If you are choosing between VFV and VSP, you are deciding whether to hedge your USD currency exposure back to Canadian dollars. Both ETFs track the S&P 500, hold almost identical U.S. large-cap exposure, and charge the same 0.09% MER. The only meaningful difference is how they handle currency: VFV is unhedged (you take on USD/CAD risk), while VSP uses derivative instruments to hedge that exposure back to CAD. That single decision has driven a substantial long-term performance gap.
Quick verdict: Choose VFV if you want pure S&P 500 exposure and are comfortable with USD/CAD currency fluctuations. Over the long term, unhedged has typically outperformed because USD has trended stronger versus CAD. Choose VSP if you specifically want to remove currency risk — for example, if you are within 2–5 years of needing the money and don’t want a CAD rally to wipe out your gains right before withdrawal. Hedging is not free: VSP has trailed VFV by ~3.5% per year over the past 5 years.
If you are still new to ETFs, it helps to understand the basics of what an ETF is and what MER means before deciding which version of the S&P 500 fits your portfolio.
VFV Overview
VFV (Vanguard S&P 500 Index ETF) tracks the S&P 500 Index without currency hedging. When you own VFV, you are effectively long both the U.S. stock market and the U.S. dollar (because the underlying assets are USD-denominated). Currency movements feed directly into your CAD-denominated returns.
Key details:
- Inception: November 2, 2012
- Assets Under Management (AUM): ~$27.8 billion CAD
- Management Fee: 0.08%
- Management Expense Ratio (MER): 0.09%
- Distribution Yield: 1.2% (equity yield)
- Distribution Frequency: Quarterly
- Number of Holdings: 504
- Currency Hedging: No (unhedged USD exposure)
- Risk Level: Medium
VFV’s holdings — NVIDIA, Apple, Alphabet, Microsoft, Amazon, Broadcom, Meta, Tesla, Berkshire Hathaway, and JPMorgan Chase — make up about 38% of the fund. The remaining ~62% is spread across the rest of the S&P 500. Information Technology dominates at ~33% of the index, with Financials, Communication Services, Consumer Discretionary, and Health Care rounding out the major sectors.
Since VFV is unhedged, your returns in CAD are a combination of (a) the S&P 500’s USD performance and (b) USD/CAD exchange rate movements. When the U.S. dollar strengthens against the loonie, your VFV returns get a tailwind. When the loonie strengthens, you face a headwind on top of whatever the S&P 500 did.
VSP Overview
VSP (Vanguard S&P 500 Index ETF, CAD-hedged) is the currency-hedged sibling of VFV. It holds the same underlying U.S.-domiciled Vanguard S&P 500 ETF but adds derivative contracts that hedge the USD exposure back to Canadian dollars. The goal: deliver the S&P 500’s USD return without the noise of currency fluctuations.
Key details:
- Inception: November 2, 2012
- Assets Under Management (AUM): ~$5.15 billion CAD
- Management Fee: 0.08%
- Management Expense Ratio (MER): 0.09%
- Distribution Yield: 1.2% (equity yield)
- Distribution Frequency: Quarterly
- Number of Holdings: 504 (same as VFV)
- Currency Hedging: Yes (CAD-hedged)
- Risk Level: Medium
Since VSP holds the same underlying S&P 500 portfolio as VFV, the equity exposure is identical: same 504 stocks, same sector weights, same dividends. The hedging is implemented through forward currency contracts that Vanguard rolls regularly. There can be an implicit cost to this hedging beyond the stated MER, showing up through tracking difference over time.
VSP is much smaller than VFV ($5.15B vs $27.8B AUM). That is normal — most Canadian investors choose unhedged for long-term equity exposure, so the hedged versions of broad index ETFs typically have lower demand.
