Some Vanguard ISA fund questions

isayhello

Hi,

I recently purchased some funds in a Vanguard S&S ISA a few nights ago, I have a few questions to help me understand better:

1 - I purchased all the funds the same night, a mix of ETF and index funds, I noticed the ETF was completed the next day, some of the index funds completed the day after but one still pending. I know they say that it could take upto 8 days for the funds to complete on the platform but I wondered why you might have some complete quicker than others, don't they all operate in the same way with a cutoff time etc so I would have expected them all to be pending or to be complete at the same time. Can someone clarify the different speeds for this please.

2 - I notice some of the funds I buy e.g. the ETFs complete as an AtBest type and are below the amount I invest e.g. if I invest 3k, the order is for £2952.10 but for the index funds if I invest 3k it's exactly 3k that goes into the fund. Why doesn't the ETF use the full amount?

underground99

isayhello said:

Hi,

I recently purchased some funds in a Vanguard S&S ISA a few nights ago, I have a few questions to help me understand better:

1 - I purchased all the funds the same night, a mix of ETF and index funds, I noticed the ETF was completed the next day, some of the index funds completed the day after but one still pending. I know they say that it could take upto 8 days for the funds to complete on the platform but I wondered why you might have some complete quicker than others, don't they all operate in the same way with a cutoff time etc so I would have expected them all to be pending or to be complete at the same time. Can someone clarify the different speeds for this please.

2 - I notice some of the funds I buy e.g. the ETFs complete as an AtBest type and are below the amount I invest e.g. if I invest 3k, the order is for £2952.10 but for the index funds if I invest 3k it's exactly 3k that goes into the fund. Why doesn't the ETF use the full amount?

Settlement times will be standard but the open-ended index funds may have different cutoffs for daily dealing depending on the exact fund involved. ETFs are traded on a stock exchange so the price you achieved is going to be known that day and the exact number of units you bought can be posted to your account earlier.

ETFs can only be bought on the stock exchange in whole numbers of shares from someone who is selling them. If a share costs just over £50 each, you could buy 59 of them for £2952.10 but you couldn't buy 60 because you didn't want to spend more than £3000.  Whereas with the open ended funds the fund manager will allow you to subscribe to or redeem from the fund in fractional units of shares to several decimal places, he will take exactly as much money as you want to give him subject to some minimum per transaction.

dunstonh

1 - I purchased all the funds the same night, a mix of ETF and index funds

I think you are mixing your terminology up.  ETFs are index funds.      I suspect from what you have said what you really mean is that you have bought some ETFs and some OEICs/UTs.  All of which were index funds.

but I wondered why you might have some complete quicker than others, don't they all operate in the same way with a cutoff time etc so

ETFs are traded live.  UT/OEICs are traded once a day.

Some platforms software updates in real time.  Some in snapshots.  Some once a day.

Settlement period on Vanguard funds range from 2 days to 3 days.

2 - I notice some of the funds I buy e.g. the ETFs complete as an AtBest type and are below the amount I invest e.g. if I invest 3k, the order is for £2952.10 but for the index funds if I invest 3k it's exactly 3k that goes into the fund. Why doesn't the ETF use the full amount?

ETFs have to be bought in round numbers.   OEICs/UTs can be fractional.

Basically, you are mixing two different types of investment universes. ETFs are slightly more advanced than UT/OEICs.  This is also partly why ETFs get no FSCS protection whereas UT/OEICs do.

isayhello

@dunstonh Thanks you're right, they were all index funds, however I noticed that with some of the OIECs/UTs even though I put the order in around midnight a few nights ago, some had completed but one hasn't yet. I guess I thought even if the funds had different cutoff times in the following day they would still all complete at the same time as they are similar types of investment vehicle. Just for reference 2 of them were global cap funds, one of which completed and the other is still pending.

Notepad_Phil

isayhello said:

@dunstonh Thanks you're right, they were all index funds, however I noticed that with some of the OIECs/UTs even though I put the order in around midnight a few nights ago, some had completed but one hasn't yet. I guess I thought even if the funds had different cutoff times in the following day they would still all complete at the same time as they are similar types of investment vehicle. Just for reference 2 of them were global cap funds, one of which completed and the other is still pending.

Someone might have an explanation if you mention which fund has not completed.

isayhello

@Notepad_Phil Sure so for example both of these were bought at the same time a few days ago and this one completed - FTSE Global All Cap Index Fund Accumulation, this one is still pending - Global Small-Cap Index Fund - Accumulation

underground99

On the face of it you might think that as the Global All Cap has an earlier cut-off in the day for accepting orders for the next dealing point (noon vs 4pm; an hour earlier if using Vanguard's platform which says 11am and 3pm), you might expect that if you caught the cut-off for the All Cap for a particular day you would definitely also catch the cut-off for the Small Cap.

However, that's not the full picture because if you read the prospectus, All Cap's noon cut-off is for a valuation point of 9pm that evening (i.e. end of the US market hours). Whereas the Small Cap has a cut off of 4pm "on the Business Day immediately preceding the relevant Dealing Day".   

So if you place the order over the weekend, or perhaps at 10am Monday for both:
- they will value the All Cap fund at 9pm Monday and you will be accepted into the fund at that time;
- but your order for Small Cap is really an order to invest at Tuesday's value which has validly been placed 'by 4pm the preceding business day', so you are not going to be accepted into the fund until Tuesday even though the order was placed on Monday or over the weekend; you'd need to have placed the order by 4pm Friday to get Monday's price on the Small Cap.

