HSBC/Vanguard Funds vs ETF's

tel_

Should the number of holdings matter greatly when comparing a traditional Fund versus an ETF to invest in?

I only ask as I was somewhat surprised, at the difference in the number of holdings of what many may consider very similar investments.

                                    FUND                                                              ETF
                        HSBC       VANGUARD                                HSBC               VANGUARD
                                                                                           (HMWO)                (VWRP)
Holdings

Equity               3,269             6,774                                         1,416                3,480
Other                   162                  25                                              64                     15

The ETF's have about half the number of holdings their traditional Funds have. What are the reasons for this?

underground99

The HSBC index ETF trading under the ticker HMWO tracks the MSCI world index which covers developed stock markets with 1586 constituents. As some of them are very small compared to the biggest ones,  HSBC can return the approximate result of that index by buying about 1400 stocks. 

The Vanguard ETF trading under the ticker VWRP tracks the more comprehensive FTSE All-World index which has about 4000 constituents including both developed and emerging markets and covering comfortably more than 90% of global stock markets -  rather than only 85% of market capitalisation on the major exchanges tracked by MSCI World. They feel they can make a fair approximation of its returns by buying about 3500 stocks

You haven't said what 'traditional fund' you're talking about from HSBC. However, their open ended fund that also tracks the same FTSE All-World index of about 4000 constituents that the Vanguard ETF is tracking, also uses 3000+ stocks to build its portfolio.

You also haven't said what  'traditional fund' you're talking about from Vanguard. From the number of stocks you mention (about 6800), I guess you're looking at their tracker for the FTSE Global All-Cap index, an even more comprehensive index which covers large, medium and small companies across developed and emerging markets. The FTSE index itself has over 9000 stocks but they approximate it's results by buying that sample of 6800-6900 of them. 

None of this is because some are ETFs and some are traditional open-ended funds. The legal structure doesn't charge the number of stocks they buy. It's simply that they are tracking different indexes.

For example if you bought a 'traditional' open ended fund that tracked the MSCI World index, like 'Fidelity Index World', it's still not going to have more than 1600 stocks because there aren't more than 1600 stocks in the index. It will hold approximately the same stuff, and get approximately the same returns, as HSBC's HMWO. It wouldn't need the 3000+ stocks held by the FTSE All-World trackers because it's only covering 23 developed stock markets, not 40+. And it wouldn't hold 6000+ stocks because it's not tracking both the developed and emerging markets and large, medium and small cap stocks like FTSE Global All Cap does.

If you wanted to use an ETF to track an index with more stocks than FTSE All-World, you could take a look at Vanguard's newish ESG Global All Cap ETF. It aims to approximate the returns from the FTSE Global All Cap Choice Index, which is basically an ESG-screened version of the regular FTSE Global All Cap Index; that screened FTSE index has only 7600 stocks rather than the 9200 in the unscreened version. So the Vanguard ETF tracking it (which is relatively new and only a small fund size so far) currently uses about 4100 stocks rather than the 6000+ that they use to track the unscreened Global All Cap.

Basically the number of stocks held by the fund product is about what index you're tracking rather than what legal structure you're using for the fund or ETF.

tel_

underground99 said:

You haven't said what 'traditional fund' you're talking about from HSBC. However, their open ended fund that also tracks the same FTSE All-World index of about 4000 constituents that the Vanguard ETF is tracking, also uses 3000+ stocks to build its portfolio.

You also haven't said what  'traditional fund' you're talking about from Vanguard. From the number of stocks you mention (about 6800), I guess you're looking at their tracker for the FTSE Global All-Cap index, an even more comprehensive index which covers large, medium and small companies across developed and emerging markets. The FTSE index itself has over 9000 stocks but they approximate it's results by buying that sample of 6800-6900 of them. 

Yes, you are spot on with the 'traditional OEIC's' I was referring to. In particular, for anyone who's interested:

HSBC FTSE All World Index C Acc (GB00BMJJJF91)

Vanguard FTSE Global All Cap Index Acc (GB00BD3RZ582).

It might be very easy to conclude that all four of these funds are very similar (and they are to a certain extent), especially when you compare what actual companies are included in their portfolios: Apple, Microsoft, Amazon, Facebook, Alphabet (and more or less in the same order).

Many thanks underground99 for your comprehensive, and easy-to digest explanation - it's all about what index they track.

I've not really heard anything about this ESG Global All Cap ETF from Vanguard. I'll definitely check it out.

