Global Tracker Funds

MPN

Thanks for the links Coatline.

I would be very interested to hear opinions/comments on Etf's vs OEIC/UT trackers?

grey_gym_sock

there is a bit less protection for ETFs than for UK-based OEICs/UTs. however, providing the ETFs are physically replicated, and from mainstream providers (vanguard, ishares, hsbc, etc), then we are talking about protection from some pretty remote risks, so i would not be too concerned about it.

(synthetically replicated ETFs carry additional kinds of risk, and i would avoid them altogether.)

other things being equal, i would prefer to hold a UK OEIC/UT rather than a physical ETF (or than an offshore OEIC). but they're not always equal. i do use ETFs in my youinvest account, partly because that keeps the platform charges down. OTOH, in my iweb account, where there's no difference in platform charges, i use OEICs/UTs.

MPN

grey_gym_sock wrote: »

there is a bit less protection for ETFs than for UK-based OEICs/UTs. however, providing the ETFs are physically replicated, and from mainstream providers (vanguard, ishares, hsbc, etc), then we are talking about protection from some pretty remote risks, so i would not be too concerned about it.

(synthetically replicated ETFs carry additional kinds of risk, and i would avoid them altogether.)

other things being equal, i would prefer to hold a UK OEIC/UT rather than a physical ETF (or than an offshore OEIC). but they're not always equal. i do use ETFs in my youinvest account, partly because that keeps the platform charges down. OTOH, in my iweb account, where there's no difference in platform charges, i use OEICs/UTs.

Thanks for you input and yes I was only looking at the physically replicated ETF's as opposed to synthetic but its reassuring to know that the major companies like Vanguard, HSBC are relatively safe but so was the Lehman Brothers!?

grey_gym_sock

MPN wrote: »

its reassuring to know that the major companies like Vanguard, HSBC are relatively safe but so was the Lehman Brothers!?

my point wasn't that the major companies won't go bust.

that shouldn't even matter, because the ETF's assets are supposed to be kept separate from the management company's assets. which means that, if the manager goes bust, the ETF's assets can't be taken to pay the manager's debts. all that would happen is that a new manager would have to be found (and there might be a brief period during which you couldn't access your investment, while this was being organized).

the only risk is that the ETF's assets were never kept properly separate in the first place. i can only see 2 ways that could happen:

1) in case the investment manager is really just a madoff-style scam, where they never really invest your money in the first place, but use it for their own purposes, and send you entirely fictitious reports about your current investment status. which i think is implausible for any mainstream investment company, not just for the very biggest. note that fund managers (both ETFs and OEICs/UTs) use a separate company as a "custodian", who looks after the assets; which is a useful layer of protection - madoff did all that in-house, which is 1 reason he could get away with it for so long.

2) in case there are very serious administrative errors, as a result of which it's not clear exactly which assets belong to which fund, or to which investor, perhaps there is something missing somewhere, and it will definitely take a long time to sort it all out. i'm guessing this might be less likely to happen at the major companies, or at least that it would be more easily fixed. but it's very unlikely happen anywhere.

it's only in the event of failures such as (1) or (2), and of the manager being liable to compensate investors for resulting losses but being unable to because they've gone bust, that you might want to call on the FSCS for compensation. and then you only can call on the FSCS for a UK fund, not for an offshore fund (or an offshore ETF). but you're more likely to want to call ghostbusters

MPN

grey_gym_sock wrote: »

my point wasn't that the major companies won't go bust.

that shouldn't even matter, because the ETF's assets are supposed to be kept separate from the management company's assets. which means that, if the manager goes bust, the ETF's assets can't be taken to pay the manager's debts. all that would happen is that a new manager would have to be found (and there might be a brief period during which you couldn't access your investment, while this was being organized).

the only risk is that the ETF's assets were never kept properly separate in the first place. i can only see 2 ways that could happen:

1) in case the investment manager is really just a madoff-style scam, where they never really invest your money in the first place, but use it for their own purposes, and send you entirely fictitious reports about your current investment status. which i think is implausible for any mainstream investment company, not just for the very biggest. note that fund managers (both ETFs and OEICs/UTs) use a separate company as a "custodian", who looks after the assets; which is a useful layer of protection - madoff did all that in-house, which is 1 reason he could get away with it for so long.

