Scotia NASDAQ Index Fund

Analysis: This index fund is designed to replicate the performance on an after fee basis of the NASDAQ 100 Index. To get its exposure, the manager uses futures that are linked to the index. The NASDAQ 100 includes 100 of the largest non financial securities that are listed on the NASDAQ based on market capitalization.

The index is very heavily weighted towards technology, with nearly 70% of the companies in the sector. Consumer discretionary and healthcare make up the rest of the index. Apple is by far the largest index constituent, making up about 18%, followed by Microsoft with about and 8.5% weight.

Recent performance has been very strong, with a one year return of more than 20%, which outpaced the broader S&P 500’s 11.6% gain. The fund’s currency exposure is not hedged.

The cost of this fund is very reasonable, with an MER of 1.11%, which is well below the U.S. equity category median, and is also much lower than the average science and technology fund, which carries an MER of 2.67%.

Investors who are looking for low cost exposure to the NASDAQ may want to consider the recently launched iShares NASDAQ 100 Index C$ Hedged ETF, which provides the same investment exposure, but does so for a lower MER of 0.35%. For investors who would prefer to stick with a mutual fund, they may want to consider the TD NASDAQ Index Fund, which is available with an MER of 1.02%. However, the currency exposure in the TD fund is hedged, which will result in a slightly different return profile.

This is not a fund that should be considered a core holding for a couple of reasons. First, the index is very concentrated. Second, it has the potential to be very volatile and investors who hold this should be prepared for a bumpy ride. In our opinion, it should be treated as a sector fund, and is only suitable for investors who have a high risk tolerance.