VFV vs VSP: Side-by-Side Comparison
| Feature | VFV | VSP |
|---|---|---|
| Provider | Vanguard Canada | Vanguard Canada |
| Index Tracked | S&P 500 | S&P 500 (CAD-hedged) |
| Currency Exposure | USD (unhedged) | CAD (hedged) |
| MER | 0.09% | 0.09% |
| AUM | ~$27.8 billion | ~$5.15 billion |
| Number of Holdings | 504 | 504 |
| Distribution Yield | 1.2% | 1.2% |
| Distribution Frequency | Quarterly | Quarterly |
| 2025 Calendar Return | +12.23% | +15.61% |
| 5-Year Annualized Return (NAV) | 13.97% | 10.40% |
| Since Inception (annualized) | 16.60% | 12.80% |
Fund data sourced from Vanguard Canada VFV and VSP fact sheets dated March 31, 2026. ETF metrics change quarterly — verify current figures before investing.
The Real Cost of Hedging
Look at the side-by-side table above and the gap is clear: VFV has dramatically outperformed VSP over the long run. Over 5 years, VFV returned 13.97% annualized vs VSP’s 10.40% — a 3.57 percentage point gap per year. Since inception (Nov 2012), VFV is at 16.60% vs VSP’s 12.80% — almost a 4-point annualized gap over 13+ years.
This gap exists because the Canadian dollar has generally weakened against the U.S. dollar over that period. When you hold VFV unhedged and USD strengthens, your CAD-denominated return gets a boost. VSP’s hedging removes that boost — and in a sustained USD bull market, removing the boost is a meaningful drag.
But hedging is not always a loser. In 2025, the dynamic flipped: VSP returned +15.61% vs VFV’s +12.23% — a 3.4-point lead for the hedged fund in a single year. That happened because the Canadian dollar strengthened against USD in 2025, making unhedged VFV a worse trade than hedged VSP.
Hedging is a bet, not a risk eliminator
The most common misconception about VSP is that it “removes risk.” It does not — it removes one specific risk (currency volatility) while leaving you fully exposed to the S&P 500’s equity volatility. And in exchange, you give up the chance for a currency tailwind. Over the long run, that has been a losing trade for Canadian investors. Over short windows, it can win.
If you don’t have a strong view on USD/CAD direction, the default for Canadian long-term equity exposure has historically been unhedged. The diversification benefit of holding USD-denominated assets — particularly during episodes when the loonie weakens (often in commodity downturns or risk-off markets) — is a real source of portfolio resilience that hedging removes.
VFV vs VSP: Pros and Cons
VFV Pros:
- Larger AUM and tighter spreads ($27.8B vs $5.15B)
- Historically higher long-term returns (~3.5–4% annualized advantage over 5+ years)
- Provides USD currency diversification — a genuine portfolio benefit
- No hedging tracking error or roll costs
VFV Cons:
- Returns are noisier — currency movements add volatility
- If CAD strengthens significantly during your holding period, you give back gains
- Bad fit for short-horizon investments where currency timing matters
VSP Pros:
- Removes USD/CAD currency risk — returns track the S&P 500’s USD performance directly
- Useful when you have a defined need-by date (e.g., funding a specific purchase in 2–3 years)
- Outperforms VFV when CAD strengthens against USD (as in 2025)
VSP Cons:
- Has historically trailed VFV by ~3.5–4% per year over 5+ year stretches
- Hedging carries small implicit costs beyond the stated MER
- Removes the diversification benefit of USD currency exposure
- Smaller AUM and slightly wider spreads
Why Choose One Over the Other?
- Time Horizon: Long-horizon investors (10+ years) generally do better with VFV. Short-horizon investors with a fixed end date may prefer VSP to remove a wildcard.
- USD/CAD view: If you think CAD will strengthen meaningfully, VSP. If you think USD will hold or strengthen, VFV. If you don’t have a view, default to VFV — historical odds favour unhedged.
- Diversification angle: Many advisors argue that USD exposure adds diversification because the loonie tends to weaken when commodity-driven Canadian markets struggle. VFV captures that benefit; VSP sterilizes it.
Should You Hold Both VFV and VSP?
