Vanguard Reducing Fees

Rheumatoid

talexuser wrote: »

Very nice reductions on my VERX and VJPN, none on VNRT but that was 0.1 anyway.

I've got a fair bit of FTSE U.K. Equity Income Index Fund - good reduction on that.

bowlhead99

Rheumatoid wrote: »

I've got a fair bit of FTSE U.K. Equity Income Index Fund - good reduction on that.

FWIW:
Though it's heresy to suggest active management in Vanguard circles, they launched their UK active fund last week. The money is split between two sub managers (Baillie Gifford and Marathon AM) with a price not too extreme considering it's active management (but more than the index, obvs.) at 0.45%.

MK62

bowlhead99 wrote: »

There are no 'double charges'. The price you see for Lifestrategy is the price you pay.

If you construct your portfolio yourself out of their underlying products and do all your own rebalancing you can 'build your own lifestrategy portfolio' with lower cost exposure (but more hassle) than buying their off-the-shelf portfolio fund. That has always been the case.

Just a bit more the case now.....;)
Perhaps "double charges" is the wrong phrase to use though....fair enough!

bowlhead99 wrote: »

If Vanguard are using the Lifestrategy fund's money to invest into another Vanguard OEiC product they will probably not be using the retail 'Investor' share class with the new lowered price anyway. There is a cheaper 'institutional plus' share class for many of the underlying funds, if you've got £200m to invest. And presumably even if the VLS60 ACC fund only wants to invest £130m into the Vanguard Japan Stock Index Fund ACC class, the manager will waive the minimum requirement and still allow them to use the cheaper version offered to large institutions and industry friends.

As it's Vanguard themselves who set all the charges and arbitrary minimum investment levels for the different share classes they create in their own funds, it's a bit irrelevant to Joe Investor which class they use internally.....
You could argue this for any fund of fund product, where the OCF includes the underlying fund charges, and claim you aren't being charged twice (or extra if you prefer)......but in effect you are, even if those charges aren't broken out individually.
The cost for doing egVLS60 yourself is around 0.15% under the old charges......under the new it's around 0.12%........so the premium for the VLS wrapper was 0.07%, and now it's 0.1%.
(using standard retail class units, as that's all that are available to us retail investors)

The annual management charges (AMC) for these funds represent a weighted composite average of the underlying funds, plus a small amount to cover the cost of administering the individual LifeStrategy Fund.

From Vanguard's own blurb on VLS.......that "small amount" just got bigger it would seem (unless they do reduce VLS charges).
Still, it's up to Vanguard - the VLS range are probably still good value overall in the grand scheme......I suppose c.0.03%pa won't be putting that big a dent in most people's retirement plans....and Vanguard are still reducing quite a few charges, which is only to be welcomed as far as investors are concerned.

Brian65

stehouk wrote: »

I'm struggling with this, i cannot find a translation, is this in english :rotfl:

I can't see anything wrong with it, apart from bid/ask spread would be better described as offer/bid spread. (an offer is a bit more than an ask)

Brian65

Thrugelmir wrote: »

Weren't Vanguard more expensive than Blackrock ?
.

Occasionally yes. When Vanguard took off Blackrock used the old supermarket trick of cutting the price of a few items so they could advertise them as being as cheap. Wheras most of the stuff remains expensive to trap those who don't check the prices.

bowlhead99

MK62 wrote: »

As it's Vanguard themselves who set all the charges and arbitrary minimum investment levels for the different share classes they create in their own funds, it's a bit irrelevant to Joe Investor which class they use internally.....

From Vanguard's own blurb on VLS.......that "small amount" just got bigger it would seem (unless they do reduce VLS charges).

What I was replying to with the stuff about share classes was a response to the contention that they have increased the fees at Lifestrategy level, which is similar to the comment you are making now along the lines of: the 'small amount' to cover the cost of running the individual VLS, just got bigger.

For example (these are made up numbers because it is not worth using the real ones as most people don't care):

When Vanguard UK receive subscriptions into their Lifestrategy product they invest those monies into a basket of trackers offered by Vanguard Ireland.

