FSCS protection and funds

dllive

Hi guys

Regards FSCS protection, I think Im right that it only covers funds (non-ETFs) which are UK domiciled.

So my VFEM - for example - which is an ETF and Ireland domiciled wont be covered, but my VVLSRU would be.

One of my funds is VIGBBD with an ISIN of IE00B50W2R13 . Where is this domiciled? Is it covered?

Thanks

masonic

It depends what you are claiming for. FSCS pays out when a financial services provider cannot meet its obligations to you. That could be your investment platform, in which case all assets they were holding for you would be eligible for protection at their value at the relevant bar date if they couldn't be returned to you. If a fund house goes bust, only UK domiciled OEICs/UTs would be eligible for protection if they didn't hold the assets they should have. If such a fund goes to zero through poor management, then that's investment risk and isn't protected.

Anything with an ISIN that doesn't begin GB is not UK domiciled.

wmb194

dllive said:

Hi guys

Regards FSCS protection, I think Im right that it only covers funds (non-ETFs) which are UK domiciled.

So my VFEM - for example - which is an ETF and Ireland domiciled wont be covered, but my VVLSRU would be.

One of my funds is VIGBBD with an ISIN of IE00B50W2R13 . Where is this domiciled? Is it covered?

Thanks

Vanguard has a summary document, see link below. You might be protected by the FSCS coverage for cash deposits for the brief periods your money is 'in-flight' between being invested and not.

There is an Irish equivalent to the FSCS for investments called the Investor Compensation Scheme, see quote and second link below.

"The Investor Compensation Scheme (ICS) protects clients of an investment firm that goes out of business. The scheme pays compensation when an investment firm authorised by the Central Bank is unable to return money or investment instruments it owes to consumers who invested with it. Such firms can include stockbrokers, investment managers, insurance brokers and agents. The maximum amount of compensation you can claim under the ICS is 90% of your net loss, up to a maximum of €20,000."

https://www.ie.vanguard/content/dam/intl/europe/documents/ucits/investor-protection-uk-domiciled.pdf

https://www.centralbank.ie/consumer-hub/explainers/what-compensation-schemes-protect-consumers-of-authorised-firms#:~:text=Investor%20Compensation%20Scheme&text=Such%20firms%20can%20include%20stockbrokers,a%20maximum%20of%20%E2%82%AC20%2C000.&text=Your%20investment%20performs%20poorly%20due%20to%20market%20conditions%20or%20other%20economic%20forces.

dllive

Thanks guys, very helpful. I will look into this.

dunstonh

ETFs are classed as a direct asset (like shares) and do not get FSCS protection.  Domicile doesn't matter in that respect (it just doubles down on the non-protection)

masonic

dunstonh said:

ETFs are classed as a direct asset (like shares) and do not get FSCS protection.  Domicile doesn't matter in that respect (it just doubles down on the non-protection)

"VIGBBD" is an Irish open-ended fund, not an ETF, so would have been eligible for FSCS protection if UK domiciled.

noclaf

The majority of my pension funds are in Vanguard ETF's...yes it's a risk due to the lack of FSCS protection but the way I see it, if any of the big players (BlackRock, Vanguard, State Street etc) get into trouble then I think we would be dealing with much bigger problems......
As a countermeasure I will likely move my current works pension into OEIC funds (UK Dom) when the time comes but am hoping that I will never need to worry abt needing FSCS protection........

dunstonh

If you stick to mainstream and use physical replication, then FSCS is not really of any benefit.

wmb194

For ETFs the protection that's relevant is at the broker/investment platform level to cover you for maladministration and fraud e.g., you thought you'd bought £10,000 in units but it actually only bought £8,000 and stole the rest you'd be covered for the £2,000 or equivalent number of units.

GeoffTF

Vanguard's UK and Ireland fund management companies are self contained subsidiaries of a much larger parent organisation. They are very unlikely to go bust, but if they did, the parent organisation would almost certainly bail them out. To do otherwise would entail a massive loss of reputation. The same is true for Vanguard's UK investment platform.