NedS

When you plot comparative performance of the various major global equity index trackers, you find there is very little performance difference between them. The Vanguard ETF doesn't have data available going back more than ~18months, on HL's site, but here is the cumulative performance of the 4 funds above:

Cumulative performance

Investment	3 months	6 months	1 year	3 years	5 years
Vanguard FTSE Global All Cap Index Investor Acc GBP	6.1%	15%	39.99%	49.54%	-
HSBC FTSE All World Index C Acc	5.98%	14.02%	38.71%	51.29%	97.41%
HSBC MSCI World	7.08%	13.21%	37.02%	53.14%	99.46%
VngurdFndFTSEAlwrldETF A	6.06%	13.3%	37.61%	-	-

For me, if I've doubled my money in 5 years, I'm really probably not that bothered if it's 97% or 99%, and if you pick the higher 99% fund, you will notice the performance over the past 12 months is the worst. Over the long term, I would expect the performance to average out and to be very much in the same ballpark as they are tracking very similar pots of companies.

A_T

slightly cheaper than VWRP at 0.20% OCF is SSAC (iShares MSCI ACWI UCITS ETF) which also covers developed and emerging markets

tel_

NedS said:

Cumulative performance

Investment	3 months	6 months	1 year	3 years	5 years
Vanguard FTSE Global All Cap Index Investor Acc GBP	6.1%	15%	39.99%	49.54%	-
HSBC FTSE All World Index C Acc	5.98%	14.02%	38.71%	51.29%	97.41%
HSBC MSCI World	7.08%	13.21%	37.02%	53.14%	99.46%
VngurdFndFTSEAlwrldETF A	6.06%	13.3%	37.61%	-	-

For me, if I've doubled my money in 5 years, I'm really probably not that bothered if it's 97% or 99%, and if you pick the higher 99% fund, you will notice the performance over the past 12 months is the worst. Over the long term, I would expect the performance to average out and to be very much in the same ballpark as they are tracking very similar pots of companies.

I jotted down these four funds a couple of months ago looking back at their past performances, and noticed this too.

Thanks for including a line graph - that really demonstrates how close they really are.

It's becoming more apparent to me that one of the HSBC funds is best to go for though, because their is a difference in the ongoing charges:

Van FTSE Global All Cap  - 0.23 %
HSBC FTSE All World       - 0.13 %
HSBC MSCI World ETF    - 0.15 %
Van FTSE All World ETF   - 0.22 % 
iShares MSCI ACWI ETF  - 0.20 %

And as we know, ongoing charges add up over years/decades.

So HSBC FTSE All World could be the favourable option for some.

Alistair31

I am considering changing SIPP[Fidelity]  and LISA[YouInvest] from VWRP to HSBC All World. What would be best platform for these if switching? At the moment values are £40k and £26k respectively and fees will be capped. @Alexland

cloud_dog

Alistair31 said:

At the movement values are £40k and £26k respectively and fees will be capped. @Alexland

Can you just clarify what you mean by the emboldened bit?  Do you mean they are currently capped (with Fidelity / AJ Bell non-OEICs are capped) or that they will be capped?

Alistair31

 I just mean that Fidelity would be £45 per annum and YouInvest £42 per annum regardless of how big each account gets. I’m just wondering if there would be a way to switch to HSBC All world fund without introducing higher platform fees that would negate any saving from switching VWRP>HSBC. 

Voyager2002

Alistair31 said:

 I just mean that Fidelity would be £45 per annum and YouInvest £42 per annum regardless of how big each account gets. I’m just wondering if there would be a way to switch to HSBC All world fund without introducing higher platform fees that would negate any saving from switching VWRP>HSBC. 

You can certainly sell those investments and buy the HSBC ETF instead without switching platforms. Obviously there would be dealing charges: you would have to calculate whether the saving in on-going charges would exceed the dealing costs before the world ends (or at least before you need to withdraw the funds). Moving to a different platform does not normally change the investments that you hold.

Alistair31

Voyager2002 said:

Alistair31 said:

 I just mean that Fidelity would be £45 per annum and YouInvest £42 per annum regardless of how big each account gets. I’m just wondering if there would be a way to switch to HSBC All world fund without introducing higher platform fees that would negate any saving from switching VWRP>HSBC. 

You can certainly sell those investments and buy the HSBC ETF instead without switching platforms. Obviously there would be dealing charges: you would have to calculate whether the saving in on-going charges would exceed the dealing costs before the world ends (or at least before you need to withdraw the funds). Moving to a different platform does not normally change the investments that you hold.

But it is not an ETF so would attract percentage based platform fee?