Low-cost index funds UK

You may have a typo: “Lyxor Core Morningstar UK ETF (LU1781541096) TCO 0.1%”
If it’s an ETF, shouldn’t it have a four character designator (probably LCUK)?

I need some guidance on cash equivalent investments in a SIPP. I don’t want to invest a large cash holding all in one go (I really shouldn’t have read Paul Singer’s Elliott letter last night!) but my SIPP provider doesn’t pay interest. ETFs are preferable but funds will do, and I assume by their nature they will be actively managed. GBP money market funds come to mind but perhaps a US treasury GBP hedged fund will do? Specific fund suggestions welcome but perhaps more so is where do I start my own research? I can’t be the only one in this predicament. Thanks in advance.

@The Investor – Many thanks.

A search of JustETF yields only two alternatives with under 6 months duration in GBP or GBP hedged (assuming we ignore the ESG flavour of ERNS).

JPMorgan GBP Ultra-Short Income ETF, ticker JGST.
https://am.jpmorgan.com/gb/en/asset-management/adv/products/jpm-gbp-ultra-short-income-ucits-etf-gbp-dist-ie00bd9mmg79
YTM 3.48% and duration of 3.6 months according to the factsheet. I don’t fully understand what it invests in but it “may be concentrated in the banking industry”.

Xtrackers Sterling Cash Swap ETF, ticker XSTR.
https://etf.dws.com/en-gb/LU0321464652-gbp-overnight-rate-swap-ucits-etf-1d
A money market fund that tracks SONIA (I assume it returns a little below base rate?). However, it’s synthetic and domicilied in Luxembourg.

ERNS YTM is 3.72% and duration of 2.3 months.

It’s perhaps nugatory given my brokers search doesn’t return anything for JGST or XSTR.

@The Accumulator – Thanks.

Vanguard Sterling Short-Term Money Market Fund GBP Inc (GB00BGB6GZ57) OCF 0.12%
https://www.vanguard.co.uk/professional/product/fund/money-market/9974/sterling-short-term-money-market-fund-investor-gbp-income-shares
I can’t trade it on iWeb/Halifax. Live chat said it’s because of the “nature of the fund, its a coded fund”. It’s on AJ Bell (but not for regular investment) and HL.

There’s also the BlackRock Cash Fund Class D GBP Dist (GB00B42XLZ68) OCF 0.24% (brokers quote OCF 0.14%, iWeb quote typical transactions costs of 0.188%)
https://www.blackrock.com/uk/individual/products/229426/blackrock-cash-fund-class-d-inc-fund
It’s on iWeb/Halifax/AJ Bell (including regular investment)/HL.

Using the AJ Bell method in your “Transaction costs” article:
Vanguard – OCF/TER/AMC 0.12%, transaction fees 0.15% -> TCO 0.27%
BlackRock – OCF 0.18%, AMC 0.25%, transaction fees 0.02% -> TCO 0.27% ?

The BlackRock, iShares, and Xtrackers funds mentioned hold different grades of credit:

ERNS – credit rating at least BBB (lower medium grade). Holds corporate bonds from banks. Tracks “Markit iBoxx GBP Liquid Investment Grade Ultrashort Index”. Lends securities, up to 8.88% on loan in last year.

XSTR – credit rating Aa3 (high grade). Appear to hold UK gilts and use swaps to return the daily gain of the index. Tracks SONIA. No lending.

BlackRock Cash – credit rating at least A-1 (upper medium grade). Holds bank deposits and unsecured commercial paper from banks. Tracks SONIA.

> It’s perhaps nugatory given my brokers search doesn’t return anything for JGST or XSTR.

XSTR should be on iWeb.

> Using the AJ Bell method in your “Transaction costs” article:

Compare the tracking error (read the article “How to use tracking error to uncover the true cost of an index tracker”). In this case, BlackRock Cash and XSTR track SONIA very similarly (difference of 0.0125% a year on average). ERNS has historically returned about 0.5% more per year, but it’s tracking a different index (ultrashort bonds).

iWeb also have ERND which is the iShares $ Ultrashort Bond ETF. At least BBB rated. Tracks “Markit iBoxx USD Liquid Investment Grade Ultrashort Index”. Might be worth considering as U.S. rates are higher (~5% YTM), but you’re exposed to currency fluctuations.

Another interesting one is FEDG – Lyxor Fed Funds US Dollar Cash ETF. Should return 3.8% now (unhedged). It appears to be available on many UK brokers, but not iWeb.

@D imho hedging would make sense if you have a large amount of money and want to convert it all to a USD fund at once. If you just want to average in over a long time then you may as well accept the currency risk.

