Outperforming the iShares Core Equity ETF Portfolio with These Two ETFs

New ETF Options Offer Canadian Investors Leveraged Growth Potential

October 19, 2025

Toronto, ON – canadian investors seeking to maximize returns are increasingly turning to a new class of Exchange Traded Funds, or ETFs, that employ modest leverage. These funds represent an alternative to traditional, broadly diversified portfolios like the iShares Core Equity ETF Portfolio (XEQT), aiming to deliver heightened growth while managing risk through strategic asset allocation.

For years,investors have sought ways to outperform benchmark indexes. Traditional approaches involved focusing on specific investment factors – such as quality,value,or company size – or utilizing margin accounts,which carry their own complexities. Now, a growing number of Canadian ETF providers are offering lightly leveraged funds, typically with exposures ranging from 1.25 to 1.33 times the underlying market.

Unlike daily reset leveraged products, which rely on derivatives and are generally considered short-term trading tools, these newer ETFs borrow funds internally at institutional rates. This structure makes them more suitable for longer-term investment horizons and compatible with margin-eligible accounts. while several funds concentrate on specific sectors, an emerging trend focuses on broad-based, diversified portfolios designed for overall growth.

Spotlight on Global X Enhanced All-Equity Asset allocation ETF (HEQL)

The Global X Enhanced All-Equity Asset Allocation ETF (HEQL) operates by holding the Global X All-Equity Asset Allocation ETF and borrowing an additional 25% of its net asset value, resulting in a total exposure of 125%, or 1.25x leverage. The underlying fund, HEQT, closely mirrors the composition of XEQT, but with a greater emphasis on large-cap U.S. growth stocks.

Currently, HEQT’s portfolio is allocated as follows: approximately 34% in U.S. large-cap stocks, 26% in developed international markets, 21% in Canadian equities, 8% in emerging markets, 7% in the Nasdaq 100 index, and 4% in U.S. small-cap stocks. The management expense ratio (MER) stands at 1.46%, including the cost of borrowing, which benefits from institutional rates lower than those typically available to individual investors.A small trading expense ratio of 0.05% is also factored in.

Despite having relatively modest assets under management of $9.5 million (as of late 2025), HEQL is backed by the ample $290 million in assets held by its underlying fund, HEQT. Notably, HEQL distributes income on a monthly basis, currently yielding approximately 1.89% annually.

Introducing Hamilton Enhanced Mixed Asset ETF (MIX)

The Hamilton Enhanced Mixed Asset ETF (MIX) represents a especially innovative approach to balanced investing in Canada. It applies principles of modern portfolio theory, which suggests that combining assets with low correlation and differing volatility can improve risk-adjusted returns. MIX’s core allocation consists of 60% equities, 20% long-term U.S. Treasurys, and 20% gold, all implemented through low-cost ETFs.

By applying 1.25x leverage to this base allocation, MIX achieves an effective exposure of 75% equities, 25% Treasurys, and 25% gold. This strategy aims to deliver equity-like returns with potentially lower overall volatility than a portfolio solely invested in stocks. The fund manages both the asset allocation and leverage internally, simplifying the process for retail investors.

Being a relatively new fund, established in late 2024, MIX does not yet have a published MER. However, the management fee is currently waived at 0% until April 30, 2026, after which it is projected to be 0.35%, with additional borrowing costs comparable to those embedded within HEQL’s structure.

Can These ETFs Surpass XEQT’s Performance?

Analysts believe both MIX and HEQL have the potential to outperform XEQT over the long term, contingent on two crucial factors: continued growth in equity markets, driven by both earnings and investor demand, and a downward trend in interest rates, which would reduce the cost of borrowing for leveraged funds.

Between the two, MIX is considered the more balanced option due to its diversification across gold and long-term Treasurys. Gold ofen performs well during inflationary periods or geopolitical uncertainty, while Treasurys frequently rally during market downturns. HEQL, conversely, provides purely leveraged equity exposure, potentially amplifying gains but also increasing the risk of notable losses during market corrections.

ETF	Leverage	MER (Approx.)	Key Assets
HEQL	1.25x	1.46%	U.S. Large-Cap, Developed International, Canadian Equities
MIX	1.25x	0% (until Apr 30, 2026, then 0.35% + borrowing costs)	equities, U.S. Treasurys, Gold
XEQT	None	0.20%	U.S., Canadian, Developed International, Emerging Markets

did you Know? Leveraged ETFs are not suitable for all investors.They carry a higher degree of risk than traditional ETFs and should only be considered by those with a robust understanding of the underlying assets and associated risks.

Pro Tip: Before investing in leveraged ETFs, carefully consider your risk tolerance, investment time horizon, and overall portfolio allocation.

Understanding Leveraged ETFs: A Long-Term perspective

leveraged ETFs can be valuable tools for refined investors seeking to enhance portfolio returns. Though, it’s crucial to understand their mechanics and inherent risks. The power of compounding can amplify gains during bull markets, but losses are also magnified during downturns. Regular portfolio rebalancing and monitoring are essential when utilizing leveraged strategies. Investors should consult a financial advisor to determine if these ETFs align with their individual investment goals and risk profile.

The use of leverage isn’t new; it’s a common practice in many areas of finance. However, deploying it within an ETF structure offers greater accessibility to retail investors. This accessibility also necessitates a higher level of due diligence and understanding of the associated risks.

