Low-cost index funds UK

@ Don – Thanks for the heads up. This post is due its annual update. I tend not to list every product with the same OCF though, just a representative one and an alternative. Definitely worth putting a RAFI ETF in though and I’ll take a look at the UBS ones. They weren’t that cheap last time I looked.

Sorry looks like the annual management fee is extra so back to drawing board. Why isn’t there an easy solution to investing? Pretty sure if someone came up with one they’d be rich!

As someone new to investing,this article is just what I need to help me assemble a selection of low-cost funds to set me on my way.
As I am still trying to familiarise myself with the terms and jargon used,would you mind explaining what a ‘retail class’ fund is, as distinct from the other products mentioned.

That was the original distinction, though these days there are plenty institutional classes that regular punters can buy with low minimums. Generally speaking, retail included max commission for the intermediaries and is being phased out. I wouldn’t worry about the name; just check out all classes that are available to you and choose the one with the lowest OCF/TER.

On that note, any tips for comparing the relative merits of the Vanguard emerging markets index fund and their emerging markets ETF? I know it’s a bit like comparing apples to oranges since they track different indices and the ETF doesn’t have much in the way of performance history, but so far it does seem to track its index much more tightly (and has a lower OCF). Is it naive to assume that one index is roughly as good as another when it comes to accessing an asset class?

Hi all,

I have just done my regular re-check of my ETF selections and at the moment I regularly put money into 5 areas (FTSE250, FTSE100, S&P500, Global Emerging Markets and Europe ex-UK).

I use the following to do this, and I have done a LOT of research into pretty much every available ETF which tracks these. These have, as far as I know, the lowest TERs and tracking errors.

One thing to note – Deutsche Bank (db x-trackers) recently announced that they are dumping synthetic ETFs (those which track using swaps and other derivates) and switching to physical replication. Lyxor are still using synthetics. Vanguard are physical. I would avoid using synthetics as you do see some funny movements (sometimes!).

Global Emerging Markets:
db X-trackers MSCI Emerging Market ETF (XMEM)
0.65% TER (lowest I can find). iShares do similar but its a FTSE EM tracker and I prefer the mix of the MSCI index

S&P500:
Vanguard Funds Vanguard S&P 500 Ucits ETF (VUSA)
0.09% TER. Cannot be beaten for cost

Europe ex-UK:
IShares MSCI Europe Ex-UK Ucits ETF (IEUX)
0.4% TER – again as competitive as I can find

FTSE250:
DB X-Trackers FTSE 250 Ucits ETF (DR) (XMCX)
0.35% TER

FTSE100 (I don’t add to this anymore but I still hold it):
Vanguard Funds Vanguard FTSE 100 Ucits ETF (VUKE)
0.10%

All of these funds are available on the Halifax ShareBuilder platform (£2 purchase fee, £11.95 sell fee) which makes pound cost averaging a real possibility with small regular amounts. None of them charge entry/exit fees if you use a platform.

Hope this helps. I have spent a LONG time looking into these four areas and originally Lyxor did come into it but their use of synthetics put me off. HSBC also do some excellent trackers but just not quite as competitive as these in my mind, but not much in it.

Also one last caveat on my numbers – I am a Channel Island resident, so accumuling funds are much more beneficial to me. I don’t pay tax on accumulated earnings – you do in the UK. You also pay tax on capital gains, I don’t. I’m also punished on dividends (20% foreign witholding tax). So accumulating funds like the db x-trackers outperform the Vanguard, for me, even though the TER is 0.65% compared to 0.29%.

Be VERY careful on the tax side. UK residents are required to declare and pay tax on the accumulated earnings. You should receive an annual tax statement telling you this.

I am a chartered accountant, but by no means a tax expert. Get tax advice before you pick what you want, as the tax is could have a bigger impact than a slight difference in TER.

The TER should effectively be the total costs, not including the investment/withdrawal fees. It is as close to a tracking error as you can get (just about, but it also depends on how well they replicate the market). So the TER of 0% quoted must be wrong although there may be no “charge”.

The charge of 0% may mean the initial investment charge. db do charge 3% if you invest direct but like most ETFs its 0% if you invest via an exchange or broker.