From the valuation point at which you get accepted into the fund, the settlement time will probably be about the same (I haven't checked ; they are separate prospectuses as one is a UK entity and one Irish). But it may well be that your Small Cap investment is just running a day behind the All Cap one because you were accepted into the fund a day later.

Once everything has settled you will see a contract note for each showing the price and value date you got.

isayhello

Thanks @underground99 so both were ordered just after midnight on Tuesday on the Vanguard platform, so following your example, on Tuesday 9pm the all cap value will have been given.

For the small cap I guess it depends what's considered the relevant dealing day? would it be the day after so Wednesday, in which case the value of 4pm on Tuesday would have been used?

I saw the all cap (along with LS100) settled and complete in my account yesterday, but not the small cap which made me wonder why there would be a difference.

underground99

isayhello said:

Thanks @underground99 so both were ordered just after midnight on Tuesday on the Vanguard platform, so following your example, on Tuesday 9pm the all cap value will have been given.

For the small cap I guess it depends what's considered the relevant dealing day? would it be the day after so Wednesday, in which case the value of 4pm on Tuesday would have been used?

I saw the all cap (along with LS100) settled and complete in my account yesterday, but not the small cap which made me wonder why there would be a difference.

Your terminology may be different... you mention  'just after midnight on Tuesday' but referring to getting Tuesday's value. To me that doesn't stack up because you can only get a future value (calculated at the next dealing point /valuation point that you qualify for), not a past value.  If you've waited past Tuesday afternoon until it's Tuesday evening, then Tuesday night, and eventually 'just after midnight on Tuesday' you place your order (say 00.15 on Wednesday morning), you are definitely not going to get Tuesday's price for either fund. For the All Cap fund you would have needed to get the order in by late morning Tuesday (Vanguard's cut-off for that day's value); after midnight Tuesday is too late.

I wonder if you are expecting to get a Tuesday valuation from ordering 'just after midnight on Tuesday', you are really meaning the order was placed at say, 00.15 on Tuesday morning? I would refer to that as 'just after midnight Monday night' as Monday ticks over into Tuesday, but if you look at the date on the calendar at that time it is Tuesday of course.

Anyway for purposes of an example let's assume you mean 00.15 on Tuesday morning 13 April (just after Monday midnight). Then:

Tuesday is a dealing day. For All cap fund if you place the order at 00.15 in the morning on Tuesday, you are definitely in time for the lunchtime cutoff on Tuesday to get the Tuesday dealing day's valuation point. The valuation point that you get will be 9pm Tuesday after the US markets have closed. 

Similarly if you place an order for LifeStrategy100 at 00.15 in the morning on Tuesday, you are definitely in time for the cutoff on Tuesday to get the Tuesday dealing day's valuation point. The valuation point that you get will be 9pm Tuesday after the US markets have closed. Lifestrategy cuts off their investor orders a few hours before All Cap, but 00.15 in the early hours of the morning of Tuesday (just after Monday midnight) is easily early enough to catch the Tuesday cut-off via Vanguard's platform.

However, for Small Cap, you are not going to get the valuation of Tuesday. Tuesday is a normal dealing day for Small Cap just like it was for All Cap, but if you wanted them to include you in Tuesday's deal, you need to have the order in by 4pm on 'the Business Day immediately preceding the relevant Dealing Day'.  So you would have needed to get the order in by 4pm Monday if you wanted to get the price of the Tuesday dealing day.

As you didn't get the order in for small cap on Monday, but only after midnight (early hours of Tuesday a.m.), you have not qualified for the price that will be calculated for Tuesday. They won't include you in those deals because you didn't have the order with them by 4pm on the preceding dealing day.   Instead, you would qualify for Wednesday's dealing.   Your order at 00.15 Tuesday is early enough to be before '4pm on the business day preceding the relevant dealing day', only if the dealing day is Wednesday. So, when they let people into the fund on Wednesday, you will be one of them.   The value that you get when admitted to the fund on Wednesday will not be the value of 4pm Tuesday. It will be whatever the valuation time is that they use. 4pm Tuesday is not a valuation point, it was just the deadline for you to get your order in for being included in the investor subscriptions on Wednesday.

Short answer, an order at 00.15 Tuesday morning (just after midnight Monday) will get you a contract note showing you were admitted to the AllCap on Tuesday with that day's 9pm valuation, because you were in time to make the Tuesday cut-off ; but will get you a contract note showing you were admitted to the SmallCap on Wednesday at the price they are using for subscriptions and redemptions on Wednesday.

isayhello

Thanks @underground99 I did mean 00:15 on Tuesday morning. Ok your explanation makes sense and if Wednesday was the dealing day for the small cap fund I would have expected the order to show as completed today but it still says pending.

I guess it depends on whatever is considered the relevant dealing day by Vanguard, in this case and because it's structured a bit differently to the all cap and LS100 I guess it won't necessarily follow the same timescales as them.

It will be interesting to find out the timescales though just in case I decide to sell one of the funds in the ISA and switch the cash to another fund.

[Deleted User]

Hello, I've always found Vanguard to be very helpful with any queries, on the telephone and messages. Regards