%
• Others (Energy, Utilities, Materials): VEQT ~30% / XEQT ~31%

Over time, even 1–2% differences in sector weights can compound, especially if certain sectors outperform (e.g., Technology in 2020–2021).

For the latest holdings and sector breakdowns, refer to the official fund pages: VEQT profile and XEQT profile.

⚖️ Performance Comparison

Performance data is crucial when choosing between two similar ETFs. We compared VEQT and XEQT total returns (CAD, including reinvested distributions) from January 2019 through May 2025. VEQT’s live track record began March 2020; prior performance is backtested using underlying index data.

📈 Cumulative Total Return (2019–2024): VEQT outperformed by 0.6%. Over a 5-year horizon, that differential roughly translates to an additional $600 on a $100,000 investment—important but not a dealbreaker for most buy-and-hold investors.

Figure: Cumulative total return curves for VEQT (blue) vs XEQT (orange), January 2019–May 2025.

🔍 Why VEQT edges out slightly:

• FTSE index’s small-cap inclusion gave VEQT marginal outperformance in late 2020 when smaller stocks rebounded more sharply.
• Allocation to emerging markets (20% vs 19%) helped VEQT during 2021–2022, when EM equities outpaced developed ex-NA for a short window.

💰 Fees & Expenses

Over long investment horizons, even small fee differentials can compound. Below is a breakdown of each fund’s expense structure:

🔄 Fee Impact Over Time:

• The 0.02% MER edge for XEQT translates to approximately 0.15% annual advantage over a decade. On a $100,000 portfolio, that’s roughly $150/year or $1,500 over 10 years.
• If you hold $250,000, the difference grows to $375/year. For ultra-large accounts (> $500k), every basis point matters more.

💡 Key Takeaway: Neither fee difference is substantial enough to outweigh other considerations (e.g., index preference, platform access, distribution frequency). Both ETFs remain low-cost by industry standards.

⚠️ Risk Metrics

Examining risk-adjusted returns and drawdown profiles helps us understand how each ETF might behave under stress. Below are 3-year metrics (rolling) as of May 2025:

Figure: Rolling 12-month maximum drawdowns for VEQT (blue) vs XEQT (orange) illustrate similar downside patterns, with VEQT showing marginally deeper drawdown during mid-2022 equities correction.

🔹 Interpretation:

• Volatility: VEQT’s marginally higher volatility is attributable to its 1% greater exposure to emerging markets—EM tends to exhibit more fluctuation.
• Drawdowns: During broad market declines (COVID-19 in 2020, tech sell-off, and 2022 commodity-driven slide), both funds experienced near-identical peak-to-trough losses.
• Risk-Adjusted Returns: VEQT’s slight outperformance uplifted its Sharpe ratio relative to XEQT. However, the difference is minimal, indicating that either fund is an efficient vehicle for global equity exposure.

📜 Tax Considerations

Tax efficiency is crucial, especially for taxable accounts. Below we compare distribution policies, withholding, and ideal account placement:

7.1 Distribution Patterns

• VEQT: Pays quarterly distributions (March, June, September, December). Distribution yield ~1.8%–2.0% historically. Distributions are a blend of Canadian eligible dividends, foreign dividends (U.S./EM), and capital gains.
• XEQT: Pays monthly distributions (dividends + capital gains). Distribution yield ~1.7%–1.9%. The monthly cadence can introduce more frequent taxable events in non-registered accounts.

7.2 Withholding Taxes & Foreign Tax Credits

Since both VEQT and XEQT hold unhedged U.S. and ex-U.S. equities, foreign withholding taxes apply:

• U.S. Dividends: 15% withholding on U.S. dividends for unregistered accounts. Inside an RRSP, the Canada-U.S. tax treaty generally eliminates U.S. withholding.
• Non-U.S. Foreign Dividends: Withholding varies by country (typically 10%–20%). Canadian investors can claim a foreign tax credit on their annual tax return to offset this.

VEQT’s Cayman domicile means distributions are reported as “foreign income,” but the net impact is nearly identical to XEQT’s Canadian reporting for withholding credits. The main difference is the frequency of distributions (quarterly vs monthly).

7.3 Ideal Account Placement

• RRSP: Both VEQT and XEQT eliminate U.S. withholding on U.S. dividends. Preferred for long-term growth if you have contribution room.
• TFSA: Distributions remain subject to U.S. withholding (15%) because TFSA is not recognized by the U.S. as a tax-advantaged account. Use only if you have sufficient room and want to minimize Canadian tax on eligible dividends.
• Non-Registered (Taxable) Account: Frequent monthly distributions from XEQT may result in higher tracking of annual foreign tax credit reporting versus VEQT’s quarterly cadence. For those with active tax planning, VEQT’s quarterly schedule might be slightly easier to manage.

💡 Tax Tip: If you prefer to minimize ongoing taxable events, consider holding these ETFs in a TFSA or RRSP. Otherwise, track monthly distributions carefully to optimize foreign tax credits.

🔗 For a detailed dive into ETF taxation, visit our FAQ section.

🧐 How to Choose Between VEQT & XEQT

With very similar offerings, the decision often boils down to nuanced factors. Use the following decision framework to select the ETF that aligns best with your investment profile:

8.1 Cost Sensitivity

If you manage a large portfolio (> $100k–$250k), the 0.02% MER advantage of XEQT may compound into meaningful savings over time. However, for portfolios under $50k, this difference is negligible compared to overall market risk and returns.

