Global Tracker Funds

MPN

I know most platforms do not charge their platform fee for ETF's but does anybody know if any platform has low fees for OEICS/UT passive trackers? As an example HL charge 0.45% on top of the trackers charge so this makes it relatively expensive?

bigadaj

The lowest percentage based brokers are 0.25%.

Fixed fee brokers can work out far cheaper on larger sums but generally it's trading costs, though can be very cheap when operating a buy and hold strategy with infrequent purchases.

Plus

Depending on the amounts and timescales, it might make sense to have a two-broker approach:

Broker A charges a percentage fee. You make monthly purchases there

Broker B charges deal fees. Every two years (say) you sell your holdings at A and buy a lump sum of the same fund at B.

The result is you only pay percentage fees on 2 years' worth of holdings and only one deal fee per two years, which is the best of both worlds.

forextc

To throw another fund into the mix I went through the same process looking for a global fund and in the end settled on HSBC FTSE All World Index Fund C Acc. It's an OEIC with an OCF/TER of 0.20.

Why did I settle on this? Well it's a little pricier than some but offers a good Emerging markets element of around 7-8%. Personally I like to see this added diversity in a world fund and for me this negated the need to hold a separate fund within that portfolio.

The emerging markets exposure looks largely to be at the expense of North American holdings, which are nearer the 50% level than 60% held in similar funds. Again I'm not chasing an edge, but just have a personal preference.

L&G offer a similar fund which is attempting to replicate the same index. It's cheaper but has a much lower emerging markets element. I'd imagine the sheer universe that these funds are trying to cover means that they use some form of partial replication to follow the benchmark.

The important thing to remember if you want to go the passive route is that it's supposed to be simple. Having made the choice to go the passive path you have already dispensed with the vagaries of much active management performance.

The individual micro differences between funds make only small performance differentials over most available data - compare performance figures for the global funds from Fidelity, L&G, Vanguard, HSBC and you will find that there is no universal best performing fund over each incremental time period. Performance also cannot account for changes in fees and this is competitive market space so fees could change again over time.

All the funds mentioned in this thread are significantly cheaper than most active counterparts and provide decent share diversification for a good price.

As a footnote I also hold the Fidelity Worldwide in my Fidelity SIPP as it's very cheap on their platform.

MPN

forextc wrote: »

To throw another fund into the mix I went through the same process looking for a global fund and in the end settled on HSBC FTSE All World Index Fund C Acc. It's an OEIC with an OCF/TER of 0.20.

Why did I settle on this? Well it's a little pricier than some but offers a good Emerging markets element of around 7-8%. Personally I like to see this added diversity in a world fund and for me this negated the need to hold a separate fund within that portfolio.

The emerging markets exposure looks largely to be at the expense of North American holdings, which are nearer the 50% level than 60% held in similar funds. Again I'm not chasing an edge, but just have a personal preference.

L&G offer a similar fund which is attempting to replicate the same index. It's cheaper but has a much lower emerging markets element. I'd imagine the sheer universe that these funds are trying to cover means that they use some form of partial replication to follow the benchmark.

The important thing to remember if you want to go the passive route is that it's supposed to be simple. Having made the choice to go the passive path you have already dispensed with the vagaries of much active management performance.

The individual micro differences between funds make only small performance differentials over most available data - compare performance figures for the global funds from Fidelity, L&G, Vanguard, HSBC and you will find that there is no universal best performing fund over each incremental time period. Performance also cannot account for changes in fees and this is competitive market space so fees could change again over time.

All the funds mentioned in this thread are significantly cheaper than most active counterparts and provide decent share diversification for a good price.

As a footnote I also hold the Fidelity Worldwide in my Fidelity SIPP as it's very cheap on their platform.

That's a very interesting post - thank you. I must admit I did not know about the HSBC FTSE All World Fund and its very good to know its an OEIC instead of the HSBC MSCI World ETF.

It is also a very reasonable price at 0.20 but there will also be the Fidelity platform fee of 0.35 on top of this?