Your costs will be whatever your broker charges you as commission (nearly all ETFs can be bought for £2 per trade if you use a regular investment plan and it’s usually around £12 to sell depending on who you use) + the TER (but this is just taken from the value of the fund by the manager, you won’t see it as a charge as such but you will notice it in the performance of the fund over time).

I know I have harped on about Halifax a fair bit, because I use them, but their research centre is pretty easy to use. I have checked that ETF for you and the TER is 0.09%, which is very low, so it would seem a good bet if you want the Euro Stoxx 50. It’s also in the £2 per trade deal.

http://www.halifaxmarketwatch.co.uk/get_kiid?isin=LU0380865021&local_code=B4STTG5

I would take a look at the makeup of the index and then see what you want to invest in rather than just the TER. I think the Euro Stoxx50 is quite bank heavy but I haven’t checked recently to be honest. Once you have picked your index to track, have a look at these ETF companies. If you can’t find a good tracker with a decent TER, I would maybe think about a different index:
Vanguard
HSBC
db x-trackers (now moving to physical replication, yay)
iShares
Lyxor

There are a few others but these tend to cover off most bases I find. You can spend your life checking these things and arguing the toss either way – its very hard to pick! If you are worried, you could always pick two and put money into one for 6 months and then the other? Or both at the same time (increases fees, but would make for an interesting comparison!).

Vanguard are usually hard to beat if they have an ETF in the area you want.

I think you mean the cheapest is 0.09%, not 0.9%?

Do you have any preference over ETFs which track the index by holding the actual shares (physical) or are synthetic.

Don’t know if it matters but I prefer the non synthetic ones.

Useful article as always! I guess that this should say 0.09%?

“db X-trackers FTSE 100 ETF (XDUK)1 OCF 0.9%

Out of interest, anyone know why the Vanguard FTSE100 ETF lost 4% of its value on 17 March? I can’t figure it out…

@David

If you mean the 19th March 2014, that’s the div date for the ETF.

http://www.bloomberg.com/quote/VUKE:LN

@TA – the initial fee for VVUEIN (Vanguard FTSE U.K. Equity Income Index Fund) was reduced recently to 0.4%.

Hi guys,

Love the resource 🙂

Has anyone done a decent analysis of the impact of initial charges vs ongoing OCF. I am particularly looking at the domestic value (I know they are all income funds but take what you can get) where the top performer has a large initial charge 8 times the difference between it’s OCF and the next cheapest. I am a big fan of Vanguard so will probably be sticking with them where I can but on a pure numbers basis that seems a lot

hello everyone
im trying to decide my emerging market exposure
i was all set to go for blackkrocks EM tracker but it was previously said tracking error was bad. im now considering vanguards emerging markets ETF. as im more of a lump sum investor having saved too much in cash this might be better? i like vangaurds EM tracker but its not avaliable from i web platform . my EM money is in legal and general EM tracker at TER 1% so i need to move it across but funnily enough the same legal and general EM tracker is TER 0.43% on iweb platform? any suggestions???

Hi TA,

What about Fidelity Index UK Fund P-Acc (GB00BJS8SF95) – OCF 0.09% – as a Domestic Equity option?

Is there any reason you have not listed it?

Many thanks.

@bigsy
I looked at iweb again and just cannot find vanguards EM tracker VIEMKT
are you sure its on there?

With respect to the Vanguard and Blackrock emerging markets (and pacific ex-Japan) funds. The constituents of each company offering differ significantly reflecting the different indices being used (the Blackrock pacific ex-Japan contains about 40% emerging Asia). That is a based on whether one considers a particular country developed or emerging in each index. Pairing the two Vanguard funds or the two Blackrock funds in suitable proportions gives broadly similar geographic blends (not identical however).

The big issue for me is not just TER, but the high unit costs of Vanguard funds. Rebalancing a small portfolio requires making small lump sum purchases (in my case £100 minimum on Charles Stanley Direct). The price of Vanguard funds from about £130-£180 just does not work with that rebalancing strategy. I used to be a Vanguard fan (and still hold three of their funds), but now look for acceptable alternatives with lower unit prices for funds that will be minority components of my portfolio (Blackrock has been winning that comparison).

An even smaller point (but one raised on this site) is that the Vanguard funds being discussed here are domiciled in Ireland, whereas Blackrock’s are GB based.

