Vanguard - ESG Dev. World All Cap Equity Index vs ESG Dev. World All Cap Equity Index (UK)

bogleboogle

Hi all, 
I've noticed Vanguard are offering a new index fund (ESG Developed World All Cap Equity Index Fund (UK) - Accumulation, launched 22 June 2020) which appears to be identical in all respects to the existing fund (ESG Developed World All Cap Equity Index Fund - Accumulation, launched in 2011).

Can anyone tell me what the differences between the two are? Thanks

george4064

It appears to be a difference in their legal structure from reading their respective KIIDs, the UK version's ACD is Vanguard Investments UK, Limited ("VIUK") whilst the original version is an managed by Vanguard Group (Ireland) Limited (“VGIL”). In the grand scheme of things I don't think it will really matter which fund you end up investing in, but I would invest in the UK if I were investing now. Perhaps Brexit related, perhaps something else doesn't really matter that much.

They do have smaller differences such as different dealing deadlines, but in terms of differences in portfolio they are both tracking same index so should be identical.

You could always ask Vanguard directly if you want to know more.

bogleboogle

george4064 said:

It appears to be a difference in their legal structure from reading their respective KIIDs, the UK version's ACD is Vanguard Investments UK, Limited ("VIUK") whilst the original version is an managed by Vanguard Group (Ireland) Limited (“VGIL”). In the grand scheme of things I don't think it will really matter which fund you end up investing in, but I would invest in the UK if I were investing now. Perhaps Brexit related, perhaps something else doesn't really matter that much.

They do have smaller differences such as different dealing deadlines, but in terms of differences in portfolio they are both tracking same index so should be identical.

You could always ask Vanguard directly if you want to know more.

Thank you! Why would you invest in the UK if you were investing now? 

george4064

bogleboogle said:

george4064 said:

It appears to be a difference in their legal structure from reading their respective KIIDs, the UK version's ACD is Vanguard Investments UK, Limited ("VIUK") whilst the original version is an managed by Vanguard Group (Ireland) Limited (“VGIL”). In the grand scheme of things I don't think it will really matter which fund you end up investing in, but I would invest in the UK if I were investing now. Perhaps Brexit related, perhaps something else doesn't really matter that much.

They do have smaller differences such as different dealing deadlines, but in terms of differences in portfolio they are both tracking same index so should be identical.

You could always ask Vanguard directly if you want to know more.

Thank you! Why would you invest in the UK if you were investing now? 

Why wouldn't you?

bowlhead99

george4064 said:

In the grand scheme of things I don't think it will really matter which fund you end up investing in, but I would invest in the UK if I were investing now. Perhaps Brexit related, perhaps something else doesn't really matter that much.

They do have smaller differences such as different dealing deadlines, but in terms of differences in portfolio they are both tracking same index so should be identical.

bogleboogle said:
Thank you! Why would you invest in the UK if you were investing now? 

george4064 said:
Why wouldn't you?

The Irish domiciled one (formerly known as Vanguard SRI Global Stock Fund) had an earlier cut off time (4pm before the valuation day rather than noon on the valuation day) and with Brexit ahead people may prefer to invest in a UK domiciled vehicle. 

Historically Ireland had a good tax treaty deal with USA where collective investment schemes considered resident in Ireland could get 0% withholding on their US dividend income - which is a factor in Ireland having a good ETF industry - and over 60% of the ESG World All-cap is North America, so it would make sense to site yourself in Ireland when running a collective investment scheme with that level of US equities.   However if it's anticipated that this will change on renegotiation based on US's most recent model treaties which don't automatically extend to resident collective investment schemes, or that the UK treaty is no worse than the Irish one in terms of tax leakage when investing globally, there may not be a reason to go though Ireland for a global fund if it can be run for the same OCF in the UK.  UK retail investors may prefer a local product, local FSCS protection etc.

Spiggle

Sorry to hijack your thread bogleboogle.

Thanks george4064, the two differing ESG listed confused yesterday but not confused anymore.

Bowlhead99 as usual you lay it out in simple terms, thank you.

As you may recall, I'm not a big investor but learning about these things. (Currently have ISA in VLS60, small historic transferred ISA in VLS80 and last years SIPP in VLS60.) I'd had an email highlighting the 'new' ESG UK Index but only looked it up yesterday. I'm tempted to use this as the investment for this year's either/or SIPP pot (£2880+TR) and/or ISA and I'm also interested in punting a small amount into the FTSE250 (VMID).

So, lets say I 'play' with the £2880+ would you have any opinion (not advice) on which of those specific two would be better? Rather, what should I be considering to differentiate and aid my decision? (Not looking for recommendations for platforms, costs etc just a considered opinion on those options from someone who fully understands these. I have been looking at the charts, history, KIIDs, etc. Stands back and waits for all the brickbats to hit me!)

Thanks in advance for any thoughts.