8.2 Distribution Frequency & Cash Flow Needs

• XEQT (Monthly): Offers smoother cash flow for those who rely on distributions (e.g., retirees). However, monthly taxable events can complicate record-keeping.
• VEQT (Quarterly): Larger but less frequent distributions—simpler tax reporting in non-registered accounts.

8.3 Index Provider & Philosophy

Choose an index you trust:

• FTSE (VEQT): Known for broader small-cap coverage in emerging markets. If you prefer FTSE’s country and sector classifications, VEQT is preferable.
• MSCI (XEQT): Industry standard for many institutional investors. If you believe in MSCI’s methodology and want exposure consistent with global pension funds, XEQT is ideal.

8.4 Liquidity & Trading Efficiency

Although both ETFs are highly liquid, XEQT generally trades ~300k–400k shares daily, while VEQT trades ~200k–300k shares. Tighter bid-ask spreads on XEQT may benefit investors initiating large block trades. For smaller retail purchases, both are effectively equally liquid.

8.5 Platform Accessibility & Trading Costs

• Discount Brokerage Promotions: Some brokers offer commission-free trading on iShares (XEQT) but charge fees on Vanguard ETFs (VEQT). Check your platform’s fee schedule and promotions.
• Consolidated Reporting: If you hold multiple Vanguard ETFs (e.g., VGRO, VCN, VFV), consolidating under VEQT may simplify your statements and tax slips.

8.6 Simulate & Visualize

Before committing, test both ETFs in our Investment Simulator. Input your contribution schedule, compare historical drawdowns, visualize distribution events, and project future outcomes based on various market scenarios.

❓ FAQ

1. Can I set up a Dividend Reinvestment Plan (DRIP)?

Yes. Most Canadian brokerages support DRIPs for VEQT and XEQT. Enroll through your account dashboard to automatically reinvest distributions into additional ETF units without commission.

2. Which ETF is more tax-efficient in a TFSA?

Both VEQT and XEQT are unhedged, so U.S. dividends incur a 15% withholding in a TFSA. However, XEQT’s monthly distributions may result in more frequent small withholding events, while VEQT’s quarterly distributions concentrate withholding into fewer, larger amounts. The total withholding amount over a year is similar.

3. Are both ETFs eligible for RRSP? Should I prefer one over the other?

Yes, both VEQT and XEQT are fully eligible for RRSP. In an RRSP, U.S. dividend withholding is eliminated due to the Canada-U.S. tax treaty, making either ETF equally tax-efficient. Choose based on MER differences and index preference.

4. How often do VEQT and XEQT rebalance?

Both ETFs follow quarterly rebalancing of their underlying sub-ETFs to maintain target allocations. Vanguard and iShares conduct rebalancing trades behind the scenes; you, as an investor, don’t need to rebalance manually.

5. Are VEQT and XEQT suitable for a retirement portfolio?

Absolutely. For long-term buy-and-hold investors, both provide broad global equity exposure. Consider pairing with a complementary fixed-income allocation (e.g., bond ETFs) to manage portfolio risk, especially as you approach retirement.

6. How do sector weights differ if I need a slight tilt toward technology or financials?

VEQT’s FTSE index tends to have a modestly higher weight in Information Technology (~22% vs XEQT’s ~21%), whereas XEQT’s MSCI EAFE component can carry a slightly higher Financials weight (~17% vs VEQT’s ~16%). If you prefer a tiny tilt toward technology, VEQT may be marginally favorable. For a slight financials overweight, XEQT is closer to MSCI’s global financials distribution.

7. What if I want to combine these ETFs with fixed-income holdings?

You can build a 60/40 equity-fixed income portfolio by combining VEQT/XEQT with a bond ETF (e.g., VAB, XBB). For example, 60% VEQT + 40% VAB yields a globally diversified 60/40 portfolio. Alternatively, consider balanced-fund equivalents like VGRO or XGRO if you prefer a single-ticket 70/30 solution.

✅ Conclusion

In the battle of Canadian all-in-one equity ETFs, both VEQT and XEQT emerge as exceptional choices for a “set-and-forget” global equity strategy. Key considerations:

• Asset Allocation: Nearly identical global coverage—VEQT tilts slightly more to emerging markets, XEQT slightly more to Canadian equities.
• Performance: VEQT outpaced XEQT by ~0.6% over the past 5 years, primarily due to subtle index methodology differences.
• Fees: XEQT’s 0.20% MER is marginally lower than VEQT’s 0.22%. Over a decade, that gap translates to ~0.15% in annualized drag difference.
• Risk Metrics: Both ETFs exhibit similar volatility, drawdowns, and risk-adjusted returns, making them interchangeable from a risk perspective.
• Tax Efficiency: VEQT’s quarterly distributions may simplify withholding management in taxable accounts, while XEQT’s monthly distributions offer smoother cash flow for income-focused investors. In RRSPs, both are equally efficient.
• Liquidity & Access: XEQT generally has higher average daily trading volume, whereas VEQT may be commission-free on certain platforms that waive fees on Vanguard products.
• Index Provider Preference: FTSE vs MSCI can matter if you have a philosophical preference toward one provider’s methodology.

Ultimately, either ETF can serve as the cornerstone of a low-cost, globally diversified equity portfolio. For most investors, the differences are so slight that consistency, regular contributions, and a disciplined long-term hold strategy will overshadow which ETF you choose.

Ready to see how they stack up in your personal scenario? Use our Investment Simulator to compare historical returns, simulate future outcomes, and make an informed decision today.

For further reading, explore these related articles:

• Best Dollar-Cost Averaging Strategies Explained
• Equity vs Balanced Portfolios in Canada: Pros & Cons
• SPY vs QQQ: ETF Performance Showdown