@ Hamzah – Thank you for your thoughtful comments. Another Monevator reader seems to have found a workaround for the Charles Stanley fractional unit problem: http://monevator.com/the-slow-and-steady-passive-portfolio-update-q4-2013/#comment-616861

@ DonF – I think this is very sensible approach. I don’t have any UBS ETFs myself.

@ Oscar’s Dad – I haven’t listed it because to the best of my knowledge it’s only available through Fidelity’s own platform right now. I’m not including Super Clean funds which are exclusive to one or two platforms and use headline OCFs to lure investors into a less competitive deal overall. Compare the platform charge and OCF for all the funds you want to buy from rival funds before committing.

As a very wet behind the ears investor. I wonder if you could help me to get my asset allocation right?

This is how my money is divided at the moment.
In a funds ISA……
UK equities (small cos + ftse all share tracker) 28%
US equitites (sm cos + S&P 500 tracker 8%
European equities 5%

Cash ISAs 27%
Index linked savings certs 18%
Cash 14%

I have put some of the cash £5760 (12/13 ISA allowance) into Charles Stanley Direct ISA & want to buy some trackers with it.

What would you recommend?

Can you actually buy the likes of XDUK on Halifax’s platform?

@Martin (comment 201).

You can buy the HSBC tracker funds you mentioned directly from HSBC, that way you cut out the middleman of the platform and save yourself some money.

(Invest enough directly with them and you may qualify for there Premier bank account which has a few useful freebies, like free worldwide travel insurance, but never let the fringe benefits tail wag the investment dog.)

Thanks to all the information on this site, I am just about to take the plunge and buy a few funds. I have settled on a simple asset allocation based on low-cost funds but there are two questions stopping me.

For me, domestic equity is between Royal London FTSE All Share Tracker Fund and Vanguard FTSE UK Equity Index. The Royal London one has lower costs so should be the obvious choice? I get the impression that OCF and TER are king but what about all the other numbers to get confused by 🙂 … According to the risk statistics info on iii.co.uk, the Royal London fund has a lower “tracking error” (2% vs 3%) – is this an indication of how well it tracks the index or is it some other number entirely? Does yield tell us anything useful?

How much is it possible to worry about tracking error? Looking at the graphs on iii.co.uk, the Blackrock property tracker has had some significant tracking blips and the Blackrock emerging markets one became separated from the index graph by 2012. I’d like to find funds with low OCF that track my chosen benchmarks well but not sure if I can tell I’ve found one or how much time and energy to spend looking for them (this was meant to be a lazy portfolio after all 🙂 ).

The SWIP tracker is excluded, I would think, because it is not very cheap once you have added the HL platform fee of 0.45%.

@Geo

I did a search on Charles Stanley and there are 50 SWIP funds, but it does not include the FTSE All Share tracker:
https://www.charles-stanley-direct.co.uk/InvestmentSearch/Search?SelectedFundManagerGroupIds=155&PreviousSelectedFundManagerGroups=155&AddFundGroupId=0&SelectedImaSectorIds=-1&AddImaSectorId=0&WrapperCompatibility=false&TypeOfUnit=false&category=Funds&submit=Search%20Now&pagesize=50

Is this a case of the search facility not being reliable?

Ah, I was looking for FTSE All Share Index (Class B). The Foundation fund does appear in my list of 50. Now I know what I’m looking for, it’s also in Interactive Investor: http://www.iii.co.uk/investing/factsheet/0MEW

I can’t see why TA would deliberately have excluded this fund, so I imagine he will add it, next time.

If I plan to use only low-cost tracker funds, like you suggest here, is there any advantage to buying using a platform? For example, I can find no advantages to buying Vanguard tracker funds on the Hargeaves Landsowne web page. Why not buy the low-cost tracker funds direct? I am investing outside of an ISA or SIPP.
I guess you need a broker or platform to invest in ETFs because they are traded on the stock market.

Fidelity has cut its tracker prices. http://www.citywire.co.uk/money/fidelity-slashes-cost-of-tracker-fund-range/a753242?ref=citywire-money-latest-news-list

They seem to be available on platforms like II (at a slightly higher price than on the Fidelity platform), so they appear to be the new price champions (or at least to match the current champs):

UK 9bp
US 10bp
Japan 12bp
Europe 12bp
Asia (excluding Japan) 15bp
Emerging markets 25bp

Whether their tracking is as good as the best remains to be seen.