I am with Fidelity a well so will take a look at the Fidelity Worldwide fund as well. Thanks again for your input.

forextc

You are welcome. Yes the standard platform fee is added on top of the fund fee.

bowlhead99

forextc wrote: »

To throw another fund into the mix I went through the same process looking for a global fund and in the end settled on HSBC FTSE All World Index Fund C Acc

L&G offer a similar fund which is attempting to replicate the same index. It's cheaper but has a much lower emerging markets element. I'd imagine the sheer universe that these funds are trying to cover means that they use some form of partial replication to follow the benchmark.

It's a misunderstanding that they are attempting to replicate the same index. The HSBC one is attempting to replicate FTSE All World, while the L&G one is attempting to replicate the FTSE World. The former covers all developed and emerging markets from FTSE's list, while the latter now only includes developed and 'advanced emerging' markets. So with FTSE World you will get Brazil and Taiwan and Mexico and South Africa, but you won't get China, India, Russia, Indonesia etc.

That not-all-world index is some 2550 stocks instead of 3000 in the all-world because of the non-inclusion of those areas, and using fewer stocks drops the market coverage from over $37 trillion to under 35.5, as of end of November, and means the top 10 holdings are closer to 9.5% of the portfolio instead of 9% in the All-World.

As you mention elsewhere in your post, many global trackers using different indices produce similar overall results without a clear 'winner' ; this is because sometimes the countries excluded from one index will do better than the weighted average of the countries included, and other times they won't - while at the core, most of what you are investing in is the same.

However if you are a fan of passive investing it doesn't seem logical to cut out entire regions on the grounds that the results will probably be similar, unless the cost savings are massive and the regions you ignore could never generate a return to beat the cost savings. For example for calendar year 2013, FTSE's factsheet showed total return of 24.7% in FTSE World and 26.8% in FTSE All World. And you did not save as much as 2.1% of fees by choosing a fund product which tracked the less-complete index...

In other years it might be the other way in terms of which index comes out on top, for example in 2015 the World only lost 1.4% while All-world lost 1.7%. But it's important to realise that a World product that performed better that year was not simply doing better because of some fee differential or and inherent efficiency of tracking fewer stocks, it did better because it excluded some of the markets which had a bad year.

You mentioned that one seemed to have more US and the other seemed to have more emerging. Basically if you cut out countries or regions (like UK in an ex-UK fund, or China and India in the FTSE World, or all emerging markets in MSCI World), then the largest beneficiaries of the drop will be the largest of the other countries by value, i.e. USA is going to take over 50% of it.

But to go back to your comment which I quoted above, it's not the case that L&G are attempting to replicate the same index and have decided to only partially replicate it so have a large difference in what they allocate to emerging markets vs the USA. They would be a bad tracker if they did that, with large tracking error. No, what is actually happening is that they are tracking a different index; they are still tracking what FTSE tells them to track when they get the new index constituents list every quarter.

As a footnote I also hold the Fidelity Worldwide in my Fidelity SIPP as it's very cheap on their platform.

Not sure on the exact product you are holding there, but Fidelity seem to have a Fidelity Index World Fund which uses MSCI World (i.e. excluding emerging markets, rather than the MSCI All Companies World Index which is more like the FTSE All-World) and they also have a Fidelity Global Equity Index Fund which uses FTSE World (as described up above, which only includes some of the emerging markets). They also have active worldwide funds.

Anyway, the obvious point to make is that if a fund is available cheaply via a particular platform (particularly an affiliated platfom) then it might not be the cheapest platform you can find . For example if Fidelity make the Class P of their Fidelity Index World Fund available at 0.13%, but only via their platform which costs 0.35%, it is basically costing you half a percent all in; and at a different provider charging 0.25% or less for platform services you could afford 0.25% for a fund, so could easily afford the HSBC All-World tracker, and then you would be getting more emerging markets rather than needing to buy the emerging markets separately.

Obviously if you have half a million quid in your Fidelity SIPP you are only paying 0.2% for the platform so with the low fund price you get the whole lot for 0.33%; but at that kind of value there are other providers which significantly undercut the 0.2% platform fee anyway.

That's not intended to be a criticism of you or of Fidelity, there is more to a platform than price and obviously it's a hassle to move providers when you're only looking at a few basis points of cost differential.