Frequently Asked Questions about Leveraged ETFs

• What are leveraged ETFs? Leveraged ETFs aim to amplify the returns of an underlying index or asset class, typically by 2x or 3x, but the funds discussed here offer more moderate leverage of 1.25x.
• Are leveraged ETFs safe? No, leveraged ETFs are inherently riskier than traditional ETFs due to the use of leverage.
• What is the MER for HEQL? The current MER for HEQL is 1.46%, which includes borrowing costs.
• How does MIX differ from HEQL? MIX offers a more diversified portfolio with exposure to equities, U.S. Treasurys, and gold, while HEQL focuses solely on leveraged equity exposure.
• Is leverage always a good thing? Leverage can enhance returns in rising markets but also magnifies losses in declining markets.
• What should I consider before investing in leveraged ETFs? Investors should carefully assess their risk tolerance, investment time horizon, and overall portfolio allocation.
• Where can I find more data about these ETFs? Visit the Global X Canada and Hamilton ETFs websites for detailed fund factsheets and prospectuses.

What are your thoughts on incorporating leveraged ETFs into a long-term investment strategy? Share your opinions in the comments below!

What are the potential drawbacks of the VB/EFG combination compared to IEFA, specifically regarding expense ratios and volatility?

The iShares Core Equity ETF Portfolio (IEFA) is a popular choice for investors seeking broad market exposure with low fees. However, strategic allocation to specific ETFs can potentially yield higher returns.This article explores how combining two ETFs – the Vanguard Small-Cap ETF (VB) and the iShares MSCI EAFE Growth ETF (EFG) – can offer a compelling alternative to IEFA, aiming for outperformance while maintaining diversification. We’ll delve into the rationale,performance comparisons,risk assessments,and practical implementation strategies.

Understanding the iShares Core Equity ETF Portfolio (IEFA)

IEFA provides diversified exposure to international equities, excluding the U.S. ItS a cost-effective solution for investors wanting to avoid domestic concentration risk.However,its broad approach means it includes both value and growth stocks,large-cap and small-cap companies,and developed and emerging markets – potentially diluting returns from high-growth areas. Its expense ratio currently sits at 0.07%, making it competitive, but not immune to the benefits of targeted ETF selection. Understanding international ETF diversification is key to building a resilient portfolio.

Why Consider Alternatives to IEFA?

While IEFA is a solid foundation, several factors suggest potential for enhancement:

* Growth Potential: International developed markets, particularly those with a growth tilt, have shown strong performance in certain periods.

* Small-Cap Premium: Historically, small-cap stocks have outperformed large-cap stocks over the long term, offering a potential “small-cap premium.”

* Strategic allocation: A focused approach allows investors to overweight areas with higher expected returns.

* Factor Investing: Targeting specific factors like size (small-cap) and style (growth) can enhance portfolio performance.

The VB & EFG Combination: A Performance Deep Dive

Let’s examine how a portfolio comprised of the Vanguard Small-Cap ETF (VB) and the iShares MSCI EAFE Growth ETF (EFG) stacks up against IEFA.

Vanguard Small-Cap ETF (VB) – Capturing the Small-Cap Premium

VB tracks the CRSP US Small Cap Index, providing exposure to a broad range of small-cap U.S. companies. While seemingly counterintuitive when discussing international ETFs, including VB offers diversification benefits and historically strong returns.Its low expense ratio of 0.05% makes it an attractive option.

* Key Benefits: Exposure to high-growth potential small-cap companies, diversification within the U.S. market.

* Past Performance (as of Oct 19, 2025): VB has demonstrated an average annual return of 9.8% over the past 10 years (data sourced from Vanguard).

* Risk Profile: Higher volatility compared to large-cap ETFs, but potentially higher rewards.

iShares MSCI EAFE Growth ETF (EFG) – Focusing on International Growth

EFG focuses on growth stocks in developed markets outside of North America. This targeted approach allows investors to capitalize on the growth potential of international economies. Its expense ratio is 0.35%.

* Key Benefits: exposure to high-growth companies in developed international markets, potential for capital recognition.

* Historical Performance (as of Oct 19, 2025): EFG has delivered an average annual return of 8.5% over the past 10 years (data sourced from iShares).

* Risk Profile: Moderate volatility, sensitive to global economic conditions and currency fluctuations.

Performance Comparison: VB + EFG vs. IEFA (Past 10 Years)

ETF	Average Annual Return	Volatility (Standard Deviation)
IEFA	7.2%	12.5%
VB + EFG (60/40)	8.9%	13.8%

Note: Past performance is not indicative of future results. this is a hypothetical allocation and actual returns may vary.

as the table illustrates, a 60/40 allocation between VB and EFG has historically outperformed IEFA, albeit with slightly higher volatility. This suggests that a strategic allocation to small-cap and international growth stocks can potentially enhance returns. ETF portfolio rebalancing is crucial to maintain the desired asset allocation.

Risk Management and Considerations

While the VB/EFG combination offers potential benefits, it’s crucial to understand the associated risks:

* Currency Risk: EFG’s international exposure subjects it to currency fluctuations.

* Small-Cap Volatility: VB’s small-cap focus introduces higher volatility.

* Growth Stock Risk: Growth stocks can be more sensitive to economic downturns.

* Expense Ratios: The combined expense ratio of VB (0.05%) and EFG (0.35%) is 0.40%, slightly higher than