I’m with Fidelity and stacked with BlackRock trackers so this is an interesting development. As said tracking error is or has been more with Fidelity than others, from what has been reported.

Hi Dale,

EMSM brings up the £ version of the SPDR Emerging Markets Small Cap ETF: https://www.spdrseurope.com/product/fund.seam?ticker=SPYX%20GY

EMSD is the $ version. Essentially two faces of the same fund.

The iShares dividend ETF in that list gives you your value option. High yield funds are a form of value – a weakish one, it’s true but as you rightly say there aren’t many options available when it comes to EM.

Hale does complicate things a lot with separate funds for value and small cap. I’d be inclined to merge them into one or two EM funds for simplicity sake, unless your portfolio is very big.

Hi Tom, few ETFs automatically reinvest dividends. The ones that do are generally called capitalising ETFs and normally it will be mentioned on the factsheet.

If you’re in an equity ETF then this would lead to a tax payment if you’re a higher-rate tax payer holding the ETF outside of a tax shelter.

Bond income counts against income tax, so basic rate tax-payers and above are in the firing line if held outside of a tax shelter.

ETCs = no dividend, no tax.

The Vanguard emerging markets fund tracks a different index (MSCI Emerging Markets) to the ETF (FTSE Emerging), so there is a slightly different allocation by country. Off the top of my head, I think the FTSE Emerging index doesn’t consider South Korea an emerging market – it makes up about 16% of the MSCI index. You would need to manually reinvest the dividend of the ETF, yes.

Yes, that’s a good point too! I forgot to say that (the last time I looked at it, anyway), it seemed like the ETF tracked its index better than the fund did, which you might expect given the nature of ETFs. However, the ETF has only been around for a little over two years so there isn’t really enough data to say definitively.

I would always double-check anything you read on Morningstar on the factsheet for whatever you’re going to invest in. The TER is supposed to be the AMC + additional bits, so it doesn’t make much sense to have an AMC higher than the TER! If you have a look on Vanguard’s website, you will see the current TER for the fund is 0.4% and the ETF’s is 0.29% as you said.

We had a discussion a while back about being able to purchase Dimensional Value Funds from a few providers, including Interactive Investor. Well, I’ve been putting in smallish amounts for a few months now via a regular investment. I noticed that last month’s trades for Dimensional UK & International funds didn’t go through. II have now told me that they can no longer execute “buy” orders for Dimensional, although they can still do “sell” orders. I suppose at least they’re not (yet) forcing me to sell them. So those of you who said “it won’t last”, were absolutely right. Sigh. Back to the drawing board.

I doubt you will be forced to sell, because what DFS want is long term, buy and hold investment, so they aren’t forced into unplanned liquidations of assets. They rely on chosen advisors to filter out the flightier investors. Now that you have invested, there’s no reason not to let you hold as long as you wish.

But with plain vanilla tracker fees getting ever lower, the DFS fees represent an ever bigger differential which they have to overcome with their smart tracking.

I still do not understand why we don’t update the list with the HSBC FTSE All Share Index Instl Acc – GB0030334345 – OCF 0.02%?

A reader has confirmed buying it at iWeb. I’m in a quandary with this fund though. I don’t want to litter the list with ‘exclusive’ funds that are not widely available regardless of broker choice. Last time I checked the HSBC All-Share I fund had disappeared from the listings of the main brokers, so I didn’t include it. If other readers can confirm holding it in places other than iWeb then I’ll put it in.

Also, I haven’t updated the list yet with the recent Fidelity index fund price slashery so readers should look out for that too.

I intend to put this year’s ISA allowance into Fidelity’s UK index tracker (All-share), as prices have been cut to 0.07% (through Fidelity, not including their platform fee). The fund is available through two platforms that are both cheaper than Fidelity: iWeb and CavendishOnline. However, they have slightly different names:

CavendishOnline: Fidelity Index UK Fund P-Acc (ISIN GB00BJS8SF95)
iWeb: Fidelity Index UK A Acc NAV (ISIN GB0003875324)

Does anyone know the difference? The Cavendish fund is described on Trustnet as “clean share class”, whereas the iWeb version is listed under “other share classes”.

