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Vanguard FTSE Global All Cap in ISA switch to ETF version?
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I generally rate Damien's videos but with this he has joined the majority of UK finance YouTubers in making several videos about a product with a lot of buzz simply for the sake of it.
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While I'm no investing expert, I pick up bits and pieces of information here and there and make the best decisions I can based on what information I can get and understand. My aim with my Global All Cap investment is to invest forget it for the next couple of decades; it's the growth part of my portfolio.
When I first heard of the ETF "Version" of Global All Cap I was to understand that it was the ETF version of the OEIC, the same but somehow cheaper because of it being an ETF. This is how the information came across.
Damien's video pointed out quite clearly where the cost reduction comes from, far from being the same investment in ETF form, it differs by 1000 or so companies. It might not amount to much percentage return wise, but it is still a difference; one is NOT investing in the same companies in the same percentages with the ETF as in the OEIC case - yes, the sampling is different, but calling the fund the same name as the OEIC can catch some people out who think it is a like for like investment. For this reason I found the video very useful.
If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
Damien's video pointed out quite clearly where the cost reduction comes from, far from being the same investment in ETF form, it differs by 1000 or so companies.
ETFs are cheaper to run than because the fund manager is not responsible for creating and redeeming shares. That is done by the Authorised Participants. Vanguard does use fewer stocks in the ETF version, but it is speculation to say that has been done to reduce Vanguard's costs.
The performance (before costs) of the OEIC and ETF should be almost the same. That has certainly been true for the global bond OEIC and ETF (despite the ETF having fewer bonds). More to the point, the (before costs) performance of VALL should be very close to that of VWRP with a market weight of VSML
VWRP does not hold all of the stocks in the index:
"The Fund attempts to: 1. Track the performance of the Index by investing in a representative sample of Index constituent securities. 2. Remain fully invested except in extraordinary market, political or similar conditions."
(VEVE does, but it does not include Emerging Markets.)
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In fairness, Damo did some useful analysis that I couldn't be bothered to do and demonstrated what appeared to be a large number of missing companies actually represents a negligible difference in overall composition. So I would not criticise him for making a video just for the sake of it.
On another thread today, someone else was steering themselves towards a more expensive MSCI All Country World Index ETF because it had 100 extra companies in it. When I did the same analysis for that, the difference amounted to around 0.01% of market cap. So it is worth somebody putting these numbers into context to avoid people reaching the wrong conclusion around what extra diversification companies at the small end of an index actually provide.
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I've already moved a lot on my ISA across, got in at under £3.67 (though wasn't in a Vanguard fund, but multiple ETFs that I wanted to simplify). For me once how I saw how quickly the AUM was growing a lot of the concerns went away and last weeks dip seemed a good opportunity to do it.
The ETF is by Vanguard who have a lot of experience and at over £1B this is no longer a small fund. If you like what VALL offers then I see little point in waiting for performance history, I was merely pointing out what I'd watched.
I saw the one looking at the tracking error, but they are different indices, but yes not sure whether that was just a content creator wanting to push a different narrative for the views. The US version, VT, has over 10K stocks and so tracks the underlying index closer, but anyone in UK/EU wanting a fund to track the whole market including small cap stocks do think VALL is something to seriously consider.
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VALL isn't simply the OEIC with a 1000 companies lopped off. VALL contains 345 companies not in VAFTGAG.
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It is not clear what is going on here. Vanguard buys and sells the underlying stocks with the OEIC. The Authorised Participants buy and sell them with the ETF. Perhaps Vanguard can trade some stocks more easily than the APs. Vanguard may have institutional clients holding the OEIC who like things to be done in a particular way. We do not know, but we do know that Vanguard is facing stiff competition particularly from ETFs.
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Given the different pricing times of the OEIC and new ETF is there a way to make a meaningful comparison of performance between the two?
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Over a long enough time frame the difference in pricing times is insignificant, but if you really wanted just take the ETF price at the same time as the OEIC pricing time.
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The problem is the OEIC pricing time is 9pm whereas the ETF is during the UK trading day.
As a result, I think it will be very difficult to identify any performance differences resulting from the factors discussed in this thread such as fund fee, trading costs, holding differences etc.
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