All the best,
Spigs

bowlhead99

Spiggle said:

 I'd had an email highlighting the 'new' ESG UK Index but only looked it up yesterday. I'm tempted to use this as the investment for this year's either/or SIPP pot (£2880+TR) and/or ISA and I'm also interested in punting a small amount into the FTSE250 (VMID).

So, lets say I 'play' with the £2880+ would you have any opinion (not advice) on which of those specific two would be better? Rather, what should I be considering to differentiate and aid my decision?

Well, it depends what you want.

The FTSE250 holds equity investments in 250 mid-sized companies listed on the UK stock exchange, companies which range in value from about half a billion to four billion quid; the money is weighted to each company based on current value, so the larger companies like Tate & Lyle or Easyjet get more of the allocation and smaller ones like  FirstGroup or Watches of Switzerland get a lot less.

The ESG Developed World also invests all your money in equities but spreads it out across 4000ish companies across the world. The median company within the 4000 is $45bn, but again it allocates by company size  and the size range of the 4000 companies is very broad, so it will have hundreds of times the amount of money allocated to  companies like Apple and Microsoft and Amazon and Google and Facebook and Visa and Nestle (all worth several hundred billion dollars) as it would to Seiko or TalkTalk (half a billion to a billion). 

Due to the mix of company types that make up the biggest ones in the global index, over 60% of that fund will be companies listed on the US stock market and a fifth to a quarter will be in the tech sector.  Whereas in the FTSE 250 you are getting shares of companies with a lot more UK exposure (although many of them are international businesses) and the fact that the index includes a bunch of investment companies and investment trusts (as well as insurance companies, fund managers etc) means that over 40% of the FTSE250 is classified as 'financial services' and only 3% is technology sector.

It isn't really possible to say which one will be 'better' - the global one is spreading your money further and wider into a lot more companies (only specifically avoiding certain 'bad for us' sectors like big oil and tobacco cos). It can be argued that small companies valued in the half a billion to five billion range may have more growth potential than the Apples and Microsofts which are already valued at over a trillion, and the fact that the 250 tracker includes various investment trusts, and has only a 10x disparity between its largest and smallest holdings (instead of 100x or more in the global fund)  will make it quite diverse without as extreme concentration in any one company. Still, it is more exposed to UK political and economic risks than a more global fund would be, and missing some industry sectors which we don't have in the UK (we don't have a google or facebook or amazon on our stock exchange).


If you are looking for long term growth and already have diversified funds in your ISAs and pensions it would not hurt to add some extra UK exposure through a midcap fund like the FTSE250 tracker. But if you are just looking for general long term growth with much more more tech and much less UK allocation, the ESG Global fund would not be a bad place to invest either. If you already have a broad portfolio and are considering adding a further investment, you could make a case for using either fund, or even a bit of both.   But as the two funds are so very different in their industry sector allocation, geographic allocation, company size and investment concentration, it is not really worth asking the question 'how would I differentiate'.  It doesn't take much work to see they are clearly very different.  All they have in common is that they are both collective investment schemes that spread your money across various company shares in line with a particular strategy.

If in doubt, you could always buy a bit of both - if you felt that, for example, having 95% of the investments be on foreign stock markets was too extreme so you didn't want  the Global fund, but having 100% of the investments be on the UK stock market was also too extreme the other way.

Spiggle

Truly amazing bowlhead99, thank you so much.

You've actually captured the important considerations for me and I am so grateful. I'm a bit of a talker and like to chat through my thoughts but sadly don't have anyone these days to do that with and you're always so kind and thorough it really helps, amazing.

I've been thinking about putting the SIPP this year into the 250 for all the reasons you've highlighted - more UK, possibly more growth opportunity, it covers some renewable energy, some newer sectors, etc. My SIPP is being invested for the long haul and I don't anticipate it being drawn on but using it to protect inheritance for my daughter to some extent upon my demise. But apart from my late OH's complete aversion to risk (cash is king) one reason that put me off investing for myself was some of the sectors/regions in the funds. As it's willed to my granddaughters, my first investment was such a fund so I held my nose and bought in. Surprisingly, I've enjoyed the ride and education so far whilst learning what else was about that would at least get a little closer to me releasing the pressure on my nose and had arrived at the 250. (I know other experienced contributors will think me terribly limited but I like Vanguard and I really need, want and like simplicity.)

My cash is rapidly losing value now with rates so low no matter how much I tart around for interest, reg savers, etc., and had thought this years ISA would need to be allocated to a hold your nose fund when along came the ESG UK offering. And it did make my eyebrows seek out my hairline when I saw the level of US and tech involved. But the VLS60/80 have a fair bit of US/tech so... The important point is I can't watch my money devaluing and with more QE that's not going to change soon. Time to decide how much of this year's ISA goes ESG I think before deciding in August where to put the balance. (I am obviously keeping the usual rainy day in cash.)

Thank you once again bowlhead99, your observations and consideration have proved again to be truly helpful.

All the very best, keep safe,
Spigs