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ETFs
Comments
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@Masonic and others appreciate the replies and I will be buying only one ETF and it will be in my tax wrapper.
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Indeed, in fairness the thread had already used the term in a non specific way and I did both use it in quotes and with the general name of "investment companies with variable capital" alongside to try and limit confusion.
And yes, Mr Osborne was really shutting the door after the horse had bolted with UK ETFs (https://moneyweek.com/298664/george-osborne-gives-investors-yet-another-reason-to-like-etfs).
Certian events afterwards didn't help either.
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I'm struggling to find where I posted this more than no times. 😊
I did find ones that said " When I started out using OEICs I was nearly caught out by the fact that some of theirs are Ireland domiciled." and "Vanguard has 22 of Irish OEICs", which I suspect is not entirely correct 😉
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ETFs have fixed pools of capital on the retail market. They trade like Investment Trusts, and like Investment Trusts can go the premium or discount to NAV. Authorised Participants can create or redeem ETF shares and generate an arbitrage profit, thereby reducing or eliminating the premium or discount:
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Yes, it's a different mechanism of achieving "open-endedness", but it's good to raise the point about trading at a premium/discount, which presents an additional risk when the market is not orderly.
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Premium/discount is usually significant even when the markets are orderly. Vanguard Developed World ETF VEVE was last reported to be trading at a discount of 0.4%. That is likely to be a bigger hit than the spread.
Assets under management (AUM) 3.66 B EUR Fund flows (1Y)−86.91 M EUR Dividend yield (indicated) 1.31% Discount/Premium to NAV−0.4% Shares outstanding 31.72 M Expense ratio 0.12%
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Vanguard's own data puts NAV at closure 24th April at $135.27 (£100.10 at exchange rate 0.740 at that time), while the closing price was £100.09 which is pretty much bang on.
Though that price is based on the UT at market close: so and there were various prior trades between £100.03 to £100.13 in the 10 minutes prior to close.
It doesn't look like there is much deviation from NAV on the LSE based on this.
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On page 2 of this thread you posted: "I guess these Ireland fidelity offering helps illustrate that in our UK world of retail collective investment schemes, ETFs, rather than being separate beasts from "OEICS" (well, investment companies with variable capital), are just subset of such "OEICS" ……….."
In your first post on page 3 of this thread you posted: "No, really, in our world of UK retail investors, ETFs are a subset of "OEICs" ……..".
In your second posting on page 3 of this thread you posted: "So hope that clears things up – from the UK retail investor point of view – that’s us? – ETFs are just a type of “OEICS” ".
You appear to be having trouble with your short term memory.
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Yes, I see, thanks. In Vanguard's case it seems the threshold is much higher than >5%. This is the list of holdings in their LS Global 60 fund:
FTSE Developed World ex-U.K. Equity Index Fund GBP Acc
33.4%
Global Bond Index Fund GBP Hedged Acc
32.9%
U.S. Equity Index Fund GBP Acc
14.5%
Emerging Markets Stock Index Fund GBP Acc
5.8%
FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc
2.5%
FTSE U.K. All Share Index Unit Trust GBP Acc
2.1%
U.S. Government Bond Index Fund GBP Hedged Acc
2.1%
U.S. Investment Grade Credit Index Fund GBP Hedged Acc
1.7%
Euro Government Bond Index Fund GBP Hedged Acc
1.6%
Japan Stock Index Fund GBP Acc
1.3%
Euro Investment Grade Bond Index Fund GBP Hedged Acc
0.9%
Pacific ex-Japan Stock Index Fund GBP Acc
0.6%
Japan Government Bond Index Fund GBP Hedged Acc
0.4%
U.K. Government Bond Index Fund GBP Acc
0.4%
Total
100%
It makes little sense to me, given that they could achieve a global 60/40 with VWRP 60% and VAGA 40%.
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Sure, thanks, but my point was really that with a sector-specific, or thematic, ETF, there are a myriad of different indices, as in the AI example I gave, where each ETF provider have their own index. So my question is really about trying to understand why this might be and/ or to get a handle on how to approach choosing one. The TERs are broadly in line with each other, and in the case of the AI ETFs, typically 0.35% to 0.40%, so there's not much to consider on the cost front. The choice of index, and by default, of provider, remain the key questions.
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