MPN

Am I right that the HSBC MSCI World Ucits (ETF-0.15%) covers only the developed world but the HSBC FTSE All World Index Fund (OEIC- 0.20%)) covers the whole world market?

Also what is the fundamental difference between a tracker than covers the MSCI to one that covers the FTSE (as above) or are they just different indexes but basically covering the same thing?

bowlhead99

MPN wrote: »

Am I right that the HSBC MSCI World Ucits (ETF-0.15%) covers only the developed world but the HSBC FTSE All World Index Fund (OEIC- 0.20%)) covers the whole world market?

Also what is the fundamental difference between a tracker than covers the MSCI to one that covers the FTSE (as above) or are they just different indexes but basically covering the same thing?

MSCI (morgan stanley capital international) and FTSE (originally named for financial times stock exchange but now a business just called FTSE Russell) are two separate providers of financial data who compile and make available a lot of different financial indices and statistics.

Then, people running index funds will tell you what index it is that they are trying to track.

Basically you could say that MSCI's ACWI (all companies world index) is a competitor to FTSE's All World. Both covering major large-cap and mid-cap shares listed in developed and emerging economies with the largest companies weighted the heaviest. FTSE's version covers $37.1 trillion of companies and ACWI covers fewer companies, but still $36.8 trillion. It is basically the same stuff.

Then they each slice and dice them into different sub indexes.

For example MSCI "World" only covers developed countries so is less complete than their ACWI, missing emerging markets

Similarly FTSE's "World" only covers developed and advanced emerging countries, missing some emerging markets. But FTSE's "Developed Index" and "Emerging" are offered separately if you wanted to construct your own mix.

All of the above are looking at large-cap and mid-cap companies only. However, FTSE for example do a separate "FTSE Global Small Cap" index which can be combined with the "FTSE Global Mid Cap" and the "FTSE Global Large Cap" to create the "FTSE Global All Cap", having about $42.1 trillion of coverage.


As you've noticed, the two HSBC products you are looking at are using two different data suppliers, and also you are right that the MSCI World is an index of 23 developed countries only (rather than their MSCI ACWI which would be an index of 23 developed countries and 23 emerging countries.

MSCI ACWI factsheet:
https://www.msci.com/documents/10199/8d97d244-4685-4200-a24c-3e2942e3adeb

FTSE All-World factsheet
http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=AWORLDS&IsManual=False

MonroeM

bowlhead99 wrote: »

MSCI (morgan stanley capital international) and FTSE (originally named for financial times stock exchange but now a business just called FTSE Russell) are two separate providers of financial data who compile and make available a lot of different financial indices and statistics.

Then, people running index funds will tell you what index it is that they are trying to track.

Basically you could say that MSCI's ACWI (all companies world index) is a competitor to FTSE's All World. Both covering major large-cap and mid-cap shares listed in developed and emerging economies with the largest companies weighted the heaviest. FTSE's version covers $37.1 trillion of companies and ACWI covers fewer companies, but still $36.8 trillion. It is basically the same stuff.

Then they each slice and dice them into different sub indexes.

For example MSCI "World" only covers developed countries so is less complete than their ACWI, missing emerging markets

Similarly FTSE's "World" only covers developed and advanced emerging countries, missing some emerging markets. But FTSE's "Developed Index" and "Emerging" are offered separately if you wanted to construct your own mix.

All of the above are looking at large-cap and mid-cap companies only. However, FTSE for example do a separate "FTSE Global Small Cap" index which can be combined with the "FTSE Global Mid Cap" and the "FTSE Global Large Cap" to create the "FTSE Global All Cap", having about $42.1 trillion of coverage.


As you've noticed, the two HSBC products you are looking at are using two different data suppliers, and also you are right that the MSCI World is an index of 23 developed countries only (rather than their MSCI ACWI which would be an index of 23 developed countries and 23 emerging countries.

MSCI ACWI factsheet:
https://www.msci.com/documents/10199/8d97d244-4685-4200-a24c-3e2942e3adeb

FTSE All-World factsheet
http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=AWORLDS&IsManual=False

Please excuse my ignorance but does that mean that basically there is no real difference between the two indexes if you are investing in a tracker?