As great friends of Vanguard Ireland and investing tens or hundreds of millions (billions, across all the sub-funds of the ICVC) , Vanguard UK's lifestrategy fund will not pay retail price, but instead use the institutional or super-special institutional class with a low fee. Let's say that low fee across the different index funds' institutional share classes is a blended average of 0.12%.

Vanguard UK say to you the retail investors: "The annual management charges (AMC) for these funds represent a weighted composite average of the underlying funds, plus a small amount to cover the cost of administering the individual LifeStrategy Fund". They charge you 0.22%. This gives Vanguard UK 0.10% on top of the 0.12% underlying cost exposure in the underlying blend of funds offered by their Irish counterpart

Separately, Vanguard offer their customers direct exposure to the individual indexes through retail share classes. You could construct your own pseudo-lifestrategy fund through direct holdings in the Vanguard Ireland products, that you rebalance yourself. Maybe that used to cost you a blended average of 0.17%, plus a bunch of hassle, to do it, so you couldn't be bothered and just bought the convenient 0.22% product.

Later, Vanguard's retail pricing of the individual index changes. Now you can build-your-own through holding the 'new lower priced' retail classes at, say, 0.15% instead of 0.17%. You probably still can't be bothered doing it and will just buy the convenient 0.22% product.

What happened to Vanguard's operating costs and profits on the Lifestrategy funds? They are still charging 0.10% to run it, on top of the 0 12% institutional fees to which you're exposed in the underlying Irish index funds. It's still correct for them to say, "The annual management charges (AMC) for these funds represent a weighted composite average of the underlying funds, plus a small amount to cover the cost of administering the individual LifeStrategy Fund.". And the 'small amount' is still 0.10%. No extra profits for them.

You say it doesn't matter about institutional classes because you can't access them yourself. And you think, hmm, that "small amount has just got bigger", implying that Vanguard UK are now creaming it in and making a bigger profit margin. But actually they aren't. They are still making the 0.10% and Ireland are still making 0.12%. Your money is getting best in class fees on the underlying assets - better than you could access yourself - and you are paying a fund-of-funds operator a 'small amount' of 10% to allocate your capital, which they use to cover the cost of offering the product and running it.

What has changed is that:

- previously you could use the underlying index funds yourself and reduce your effective fees - putting 0.10 of the VLS running costs back in your pocket but increasing your underlying fund charges by 0.5% due to needing to use a retail share class. Net, you're getting 0.5% back in your own pocket.

- after the retail fee reduction, you can still use the underlying index funds yourself and reduce your effective fees - putting 0.10 of the VLS running costs back in your pocket but now increasing your underlying fund charges by only 0.3% due to needing to use a retail share class. Net, you're getting 0.7% back in your own pocket.

So:
1) Vanguard Lifestrategy isn't getting any more expensive;
2) Vanguard Lifestrategy aren't increasing the 'small amount to cover the costs of running it';
3) Due to reduced retail pricing on underlying funds, customers have the opportunity to save a little more money by using the underlying funds than they previously could have done, if they can be bothered with the hassle of that. Alexland is right that it is now relatively more attractive to run your own multi-fund portfolio.
4) Customers are cynics and wil usually assume they are getting screwed whenever they hear about a fee structure change and are given the opportunity to talk about it

A_T

They may be reducing their fees as perhaps their pension will have a higher platform fee that then 0.15% for their ISA and general accouns.

Alistair31

A_T wrote: »

They may be reducing their fees as perhaps their pension will have a higher platform fee that then 0.15% for their ISA and general accouns.

Ah, the Vanguard SIPP. Many will grow old waiting on it to launch.

Thrugelmir

Alistair31 wrote: »

Ah, the Vanguard SIPP. Many will grow old waiting on it to launch.

Vanguard funds in general still need to gain traction. VLS 60 is around £7 billion in size. Even WEIF was over £10 billion at the point of failure.

A_T

Alistair31 wrote: »

Ah, the Vanguard SIPP. Many will grow old waiting on it to launch.

Probably waiting until Brexit is resolved - last thing they want is the pound to jump and their CS swamped by new investors asking why their VLS funds have fallen.