The investor in this scenario is concerned about fund expenses (MERs) and prefers a product with lower costs and potential for higher returns.
According to the CSC materials, exchange-traded funds (ETFs) are known for having:
Significantly lower management expense ratios (MERs) compared to mutual funds and most other managed products, because they are generally passively managed and do not bear the high costs of active portfolio management.
Lower trading costs due to the in-kind creation and redemption process, which reduces the need for the fund itself to buy and sell securities.
Opportunities for higher returns as lower costs directly enhance net returns to investors.
In contrast:
Segregated funds (B) are insurance products with higher fees due to guarantees.
Hedge funds (C) typically charge very high fees (often 2% management + 20% performance fees).
Liquid alternatives (D) also come with higher MERs and are designed for diversification and risk management, not necessarily for low cost.
Therefore, the most appropriate choice is Exchange-traded funds (ETFs), as they best meet the investor’s preference for low MERs and potential for higher returns.