Holding both is one way to express a “neutral” view on USD/CAD — you split your S&P 500 allocation 50/50 between unhedged and hedged. The result is essentially a half-hedge, which is sometimes recommended by advisors who don’t want to make a directional currency call.
That said, the simpler approach is to pick one based on your time horizon. For tax-sheltered, long-term accounts (TFSA/RRSP), the long-run odds favour unhedged VFV. For defined-need money inside 2–3 years, VSP removes one source of variability. Holding both adds complexity without obviously improving outcomes.
Who Should Buy VFV vs VSP?
You should buy VFV if:
- You have a long time horizon: 10+ years out, currency volatility evens out and unhedged usually wins.
- You want USD currency diversification: A natural hedge against domestic Canadian downturns.
- You don’t want to bet on currency direction: VFV is the path of less assumption — you just hold the underlying U.S. equity exposure as it is.
You should buy VSP if:
- You have a short, defined time horizon: 2–5 years until you need the money — currency volatility could meaningfully change your withdrawal value.
- You believe CAD will strengthen against USD: Hedging captures the benefit of a rising loonie.
- You want returns to track the S&P 500’s USD performance directly: Easier to understand without the FX layer.
Both VFV and VSP can be bought commission-free on Questrade or Wealthsimple. Both are TFSA, RRSP, FHSA, RESP, and non-registered eligible.
Final Thoughts
VFV vs VSP is one of the cleanest currency-hedging decisions in Canadian investing. Same fund family, same index, same fees — just one is hedged and one isn’t.
The historical track record favours unhedged VFV by a wide margin (3.5–4% per year over multi-year stretches). That advantage is real, but it is not guaranteed — 2025 was a clear example of hedged VSP winning when the loonie strengthened.
For most long-term Canadian investors building wealth in a TFSA or RRSP, default to VFV. It captures the S&P 500 plus a free USD diversification benefit, at the same MER as VSP. Reach for VSP only when you specifically want to remove currency from the equation — typically because you have a short time horizon or you have a directional view that CAD will strengthen.
Check out our other ETF comparison articles:
VFV vs VSP FAQ
What does “currency-hedged” actually mean?
VSP uses derivative contracts (typically forward currency contracts) to offset its USD exposure. The result is that USD/CAD movements don’t materially affect your returns — you get the S&P 500’s USD performance translated to CAD without the currency layer.
Why has VFV outperformed VSP so much?
USD has generally strengthened against CAD over the past decade. When you hold unhedged VFV, that currency tailwind adds to your returns. VSP’s hedging removes that tailwind. Over 5 years, the gap is about 3.5% per year (13.97% vs 10.40%).
Should I switch from VFV to VSP if I think CAD will rally?
That is a directional currency bet. Most retail investors don’t have an edge in predicting currency moves. If you have strong conviction CAD is undervalued, VSP captures the potential rally. If you don’t have a view, default to VFV.
Can I hold VFV or VSP in my TFSA or RRSP?
Yes, both are eligible for TFSAs, RRSPs, FHSAs, RESPs, and non-registered accounts. Because VFV and VSP are Canadian-listed ETFs, U.S. dividend withholding tax can still apply inside the fund even when you hold them in a registered account. The RRSP treaty benefit is cleaner when holding U.S.-listed ETFs directly.
What about ZUE — BMO’s hedged S&P 500 ETF?
ZUE is BMO’s CAD-hedged equivalent of ZSP. It is essentially the BMO version of VSP, the same way ZSP is the BMO version of VFV. The hedged-vs-unhedged decision is what matters; the provider choice is secondary.
Disclaimer: The information in this article is for educational purposes and should not be taken as personalized financial advice. Both VFV and VSP are solid S&P 500 ETFs, but it is important to do your own research (as we have with sources like Vanguard Canada) and consider your unique financial situation or consult a financial advisor before making investment decisions. Investing in ETFs carries risks including possible loss of principal — always ensure any investment aligns with your objectives and risk tolerance.
Last updated: May 1, 2026
