Vanguard FTSE Global All Cap in ISA switch to ETF version?

Bravepants

https://forums.moneysavingexpert.com/discussion/comment/82117928#Comment_82117928

Hi,

I got this AI summary from Google when I searched: "Vanguard FTSE Global All Cap ETF currency effects compared to OEIC"

Fund Base Currency and Trading Tickers (The Difference)

• The OEIC (Mutual Fund): Domiciled in the UK, it operates natively in GBP. When you buy or sell, you deal directly in British pounds, meaning no foreign exchange (FX) conversion happens at the point of trade. [1]
• The ETF: Domiciled in Ireland with a USD base currency, it trades on exchanges like the London Stock Exchange with a GBP ticker (VALL). Buying the GBP-denominated ticker on a UK broker means you transact in pounds, but the platform or market maker may implicitly price in underlying currency conversions, though it avoids explicit ongoing retail FX transactional penalty fees if bought in GBP.

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/82118250#Comment_82118250

That is just AI. AI makes things up.

Bravepants

https://forums.moneysavingexpert.com/discussion/comment/82118242#Comment_82118242

Yes, you're right I went back and did another dummy run, well at least I saved £7.50 on my £350 purchase! 😀

I've begun the process of transferring to Scottish Widows now anyway.

Bravepants

https://forums.moneysavingexpert.com/discussion/comment/82118262#Comment_82118262

I agree that AI makes things up, I have seen it do that. However in the case of a summary it provides references to the information it is summarised from, so it can be checked.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82118250#Comment_82118250

The AI summary is nonsense and generalised to all ETFs that include foreign currency assets - confusing a fund's accounting currency with actual currency exposure. A fund's base currency is used for reporting purposes and for a global fund will inevitably differ significantly from actual currency exposure. Both the OEIC and the ETF hold pretty much the same basket of global equities, over 95% of which are non-GBP, so their currency exposure is identical.

The AI's claim about implicit platform conversion fees is obviously incorrect. If you purchase a GBP-quoted asset on a UK platform using GBP, your broker executes a standard local transaction with no FX, regardless of whether it's the OEIC or the ETF trading under a GBP ticker on LSE.

FX does occur at the unit creation and redemption level, as net inflows are converted to purchase local shares on foreign exchanges. For the OEIC, Vanguard UK takes retail sterling inflows and converts them at institutional spot rates to buy the underlying basket. For the ETF, Authorised Participants (APs) execute this in the primary market, buying the underlying foreign constituents locally and exchanging the basket with Vanguard for newly created ETF units.

There is no logical reason to assume an AP trades FX on terms any less favourable than Vanguard. Both will be trading multi-million-pound volumes at institutional spot rates. If there was any meaningful currency "load" in the ETF's live price, it would be seen as a widened bid-offer spread or a persistent premium/discount relative to NAV (the OEIC is less transparent in this regard, as it uses swing-pricing, which conceals these things).

By the way, the AI did give a "reference" for its information, which linked through to a reddit post, and that post didn't even support the statement it made.

Bravepants

https://forums.moneysavingexpert.com/discussion/comment/82118317#Comment_82118317

Awesome! Thanks for that comprehensive answer. I think you’ve well and truly answered my question regarding currency effects! 😊

AI is very useful for sparking debate if nothing else!

aroominyork

Whenever you rearrange your holdings, eg moving from OEIC to ETF, you can bet your bottom dollar the market will go up on the day you are out of the market. There is a way to mitigate this risk if you have some spare cash. Say you want to move £100k from OEIC to ETF. Invest your spare £20k in the same fund in a GIA and then, over five days, make your switches. Sell the GIA at the end. You will always have £100k invested and the cost will be a few extra trades. If you are already over the £3k capital gain in your GIA and make a profit, the extra CGT on the gain will justify the process you went through.

leosayer

https://forums.moneysavingexpert.com/discussion/comment/82118342#Comment_82118342

You can see that the (lack of) currency impact by comparing the long term performance of similar funds with different base currencies for example VWRP (ETF in USD but priced in GBP) and VAFTGAG (OEIC in GBP).

They are virtually identical with only minor differences due to different global equity indexes tracked and price/valuation timing.

orange-juice

https://forums.moneysavingexpert.com/discussion/comment/82118460#Comment_82118460

Forgive me for my ignorance but how should one time it to mitigate the different ways that oeic/ETFs are priced (i.e. etf shares being priced at the value you see roughly versus oeic which is priced once a day/next day or something?). Is it to buy the etf in tranches.. or specific time of day?

masonic

https://forums.moneysavingexpert.com/discussion/comment/82118714#Comment_82118714

The OEIC has a valuation point at 9 pm, so you can't eliminate time out of the market completely. If you were to sell and concurrently buy £20k this Friday, then the released capital will be available to invest in the ETF perhaps first thing Tuesday morning. Even if you leave it to the last hour of trading to buy the ETF, your next tranche of the OEIC will not "sell" until around 5 hours later, during which time US markets will be open. But this is better than having days out of the market.

Personally, I would probably keep it simple and pick a small number of random days to do a simple switch, but I am not looking to use these new funds in my portfolio, and have been using other ETFs for quite a number of years.