I had another look at iWeb, some other funds available are:

– Pimco US Dollar Short Maturity Source ETF (IE00B67B7N93). This one looks good – currently 5.13% YTM and there’s a GBP hedged accumulating variant (IE00BK9YKZ79). Unfortunately iWeb have the unhedged variant, but don’t have the hedged variant. It’s a big fund too, $2461m AUM. Maybe iWeb will add it if you ask.

– Royal London Short Term Money Market. Available in both income and accumulating variants. Tracks compounded SONIA almost perfectly. The biggest fund so far, £5244m AUM.

Hi Guys –

Thanks so much – very helpful.

Love the work you’re doing!

Sidenote – I’d also point your readers to an interesting ESG Guide, including a comparison of the Vanguard ESG Global Fund with its non-ESG Version:

https://www.bankeronwheels.com/review-of-ishares-msci-usa-sri-ishares-esg-msci-usa-leaders-ishares-msci-usa-esg-enhanced-vanguard-ftse-esg-global-all-cap/

-James

Hi, thanks for another great article.

I currently invest in the HSBC FTSE All World and would like to add small-cap exposure.

I notice that all the listed world-small-cap funds/ETFs track the MSCI index.

Does anyone know if there are any FTSE alternatives out there (my search has been fruitless)?

If not, how big a deal would it be to “mix and match” the two index providers?

Thanks so much for any advice.

What tools are you using for fund/ETF analysis in the UK? I found very useful trustnet.com and morningstar.co.uk.

Below is my table of money market instruments sorted by 6months performance.

Rank Fund Yield YTD 1m 3m 6m 1y 3y 5y
1 PREMIER MITON UK MONEY MARKET B INC GBP 4.39 0.7 0.2 0.9 1.7 2.2 2.2 3.4
2 ABRDN STERLING MONEY MARKET I ACC 1.5 0.8 0.3 0.9 1.6 2.2 2.4 3.9
3 ISHARES £ ULTRASHORT BOND UCITS ETF GBP n/a 0.6 0.2 0.8 1.6 2 2.7 4.7
4 L&G CASH TRUST I ACC 2.3 0.7 0.3 0.9 1.6 2 2 3.3
5 LF CANLIFE STERLING LIQUIDITY I ACC 2.65 0.7 0.3 0.9 1.6 2 2.2 3.7
6 ROYAL LONDON SHORT TERM MONEY MARKET Y ACC 3.58 0.7 0.3 0.9 1.5 2.1 2.2 3.6
7 FIDELITY CASH W ACC GBP 1.39 0.6 0.3 0.8 1.4 1.9 1.9 3.2
8 BLACKROCK CASH D ACC 2.85 0.6 0.3 0.8 1.4 1.9 1.8 2.8
9 INVESCO MONEY (UK) NO TRAIL ACC 3.52 0.6 0.2 0.8 1.4 1.7 1.4 2.2
10 VANGUARD STERLING SHORT-TERM MONEY MARKET A INC GBP 0.08 0.6 0.3 0.8 1.4 1.8 1.9 n/a
11 LGIM DHL LIQUIDITY n/a 0.7 0.3 0.8 1.4 1.9 2 n/a
12 INSIGHT ILF GBP LIQUIDITY C4 3.96 0.7 0.3 0.8 1.4 1.8 1.8 2.9
13 CT STERLING SHORT-TERM MONEY MARKET RET INC GBP 3.58 0.7 0.4 0.9 1.4 1.9 1.7 2.7
14 JPM GBP LIQUIDITY LVNAV R DIS NAV 0.03 0.4 0.2 0.6 0.9 1.2 1.3 1.9

@TA – Just wondered if I am missing something but under your selection for
“Global equity – developed world and emerging markets (All-World)” why is this fund below not included:

Legal & General Global Equity Index Fund Unit Class I GBP Accumulation – (ISIN: GB00B83LW328)

Seems fairly cheap but is there something wrong with it?

I think it seems to be an “All-World” fund and tracks the FTSE All World index (unlike the L&G International Index Trust which excludes the UK which you have included in your ex-UK selection).

Seems to have had fairly close performance over 5 years according to IWeb – 10.48% annualised return for Global Equity Fund and 10.94% for Int. Index Trust.

