VWRL FTSE All-World UCITS ETF

Data extracted from here:

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-distributing/price-performance

And here is a general question that came up in conversation with friends today - if this ETF with 0.22% fees can nigh on identically match the benchmark, is there a way to copy it without the fees, to outperform by 0.22% or would the effort/risk be too much?

My argument was that 0.22% compounded over 10 years is an extra 2.22% return if achievable. To me I said this was not worth the effort but not to say it cant be done!

The simplest way would be to build a basket of ETFs roughly following its geographical breakdown with lower OCFs, and rebalance on a frequent basis.

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My choices to achieve this would be csp1, meud, emim, lgag, vjpm, ub23 in the right percentages. They would drift off the percentages over time, so not maintenance free.

Bear in mind you wouldn’t be saving the full 0.22% OCF as the alternative ETFs are still going to have a cost.
Particularly for the portion in Emerging Markets the OCF is likely to be 0.2% or higher…

I think you would really struggle to get the average cost under 0.12% OCF. If that is the case you would only be saving 0.1% a year which is around 1% a decade and around 3.9% over 40 years.
I would break the ETF down into others if there were tax differences (eg. Widthholding taxes) or if you wanted to overweight a region, but I don’t know if it would be worth it in this situation.

Edit: I guess an alternative would be to create 6 pies covering say the top 300 stocks in the ETF.
However with foreign exchange fees, the need to rebalance and the loss diversification (+ all stocks would be very large companies, no medium) I don’t think it would provide better returns than the ETF approach.

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I make it about 0.093% ter with my breakdown.

Vanguard worldwide v regional etfs - Google Sheets.

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Very interesting!

I guess it could work out then, for 0.12-0.13% less a year. :smiley:

Are you looking to implement it?

Things to consider before implementing it:
Have you looked at the number of holdings? I guess you may miss out on some medium caps or some of the smaller large caps?
In any case you could just buy this and then complement it with a World Small Cap or something.

Also a thought would be that you may miss out on some countries. For example, does the EM ETF include Eastern European Markets?
Asking because as far as I’m aware the Eurostoxx 600 doesn’t include certain countries such as Poland, Cyprus, etc.

Another thing to consider is that FTSE and MSCI have different markets within their “Developed” and “Emerging Markets” ETFs. If I remember correctly South Korea has a different classification for both of them and I think Poland might also. Worth checking as you may have accidentally kept them out or included them twice.

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I haven’t checked all the number of holdings. I haven’t checked overlaps. The EM ETF does include Poland. I don’t think it includes Cyprus.

In general there would be some differences. My aim when I originally chose the set of etfs was to approximate (not replicate) SSAC the Ishares MSCI ACWI etf. I looked at regions/main countries, ters, spreads, and avoided synthetics, and for US I checked domicile to avoid unnecessary drag on performance from withholding tax.

It’s possible to reduce ter percentages further, for example using some Amundi Prime etfs but these are not very liquid and have wide spreads. US is by far the biggest contributor, so if you don’t mind synthetic etfs, SPXP would bring the aggregate ter percentage down even more.

In some regions performances between different etfs have varied a lot because of differences in constituents. But I’ve concentrated more on costs in these instances because I think these differences in performance would be likely to even out over time.

One other thing that can be considered is that when Vanguard lend out shares, not much is taken out of the proceeds from lending, so they can have a slightly enhanced performance. I don’t think this is a material difference in view of the difference in ter in our context here.

I’m quite new to etfs, so there may be nuances I’ve missed.

I usually invest in individual companies or on occasions investment trusts, so I might not implement it for myself. But it’ll probably be implemented in this or similar form for a less experienced family member that could benefit from less of a roller coaster ride than I get.

In the meantime I’m monitoring performance for a while to see that it’s not too far out from the ishares ACWI etf. UB23 (Canada) is proving to be a bit of a pain, because the prices don’t agree in different places and the google finance function returns late prices that are obviously not right. UB23 is also the one with the widest spread and largest ter, and I’m a little reluctant to include it. But there doesn’t seem to me to be a better alternative for Canada.

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It’s worth noting that what you gain in savings on ongoing charges by using regional ETFs, you usually lose in higher ‘hidden’ one-off and transaction costs.

I did the maths on it once with Vanguard ETFs. It was actually cheaper to buy VEVE + VFEM than to break it down any further.

If I remember rightly, the difference between holding VWRL versus VEUR + VAPX + VJPN + VNRT + VFEM was relatively negligible when you consider the total cost.

Edit: While it’s a relatively quick and crude calculation, using the all-in costs listed by Vanguard above (minus the platform fee), you can see below that there isn’t as much of a difference as you may expect:

tes

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I think if you are Investing in Index Funds outisde of the Pension and into the ISA, you are much better off than paying 0.5% ter plus any fixed price on “Management” of the Pension fund, on top of the 20% Income Tax when you do then decide to take it out.

Just to add some extra points to this:

Remember the OCF displayed is an estimate and not guaranteed. It can change at any time. It can go up. It can go down.

Remember ETFs also incur ‘transaction costs’. These are displayed on your ETFs KID but are also subject to change and are essentially an estimate based on historically transactions within the fund. But the spread of the assets within the fund will affect the tracking error due to costs associated with trading these assets.

Also, interestingly, not all ETFs adhere to UK Reporting Standards. Therefore (outside of ISA and Pensions) your profits could be subject to Income Tax at your marginal rate - rather than Capital gains tax. That’s quite a difference.

Do Trading212 display Transaction charges? I don’t think they do. Weird

Do Trading212 display if the ETF is has UK Reporting Status? I don’t think they do. Weird.

Jeeeez. That was boring.

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