Also, a bit worryingly, while the annual management charge is advertised as 0.1% on Trustnet, the OCF comes to 0.3%, and if Trustnet’s notes under OCF are correct then there are further hidden charges described below. Can anyone shed any light on which of the two options above is likely to have the lowest charges overall, including all the hidden charges that are never published?
thanks

From Trustnet:
“Performance fees, transaction costs, interest on borrowing, costs associated with derivatives, entry and exit fees and soft commissions are not included in the OCF calculation, and should be factored in separately by the investor.”

Thanks, the Vanguard fund does look like a better choice.

Are Fidelity really allowed to hide costs in the tracking error? I would have thought an error would cause random divergence from the index, but now that I look on Trustnet I see the error is consistently negative. Interesting…

Lorenzo, I think iWeb’s site might be misleading on that one – the trading page says 0.08%, but the KIID says 0.15%. I wonder which one is correct?

That fund is also showing at 0.08% on II and seems to be purchasable: http://www.iii.co.uk/investing/factsheet/I10K

I see that they also have the US Index I fund at 0.08%.

I’ve also got a lump sum in HSBC AllShare Ins Acc tracker (OCF of 0.02%) on iWeb – looking at the corporate action notice this means you can sell but not buy this fund.

HSBC still list the C version of this so I’m presumimg the underlying fund is still going, but iWeb are closing this loophole of low charges for this I varient.

Am I wrong? or should I be moving out of this fund into the safety of say Vangaurd or DBX tracker for some UK exposure.

@292 ivanopinion
For Fidelity Index World I (I10K) you’re correct that AMC is .08% but TER is .15%

Hi Andrew,

You can take a look at it on Morningstar: http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000000QXT

Ah, just reading in more detail and it’s probably because the Fidelity fund has a higher tracking error than the others.

Please explain what a ‘value product’ is. Aren’t all the funds you are recommending supposed to be good value.
Ta

@Tom k – I am also confused about this! Seems that this ETF paid out 4 divis over the last year totalling just over £2, which on current price of £30 is approx 6.76%, much more than FTSE 100 yield. Most of this seems to be due to a large divi paid in mid March 2014. This could be because most FTSE 100 companies pay a larger divi in March BUT interestingly a chart comparing this ETF with FTSE100 shows a large relative drop. I’ve no idea why Vanguard would do this.

Vanguard are cutting charges on a number of their ETFs and funds according to a number of news sources.

Nothing on the Vanguard website yet.

Ooops!!! Somehow managed to miss that article. It was a long day yesterday that’s my only excuse. Ha ha.

I think the 5% is only if you trade directly with HSBC rather than through a brokerage. Similar thing with DB x-trackers although at 3%. May want to check that though!

What’s the code for it and I’ll check?

Yes that’s the entry / exit charge if you traded direct rather than on an exchange. Realistically I doubt anyone would ever do this

Lyxor has launched what looks like a global value factor ETF (with, of course, the word ‘beta’ in the name) at 0.4% TER.

http://tinyurl.com/oeoenf8

@ Don – thanks very much for the link. We’re still very underserved in the UK with value options.

@ Robert – I doubt it. DFA has systematically been shutting down availability on the brokers that were selling them. It’s against their creed. Here’s some more value options: http://monevator.com/uk-value-premium-funds/

@ James – I had the same issue with iWeb – when I rang them to see why I couldn’t find CRBL, they said that as they can only trade it via one source, they are unable to get ‘best price’ so won’t list it – that’s if I correctly understood what they said.

@ Don – it sure is. Ticker SGVB. But Lyxor don’t even list it on their website yet. Once they publish some literature on it then we can take a view. It’s always a good idea to give a new ETF time to bed down too.

@The Accumulator/others, just figured it out after I typed the comment! The trick is to deselect OEIC and Unit Trusts from the search options, then a search for gold will bring them up! Not obvious (unless I’m a little challenged, that is)

Things get more bizarre. Although all of the gold ETF’s can be found on iWeb’s lookup tool, only SGLD and XGLD are available to trade (look for them under the UK equities tab, not the funds tab). The iShares one is unavailable (except if you buy the USD version), despite it being available according to the lookup tool.

