Vanguard Bond ETFs: Transaction charges more than the Ongoing costs

raghav.raman

Transaction charges of some Vanguard Bond ETFs are more than their Ongoing costs,

For example,

Vanguard U.K. Gilt UCITS ETF (VGOV) - Ongoing Charge: 0.05 Transaction Costs: 0.08

https://www.fidelity.co.uk/factsheet-data/factsheet/IE00B42WWV65-vanguard-funds-plc/key-statistics

Whereas similar ETFs from other providers do not have or much smaller Transaction charges,

Amundi Core UK Government Bond UCITS ETF Dist (GILS) - Ongoing Charge: 0.05 Transaction Costs: 0.00

https://www.fidelity.co.uk/factsheet-data/factsheet/LU1407892592-multi-units-luxembourg/key-statistics

iShares Core UK Gilts UCITS ETF GBP (Dist) (IGLT) - Ongoing Charge: 0.07 Transaction Costs: 0.01

https://www.fidelity.co.uk/factsheet-data/factsheet/IE00B1FZSB30-ishares-ii-plc/key-statistics

Is there a reason for this difference?

Your thoughts and reviews are gratefully received.

Thanks

InvesterJones

There's no reason transaction costs have to be lower than ongoing costs, and where the ongoing cost is very low it's quite likely the transaction costs could be higher. However the clue is in the name, it's not an ongoing charge, so unless the fund is doing a lot of buying/selling etc. then you should find it drops by the next month or so.

As for why it's different between funds.. well the funds don't have to buy and sell underlying holdings all at the same time, nor do they have an exactly equal amount of investments/withdrawals being made by holders, so their transaction costs might differ at any point in time.

dunstonh

Transaction charges of some Vanguard Bond ETFs are more than their Ongoing costs,

That can happen.  Its nothing new.

Is there a reason for this difference?

Remember that transaction costs is not a real figure.  Its a synthetic one that allows a variety of calculation methods and most fund houses don't tell you which method.     This is why most investors ignore TC.      When the EU was consulting on TC for MiFIDII they were warned of the issues but did nothing.     Currently, the FCA is consulting on changing the methodolgy for TC to clear up some of its problems.

But in the meantime, ignore TC.  Its not an explicit charge. You are not paying it.   Its synthetic calculation to give an idea of your share of costs that the fund has suffered but it includes an element of profit and loss and the figure can go negative or positive in a period.

GeoffTF

The EU Directive, which has been incorporated into UK law, does not specify a single standard way of calculating transaction costs. (I expect that there were not enough votes for that to happen.) You cannot validly compare transaction costs quoted by different fund managers. If Vanguard quotes higher transaction costs, that may tell us that Vanguard is more honest than some of the competition, but nothing more.