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Vanguard FTSE Global All Cap in ISA switch to ETF version?
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Further to this, a gain / loss can result either from differing premiums / discounts for the two funds, or from a change in the underlying value between the London close and the New York close. I calculated the gain / loss between each London close and the next day's London close. The were a few cases where big gains or losses of NAV coincided with big gains / looses in the same direction for the share price, but mostly they did not. The big gains / losses in NAV seem to be mostly the result of differing premiums / discounts.
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Has anyone seen this yet?
Damien Talks Money on Youtube doing a comparison between the companies included in the VALL ETF version of Vanguard's FTSE Global All Cap Fund and the OEIC version (VAFTGAG). It seems that the fewer companies covered (some 1300 or so) by VALL explains the reduced cost compared to VAFTGAG.
Small and micro cap companies are missing in VALL, but he concludes that Vanguard may include those companies as the ETF becomes more established.
If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.1 -
Maybe a few sentences describing who that is, and what they say, would be useful. It's an image, not a video.
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On my screen it's a clickable link to a video.
If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
The video played when I clicked on it.
It was interesting. Thanks for posting. 👍
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I saw this yesterday. Nothing there that I'd consider a cause for concern. When it was first listed on justETF, replication was shown as "Physical (Sampling)". So we now know it is capturing about 99% of the sister fund by market cap. That ought to be good enough, and they might expand it further as the ETF grows in size.
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I also saw that video and was not concerned. The ETF has less stocks than the OEIC version. Both are sampled. That is nothing new or unexpected. The same is true of the global bond OEIC and ETF:
I used Morningstar compare the performance of the two funds over the last 7 years. VAGS won by an annualised 0.06%, which which closely matches the differences in the two OCFs. The cheaper fund is the better buy.
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It's not as simple as saying VALL just has less funds VAFTGAG, which is clear by looking at the totals. For instance it went on about how by VALL not having some of these smaller illiquid companies will be able to save some of the costs, because VALL is not a straight subset of VAFTGAG.
VALL portfolio contains companies that are not in VAFTGAG, 363 companies, which it can do as VAFTGAG does not own the whole index, these are all small companies, the largest comprising just 0.0026% of VALL, but probably mean over time which does better isn't just down to the small-caps VALL doesn't have.
One of the questions has been whether this 6429 portfolio of VALL is just the initial one and whether it will grow to the same number as VAFTGAG. If it had purely being a subset, then you might think they would as the AUM continues to grow, but the fact that it holds companies not in VAFTGAG probably means it won't.
They'll probably do similar but could well be more affected by how well the larger companies do (the top 10 makes up 22.18% of VALL but just 21.73% of VAFTGAG, stretch this out to top 100 or top 300 and the difference expands to 1.2%). Even so I expect both to be fairly similar in performance.
It was a pity the video just compared the two in so only addressing holders of the OEIC and whether they should change due to the fee reducing by 2/3rds. Maybe another video later will address the unasked question of how VRWP compares, since there'll be plenty of people considering switching from one ETF to the other.
Finally VALL isn't just VRWP plus small caps either, there's 444 companies in VWRP that are not in VALL.
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The three funds VWRP, VALL, and VAFTGAG all contain the same 3327 companies, which is the bulk of the fund (portions of each company will differ very slightly though) and the differences in companies is will be that final few percent.
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One of the questions has been whether this 6429 portfolio of VALL is just the initial one and whether it will grow to the same number as VAFTGAG. If it had purely being a subset, then you might think they would as the AUM continues to grow, but the fact that it holds companies not in VAFTGAG probably means it won't.
Look at the precedent:
Vanguard Global Bond Index Fund
Inception date 23 Jun 2009
Ongoing charge (OCF) 0.15%
15,057 BondsVanguard Global Aggregate Bond UCITS ETF (VAGS)
Inception date 18 Jun 2019
Ongoing charge (OCF) 0.08%
12,529 BondsVAGS still has fewer bonds than the OEIC version after more than 7 years.
They'll probably do similar but could well be more affected by how well the larger companies do (the top 10 makes up 22.18% of VALL but just 21.73% of VAFTGAG, stretch this out to top 100 or top 300 and the difference expands to 1.2%). Even so I expect both to be fairly similar in performance.
VALL with almost certainly do better because of the lower fees. Once the fees have been extracted from the comparison, any difference will be random and could go either way. Look at what happened with VAGS. The difference in fees mostly accounts VAGS outperformance.
Vanguard's statistical algorithms will be changing the weights over time to track the index as closely as possible, but with fewer stocks than the index (for both the OEIC and the ETF). Even with full replication, Vanguard's weights do not precisely match the index for practical reasons. Sometimes a particular country or sector is a tiny bit overweight and sometimes a tiny bit underweight. Follow the "Portfolio Data" section for VEVE over time, for example.
It was a pity the video just compared the two in so only addressing holders of the OEIC and whether they should change due to the fee reducing by 2/3rds. Maybe another video later will address the unasked question of how VRWP compares, since there'll be plenty of people considering switching from one ETF to the other.
There are lots of YouTube videos addressing that issue. I have not seen one that makes a barrel load of sense though.
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