@ Tom – this list is collated on the basis of cost, so there’s no intended editorial comment on the BlackRock version. The advantage of a fund with an older track record is that you can be more confident in how well it tracks its index and unquestionably that’s more valuable than a 0.01% sliver of cost. Stick tracking error in the search box for some ideas on how to measure tracking error / difference.

Re: differing allocations to developed and emerging Asia – this might matter if you had other funds covering these regions and you wanted to strictly control your asset allocation, or if your job depended on these regions and that in turn influenced your exposure. Those differences will influence the eventual returns of the two trackers, but as none of us can predict the future it’s not worth worrying about.

@TA:

Thanks for the up-date: I’ve found the various iterations of this article to be a really handy resource.

I’ve just had a quick look at the Vanguard website and the ETF page seems to indicate that four new ETFs are about to be launched, covering FTSE 250, Europe ex-UK, Developed World and North America.

https://www.vanguard.co.uk/uk/portal/investments/etf

All look pretty cost competitive and could be up for consideration in the best buy league tables!

Not sure if they are actually available to buy yet, but thought you might appreciate the heads-up.

Cheers!

You can now view the fact sheets for those four funds on the vanguard website.

You can find the full list of consituents and weightings for FTSE indexes at the link below:

http://www.ftse.com/analytics/factsheets/Home/ConstituentsWeights

No difference. The £ version is just a consumer nicety (people are reassured by the familiarity) but the base currency is still in $ so you’re still subject to currency risk.

Excellent on the added Vanguard stock ETF’s. I hope they widen the bond ETF offering soon also…

Geezer,

You are right to be concerned, and not just about stock lending activity.

One ETF has an advertised TER of 0.4% but has securities lending income of £83,000. However, that is swamped by the £246,000 it incurs in Realignment Costs which takes the TER up to 0.46%. Still cheap but it is clear that there are issues such as counter-party risk, liquidity that need to be considered.

@ Geezer – you’re concerns should be applied to the whole financial industry rather than just ETFs. Security lending is standard practice across a great many investment vehicles – the difference with ETFs is that they’re transparent about doing it, which you can’t say for much of the industry. Security lending does create counter-party risk, but you can find ETF providers who don’t engage in this practice if you’re worried.

@ Davros – you’re quite right. My mistake. Thanks for letting me know. Will update the piece. Shouldn’t you be off conquering the universe? 😉

I’m sure I’m being hopelessly naive, but what is the difference between Fidelity Index UK Fund W (ISIN: GB00BLT1YM08) and Fidelity Index UK Fund A (ISIN: GB0003875324). I’ve read the KIIDs and I don’t see anything obvious.

At least on the Intelligent Investor website, the W fund shows an AMC of 0.09% and “-” for TER, while the A fund shows an AMC of 0.10% and a TER of 0.30%. Does the A fund really charge three times as much, or am I being deceived? Even if I’m being deceived, why would anyone choose the A fund over the W fund, since the W fund is at least fractionally cheaper judging from the AMC?

@ Steve – the A fund is an older legacy Fidelity index fund with a TER / OCF of 0.3%.

The W fund is a newer version of the same thing that Fidelity brought out to compete with Vanguard, it’s OCF is 0.09%.

There’s even a P version you can buy from Fidelity at 0.07%.

Forget AMCs and look for the OCF / TER on websites. If they only give you the AMC then look at a different site.

You’ll often find that there’s an alphabetti spaghetti of share classes attached to the same fund. They are different incarnations of the same thing – some are institutional versions as Naar says, some are cheaper versions available to certain platforms on an exclusive basis and some are older versions they don’t bother to reduce the price on because they’re happy to fleece inert investors.

Anyone else having trouble buying Fidelity Index World I Acc (GB00B7LWFW05, I10K) on Interactive Investor?

The boring details are: on 23rd Oct, my buy order for the fund was rejected. When I called II to find out why, I was told the fund is “sell tradable only” but that’s about all they could tell me – nothing about why, or whether this is permanent or temporary. I then called Fidelity who said as far as they were concerned the fund was ok buy via II. A second call to II, to follow this up, got the same it’s “sell tradable only” response.

I’d welcome any thoughts or suggestions… as it now looks like I need to find an alternative World index fund, on Interactive Investor, at least.

Thanks.

