Geographic allocation: the real difference
The most substantive structural difference is how much each fund overweights Canada. Both apply home-country bias, but to different degrees.
VEQT allocates ~31% to Canada versus XEQT's ~25%. This means VEQT gives you more exposure to Canadian banks and resource companies, while XEQT tilts slightly more toward international developed markets. VEQT also has a larger emerging markets allocation. Neither is objectively better. The practical impact on long-run returns has been minimal: both returned exactly 20.45% in 2025.
The MER difference: real money, but modest
XEQT's 0.20% MER is lower than VEQT's 0.24%. On $100,000 invested, that is $40 per year. Over 25 years at 7% returns, the compounding effect of that $40 per year difference amounts to approximately $3,800 in favour of XEQT. For the full picture of what XEQT's 0.20% costs and saves over a career, see the MER deep dive.
Both fund companies reduced their management fees to 0.17% in late 2025. XEQT's MER will likely settle around 0.19% once the fiscal year fully reflects the change, and VEQT's similarly. The gap may narrow further.
Distribution frequency
XEQT pays distributions quarterly. VEQT pays annually. From a total-return perspective this makes no mathematical difference. Distributions reduce the fund's NAV dollar for dollar.
Psychologically and practically, quarterly distributions can be useful. For investors who reinvest manually, four opportunities per year to deploy cash beats one. For investors who find the quarterly deposits psychologically reassuring during market downturns, it supports behavioral discipline. This is a small but genuine XEQT advantage for newer investors.
Number of holdings
VEQT holds over 13,800 individual stocks versus XEQT's ~8,400. This is because Vanguard's underlying ETFs use FTSE and CRSP indices, which tend to include more small-cap exposure, while iShares uses S&P and MSCI indices with tighter inclusion criteria.
In practice, both cover the overwhelming majority of global market capitalization. The additional 5,400 stocks in VEQT are mostly tiny companies with negligible individual weight. For practical purposes, diversification is equivalent.
Performance: the honest answer
Both VEQT and XEQT returned 20.45% in 2025, identical to two decimal places. Over three and five years, XEQT has marginally outperformed VEQT, with analysts attributing this to XEQT's slightly higher US weighting during a period of exceptional US equity performance. Over one year, VEQT has sometimes nudged ahead due to its higher Canada and EM weighting. Neither fund has demonstrated a consistent, reliable performance edge.
Over any meaningful time period, XEQT and VEQT will deliver virtually the same net return. The gap will be a few basis points in either direction depending on which geography outperformed that year. Do not choose between them based on performance expectations.
Who should choose which?
The tax-loss harvesting pair
One advanced strategy: XEQT and VEQT are different enough to be used as a tax-loss harvesting pair in non-registered accounts. If XEQT falls and you have unrealized losses, you can sell XEQT and immediately buy VEQT to crystallize the capital loss for tax purposes while maintaining essentially identical equity exposure. This avoids the CRA's superficial loss rule, which would disallow the loss if you repurchased an identical investment within 30 days. Consult a tax advisor before attempting this strategy.
If you are also comparing XEQT or VEQT against funds with a bond allocation, see XEQT vs VGRO for the 100% equity versus 80/20 comparison, or Best All-in-One ETF Canada 2025 for a complete comparison of all six major Canadian products from iShares, Vanguard, and BMO.
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