2) in case there are very serious administrative errors, as a result of which it's not clear exactly which assets belong to which fund, or to which investor, perhaps there is something missing somewhere, and it will definitely take a long time to sort it all out. i'm guessing this might be less likely to happen at the major companies, or at least that it would be more easily fixed. but it's very unlikely happen anywhere.

it's only in the event of failures such as (1) or (2), and of the manager being liable to compensate investors for resulting losses but being unable to because they've gone bust, that you might want to call on the FSCS for compensation. and then you only can call on the FSCS for a UK fund, not for an offshore fund (or an offshore ETF). but you're more likely to want to call ghostbusters

Thanks for clarifying this and I'm sure it will be an interesting post to other forum members who are thinking about whether to go the ETF or OEIC/UT route.

coastline

MPN wrote: »

Thanks for clarifying this and I'm sure it will be an interesting post to other forum members who are thinking about whether to go the ETF or OEIC/UT route.

Some investors will like the idea of trading online with an instant price similar to a quote for a share..
Others will be looking at the annual fees etc...see the link below..
As stated in previous posts most investors will be sticking with the physical and general ETF's such as VWRL.

http://www.hl.co.uk/investment-services/isa/savings-interest-rates-and-charges

http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates

MPN

coastline wrote: »

Some investors will like the idea of trading online with an instant price similar to a quote for a share..
Others will be looking at the annual fees etc...see the link below..
As stated in previous posts most investors will be sticking with the physical and general ETF's such as VWRL.

http://www.hl.co.uk/investment-services/isa/savings-interest-rates-and-charges

http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates

I'm with Fidelity for my S&S Isa's and they do not charge their 0.35% platform fee for either the HMWO or the VWRL. However, they do charge their platform fee on top of the OMC for OEIC/UT's trackers?

Do all platforms charge such as HL and Fidelity charge their full platform fee for OEIC/UT trackers?

Wagas

I like the look of VWRL but as it's an ETF I gather you can't buy ACC units and instead you have to re-invest the dividend via your platform. I'm with HL and they charge for re-investing the divi. So is there a VWRL equivalent fund that can be purchased as ACC?

Thanks

bowlhead99

Wagas wrote: »

I like the look of VWRL but as it's an ETF I gather you can't buy ACC units and instead you have to re-invest the dividend via your platform. I'm with HL and they charge for re-investing the divi. So is there a VWRL equivalent fund that can be purchased as ACC?

Not many that I know of, if you are looking for an ETF and a cheap one to boot.

iShares do an accumulating/capitalising ETF that covers the MSCI World index, their "iShares Core MSCI World UCITS ETF". It is not an equivalent to the VWRL fund because it only covers developed world, but it is accumulating as you are looking for and the price is a reasonable 0.2%.

https://www.ishares.com/uk/individual/en/products/251882/SWDA

Alternatively iShares also do one that tracks the MSCI ACWI index. The all companies world index does include emerging markets as well as developed markets, so it's MSCI's equivalent of FTSE All-World and would meet your criteria of doing the same thing as VWRL while being accumulating. The London ticker for iShares MSCI ACWI UCITS ETF, is SSAC.

However, that one is not part of iShares 'core' range of cheapest products, and is 0.60% a year which is quite a lot more than Vanguard's. It's also <$400m in size compared to SWDA's $8bn, so may be less liquid when you are buying in or selling out.

There are a couple of relevant comments to make:

1) the 'cost' of failing to immediately reinvest a couple of percent dividend, if delayed for an entire year in which the average return of the product was say 6%, would be 6% of the 2% which is 0.12%. That is not a very high annual cost. So there is no need to immediately receive the dividend received from the global tracker if you are already going to buy some more of the fund a year or two later - it wouldn't make sense to incur an significantly higher fee from the fund to have an 'accumulating' product if you can instead just roll it into your annual rebalance process.

2) If you get an accumulating ETF that rolls up its income and reinvests it without ever paying it out, you need to make sure it is a 'reporting' fund for HMRC purposes so you don't have to pay income tax on all the gains under HMRC's anti-avoidance rules. Both of the iShares funds mentioned are on the HMRC approved list as reporting funds. Being a reporting fund means you will be able to get a report from them which shows what income it earned and reinvested without distributing, so you can pay your dividend tax on that. So it means you are going to have to wait to get its annual report, however many months after its accounting year-end, before you can work out what taxes you owe on the dividends it earned and internally reinvested.

That second point may or may not be relevant to you - it's certainly not a big deal for SIPP or ISA investors who don't pay tax - but for other investors who are not using a tax wrapper, it's potentially a pain. Even though you may know that you're within your annual dividend and gains limits, you still need to get the documents and do your recordkeeping to prove that you are indeed within your annual dividend and gains limits.

ColdIron

Wagas wrote: »

I'm with HL and they charge for re-investing the divi

HL will do automatic dividend reinvestment for you, it costs 1% (£1 minimum, £10 maximum). If you only get £10 a quarter from VWRL that's 10% but in reality it's only a quid and may be the easiest option for you