The Vanguard dilution levy is now 0.2% reduced from 0.4% on their UK FTSE all share tracker from 3rd November 2014 according to the factsheet.

Haven’t had chance to check if any of the other dilution levies has changed.

Yes. Good spot Allie.

As if by magic my Vanguard UK equity index fund on ATS has changed into the FTSE U.K. All Share Index Unit Trust (yesterday?).

Not had any message about it.

I’ve got a lot more units now but the unit price is correspondingly lower. The conversion calculation is correct.

There is now an item about the fund merger and reduction in dilution levy on the Vanguard website

https://www.vanguard.co.uk/uk/portal/articles/vanguard-news/fund-merger-fee-reduction.jsp

For each unit in the FTSE UK equity index fund you should have got 1.28014556 units in the FTSE UK all share index unit trust according to my conversion.

@ Snowman – thank you as ever! Will update over the weekend.

@ ABC – those are the only 3 passive global inflation linked bond options I know of. I would only go for XGIG because that’s the only one hedged to the £. The L&G fund would suffer from currency risk too as its unhedged.

I think the synthetic ETF scare has been overdone and wouldn’t let it stop me investing in an asset class if a synthetic ETF was the only way to get exposure.

for my bond allocation im looking for an
Emerging Market Goverment bond etf
does anyone know of one ? I believe they are good and offer over 4% yield. can anyone help?

@ABC1
many thanks, I will check this one out.
I did find a vanguard one VWOB .

@dawn
EMDL is GBP London listed trading in £ so the dividends should be paid out that way too – one would think

I have held EMDL for just under 2 years now – it has lost just over 8% in capital value since then, but that has been compensated by the coupon payments. Tim Hale’s Smarter Investing does not recommend Emerging Market bonds due to their price volatility. I suppose he has been proved right in my case, but I will continue to hold them for the relatively high yield.

The SWIP Foundation Growth B Fund doesnt seem to be accepting new investment at least on ii.

Hi

I’m changing a cash ISA into the ‘low-volatility’ (bond) part of a currently equity-only ISA. I’m after a one-off slug of (from above):

UK Government bonds – mixed duration
Cheapest:Vanguard UK Government Bond ETF (VGOV) OCF 0.12%
Next best :Vanguard UK Gov Bond Index (VIUKGO) OCF 0.15%

The ETF is newer & cheaper (and has no stamp duty) – I re-read the “ETFs Vs index funds: The ultimate battle of the trackers” post from 2010, and the conclusion was index funds are simpler and easier to manage…

But with the 2 products investing in such similar things, is there anything else to consider? Does the ETF pay out yields which have to be re-invested, compared with the Accumulation nature of the fund?

Any comments gratefully received 🙂

I’ll shortly be moving some cash ISAs into global trackers and was considering just getting more of the Vanguard Dev World Ex UK (VVDVWE). Not truly global as “Ex UK”, so I’ve also considered the Fidelity Index World Fund Acc which has a similar annual charge of 0.15%. However I also looked at the Vanguard VWRL ETF.

The Fidelity and VVDVWE funds show very similar performance over the past year. In contrast, the VWRL ETF lags by about 4%. Comparison of the holdings of the ‘global’ ETF and Fidelity funds show they are broadly similar … both in equity held, sectors and geography (VWRL has less US exposure by a few percent, but nothing much else to my untrained eye).

What am I missing? The VWRL ETF has a TER of 0.25% which surely can’t account for the difference in the returns. Other than the immediate gratification of ETF dealing (which I do so rarely I couldn’t care less about) there seems no reason to consider the ETF any further.

[Note … all comparisons made using the HL website which, although not worth the 0.45% platform charge, remains my favourite]

I was looking at cf lindsell train uk equity d fund .The returns are impressive under FTSE all share index.The literature states that they have invested in UK all companies and UK small market shares.The HL further shows that they have invested in America as well.Do you think that this fund is better than others or is just an expensive tracker.

Hi,
question on the property suggestions above. I have looked at ■BlackRock Global Property Securities Equity Tracker D (GB00B5BFJG71) OCF 0.23% and find its a Unit fund and will attract additional 0.2% charges from my SIPP provider…is this right (its a fund not a ETF) or have I missed the ETF version of this?
Cheers
Paul

@Dawn – Maybe because Vanguard is a larger fund manager or it follows its benchmark so closely (4.5% of the fund in Japanese stocks). But it is slightly higher on the AMC. May be worth checking the dividend yields as this is the main purpose of these funds – high dividend yield.

