Vanguard All World ETF vs Global Fund

Aidanmc

I have been looking at these two investments:
Vanguard Global All Cap Index fund
Vanguard All World UCITS ETF
When comparing the charts for these products i see they track more or less identical and the fees are also similar at 0.24% and 0.25%.
What would be the advantage of holding an ETF investment vs a fund investment or vice versa within a S&S Isa for example?
Thanks

masonic

The fund investment has FSCS protection, while the ETF does not. The fund can only be traded once per day (when markets are open), whereas the ETF can be traded instantly. The fund may attract lower (or no) trading charges. The ETF may incur lower (or no) custody charges. There may be a bid/offer spread on the ETF, whereas the fund has a single price. Likely the asset allocation is not exactly the same between the fund and ETF. You have a choice between income and accumulation units for the fund, but not the ETF. There are probably other differences.

ChesterDog

Further to Masonic's thorough answer, IIRC the fund includes small companies whereas the ETF does not.

Clearly this might have an effect on relative performance over the long term, but it's likely the effect would be small.

IanManc

masonic wrote: »

The fund investment has FSCS protection, while the ETF does not. The fund can only be traded once per day (when markets are open), whereas the ETF can be traded instantly. The fund may attract lower (or no) trading charges. The ETF may incur lower (or no) custody charges. There may be a bid/offer spread on the ETF, whereas the fund has a single price. Likely the asset allocation is not exactly the same between the fund and ETF. You have a choice between income and accumulation units for the fund, but not the ETF. There are probably other differences.

Here are a few more:

The ETF invests in 3201 stocks, the fund in 6196 stocks.

The median market capitalisation of the stocks in which the ETF invests is £53.1BN, while in the fund it is £33.1BN.

The concentration of the ETF in the top ten stocks is 11.23% and for the fund is 10.01%.

The geographical spread is slightly different, e.g. the ETF is 54.1% invested in the US and the fund is 54.7% invested in the US.

(The above illustrate the points that Masonic and ChesterDog referred to about the composition of the investments.)

The ETF yields 2.13% which is paid quarterly, while the Inc units of the fund yield 1.84% paid annually.

The fund is UK domiciled, whereas the ETF is Irish domiciled, so any income from the ETF is foreign income and goes in a different section on your tax return if held outside an ISA or pension.

No doubt there are other differences too.

dales1

Further to Masonic's lightning-speed answer, I would add that, when buying or selling, the price of the ETF is on the screen when you choose to commit, whereas you buy or sell the Fund "blind" at the uncertain next valuation point price.
Also, as a second-order difference, when selling the Fund to buy another one you will be out of the market for a few days, whereas on some platforms you can sell and buy ETFs contemporaneously and avoid being out of the market (and losing out from rising prices).
Also, the ongoing custody charges that Masonic mentions, may be more important to you than the initial trading charges.
Dales.

AnotherJoe

masonic wrote: »

The fund investment has FSCS protection, while the ETF does not[\B]. The fund can only be traded once per day (when markets are open), whereas the ETF can be traded instantly. The fund may attract lower (or no) trading charges. The ETF may incur lower (or no) custody charges. There may be a bid/offer spread on the ETF, whereas the fund has a single price. Likely the asset allocation is not exactly the same between the fund and ETF. You have a choice between income and accumulation units for the fund, but not the ETF. There are probably other differences.

Is that relevant? To say it has FSCS protection could mean, to some readers, that you are protected against it deceasing in value, which of course you are not. I doubt there's any actual practical difference between the two in terms of whatever the FSCS protection would provide. You might as well say it's protected from attack by dragons.

masonic

AnotherJoe wrote: »

Is that relevant? To say it has FSCS protection could mean, to some readers, that you are protected against it deceasing in value, which of course you are not. I doubt there's any actual practical difference between the two in terms of whatever the FSCS protection would provide. You might as well say it's protected from attack by dragons.

You are of course free to doubt there is any difference between the two, just as you have previously conflated FCA regulation and FSCS protection.

The facts, however, differ, and investing in the ETF leaves you vulnerable to counterparty risk that investing in the fund (within the FSCS limits) does not. You may well say that Vanguard is such a massive company that it could never suffer institutional fraud to the degree that the FSCS might be expected to pay out. However, if you read the OP carefully, the question posed was not specific to Vanguard ETFs, and there are a whole host of small niche ETF providers who might be more at risk of running off with investor capital - a situation where ETF investors would suffer a loss, while investors in open ended funds would be compensated by the FSCS.

AnotherJoe

masonic wrote: »

You are of course free to doubt there is any difference between the two, just as you have previously conflated FCA regulation and FSCS protection.


Thats a low blow and not relevant to this specific issue especially since I made no mention of FCA


The facts, however, differ, and investing in the ETF leaves you vulnerable to counterparty risk that investing in the fund (within the FSCS limits) does not. You may well say that Vanguard is such a massive company that it could never suffer institutional fraud to the degree that the FSCS might be expected to pay out.



Vanguard is such a massive company that it could never reasonably be expected to suffer institutional fraud to the degree that the FSCS might be expected to pay out.



However, if you read the OP carefully, the question posed was not specific to Vanguard ETFs,

Thats a very good point, though I suspect the OP was more likely asking the question regards these two specific funds, but if it was only a more general question then yes you are absolutely correct


and there are a whole host of small niche ETF providers who might be more at risk of running off with investor capital - a situation where ETF investors would suffer a loss, while investors in open ended funds would be compensated by the FSCS.

I agree. But in the context (which the OP may not have been asking) of "is there any practical difference between these two specific funds which should make me invest in one or the other" then I'd stand by my point as regards FSCS protection its as useful as an insurance policy against dragon attack.

masonic

AnotherJoe wrote: »

I agree. But in the context (which the OP may not have been asking) of "is there any practical difference between these two specific funds which should make me invest in one or the other" then I'd stand by my point as regards FSCS protection its as useful as an insurance policy against dragon attack.

Lack of FSCS protection hasn't stopped me investing mostly in ITs and ETFs. But I understand that there is a more substantial counterparty risk involved with these types of investment. I consider it not to be a practical difference, because I have looked into the background of each provider.

One could make the same argument for several of the other differences pointed out in this thread (that they are of no practical difference). Whether or not it is a practical difference, or just a difference should be left to the individual investor to consider based on their own circumstances.