Spreads on All-World ETFs

GeoffTF

masonic said:

Malthusian said:

The trouble with Vanguard's dilution levy is that they applied a charge to cover the cost of buying shares on your behalf, even when they weren't actually buying any shares because inflows matched outflows. (I.e. your money was used to pay out investors going the other way and you got their already-bought-and-paid-for shares.)

By today's standards, "we'll transparently charge you for this thing we might not actually be doing" isn't transparency.

I wasn't opposed to the dilution levy in principle. To be fair it should be scaled to a level that reflects the proportion of days there have been net inflows. Then it is just spreading the cost over all buyers, rather than just those who unluckily placed their buy order on a day when too few people were selling. Knowing what you'll pay in advance is more transparent than not knowing until the order is executed in the case of swing pricing and given the choice I'd take the option of a known dilution levy vs unknown swing price. But with ETFs and other exchange traded investments you can get an at-best quote or place a limit order, which sidesteps this issue.

You do not know what the swing pricing has cost you after the trade has executed either. You know the price you paid, but you do not know what the NAV was on that day. Vanguard could publish that, but I expect that it would hit sales, unless every other fund manager had to do the same. They are going to fight tooth and nail to prevent that happening of course. Vanguard is right. A dilution levy is the fairest method of paying for unit creation and redemption.