Yes very approximately that’s about it – although ‘growth’ doesn’t always grow and ‘high yields’ can sometimes vanish into zero yield or much lower yields (e.g. RSA, Tesco, and Halfords). That’s why I’ve sold most of my so called ‘high yield shares’ and replaced them with high yield ETF’s such as VHYL, EUDV and IUKD – you don’t need to follow what’s going on in each individual company, whilst the ETF benchmark criteria will automatically replace any dividend cutters with new stocks that fit the ‘high yield’ requirements (along with other factors such as dividend cover, market capitalisation, dividend history etc.) Hope that demystifies them a little

@ Dawn – here’s a piece explaining value: http://monevator.com/the-value-premium/

High dividend yield is one form of value though is generally held to be the weakest.

Companies with strong book to market price, sales to price and cash flow to price are other common ways of measuring value equities. The article explains in more detail.

The iShares and db X value ETFs weren’t available last time I updated the article which is why they don’t appear in the list.

You need to do due diligence on any of the above trackers you’re considering. As mentioned in the piece, I only list according to cost i.e. the Ongoing Charge Figure – as a jumping off point for your own research.

Value funds are likely to be volatile and will deviate substantially from the market’s performance at times – potentially for years. Often that can be a cause of pain for investors when the performance is on the downside. It’s a phenomenon known as tracking error regret and it can be very tough to live with which is why many find value investing hard.

Really useful list. I too have the Fidelity Global Inflation Linked Bond Fund GBP and looking for a cheaper better performing option. My platform says that the XGIG is not available in an ISA – is that general or just my provider – anyone know?

I have the Vanguard UK Inflation Linked Gilt Index in my portfolio, and whilst browsing around see that it is classified by my platform as a hedge fund. Checked all the other inflation linked gilt funds and they are classified the same way.

Does anyone have an explanation of why this should be the case. In my ignorance I cannot see the reason.

Correction to post above. To clarify its the FTSE Dev Europe ex UK. Not the global one. So they are both European indexes. Sorry.

Hi Scot.

Check the prospectus out. You can get a copy here: http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000SKX8&tab=14&DocumentId=77d9c76abb2b04d4afd50b4699e3fa71&Format=PDF

Looks like the ‘P ‘ class is only available through partner platforms and has lower minimum purchases. The ‘W’ is available to everyone through other channels so probably is the one with higher charges?

Happy hunting.

@ Scot – I’m reading but sadly I don’t have the time to unknot all the exclusive deals going on. Generally, speaking they don’t make a more expensive platform the cheapest anyway. So I’ll cover off the cheapest universally available trackers but it’s always worth checking if your platform has a deal.

@ Kris – one index beating another for the last 5 years is no guarantee it will do so for the next 5 – assuming there are constituent differences. For a fuller few of costs, take a look at the articles on the site on tracking error and tracking difference.

To update on the ‘P’ & ‘W’ classes of Fidelity Emerging Markets Index as I mentioned above – I’m 99% sure that as of a couple of days ago both were listed to buy on iii, but when I checked last night only the universally available ‘W’ class could be bought through that platform.

@paul – there are ETFs tracking FTSE 250 offered by Vanguard, iShares and HSBC -and possibly others (SPDR?). The only fund I’m aware of is Blackrock, only available in accumulation units.

The latest OCF for the Legal & General L&G International Index Trust I (GB00B2Q6HW61) is 0.13% rather than the 0.31% shown in the article, according to the key fact document on Morningstar.

Looks like Blackrock have upped the game a little bit with announcements today…

Their UK Index Tracker (D class) OCF reduced from 0.16% to 0.07%, beating the Vanguard leader on this post and without the pesky initial charge either.

They’ve also reduced the charges on their US and Continental European trackers, although annoyingly not on their emerging markets or corporate bond trackers. Apparently no reduction in sight for these, although the reason for the cuts in the others was the increased size of the funds, so maybe if the funds grow some more!

To partially answer my own question, I just found out that IWRD specifically had 0.03% return from securities lending in the last 12 months, not nearly enough to tip the scale. Still worth checking this for other funds though.