Here is the KIID (from IWeb):

https://api.fundinfo.com/document/0c9d1eaa672fb77b859d15eab5f2448f_116024/KID_GB_en_GB00B83LW328_YES_2023-03-17.pdf?apiKey=605b9952-c07c-4fe8-a749-1ed0e2f1e8e8

and this shows the fund charges:
https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/detail/GB00B83LW328

but says ongoing charge is 0.13% but with a typical transaction cost of 0.188% ? – more than the OCF charge? Don’t really understand that being more than the OCF? That would make 0.318% overall? It does say underneath this: “*This is an indication based on the market average. The fund’s actual transaction cost will be shown before you place a trade.”

These are exactly the same quoted charges (on IWeb anyway) as the L&G International Index Trust. (Oh, I’ve just seen that the transaction cost is exactly the same 0.188% for Vanguard Dev. World fund & Fidelity Index World P fund – so think Iweb probably use this inaccurate figure for most. )

Thanks TA.

I was just looking at the fund factsheet dated 28 February 2023 for L&G Global Equity Index Fund here:

https://fundcentres.lgim.com/srp/lit/7vYWQ2/Fact-sheet_Legal-General-Global-Equity-Index-Fund_28-02-2023_UK-Con_UK-ADV_UK-PRIV.pdf

and that gives an Ongoing Charge of 0.52% which seems high and normally doesn’t include transaction costs either – whereas Hargreaves and IWeb give the ongoing charge as 0.13% which is what I thought it was.
Which would be correct – it’s a bit confusing? Where is it best to look to find the correct ongoing charges/transaction costs figures as even the fund factsheet doesn’t seem to give any transaction costs?

I thought this fund and the L&G International Index Trust fund both had the same ongoing charges, according to most brokers of 0.13% for the class I fund (Hargreaves also do class C at a discount through them but that’s just through them I believe). You would have thought the Fund Factsheet would be correct though but then again you would think the brokers selling them would be also?

The L&G factsheet linked to above is for Class R, not Class I (or HL’s Class C). It has ISIN GB00B032BN28 (acc) or GB00B032BM11 (inc). The ISIN given for Class I at, for instance, Charles Stanley is GB00B83LW328 (acc), which gives the Annual Management Charge as 0.13%: https://www.charles-stanley-direct.co.uk/ViewFund?InvestmentId=We6qfjGExa4%3D&Isin=GB00B83LW328&PreviousSearchResults=%2FInvestmentSearch%2FSearch%3FSelectedFundManagerGroupIds%3D151%26PreviousSelectedFundManagerGroups%3D%26AddFundGroupId%3D0%26SelectedImaSectorIds%3D-1%26PreviousSelectedImaSectors%3D%26AddImaSectorId%3D0%26SearchText%3DGlobal%2BEquity%2BIndex%26WrapperCompatibility%3Dfalse%26TypeOfUnit%3Dfalse%26category%3DFunds%26submit%3DSearch%2BNow

Thanks@ TA and @ Barney – for the info.

Yes you’re right Barney, I didn’t spot it was R Class – need to pay Specsavers a visit soon – if I can find it! (I wondered why HL/IWeb said it was 0.13% ongoing charge.) I never looked on Charles Stanley (as I don’t have an account with them and tend to look at brokers I have accounts with (even though I know some broker websites you can still use their info even if you don’t have one). Charles Stanley seem to include the transaction costs as well (where they are able to it says) – so is useful as others don’t always seem to give transaction costs (and some that do don’t seem to be accurate).

The only other way I could think of to pin down the actual transaction costs is due to what IWeb say on their website which is this: “*This is an indication based on the market average. The fund’s actual transaction cost will be shown before you place a trade.”

So it’s a rigmarole but you could go through the process of placing a trade (and then subsequently cancel it) just to view the actual total cost. I never realised there could be quite so much in additional transaction costs – sometimes around as much as the OCF it seems.

Many thanks TA & Barney.

Thank you for collecting all this information so comprehensively it’s really a useful resource. One small correction, the ticker/symbol for the Goldman Sachs Access UK Gilts 1-10 Years ETF should be GBPG

Hello!
I am in trouble!!
I am looking after my sister’s SIPP. She recently transferred in £371,415.84
So far I have only bought: Vanguard Life Strategy with book cost of £25,775.12
Q – do I lump sum over time and on dips or contribute monthly
Q – our local market is UK – how do I increase UK exposure -was thinking I need a equity income fund pref an index tracker with low low cost
Q – can’t think an aggregate bond fund eg index tracker – should I bother?
She is not looking to draw on the SIPP for at least 10 years (other income)
Q -I’ve been told to add global -and go for HSBC FTSE ALL WORLD acc -there will be holding overlaps with the Vanguard I guess
Q- Also I need to consider small cap value and small cap growth -but no idea whats best in class for those
Any suggestions on the above would be appreciated
My head is spinning with all these permutations and combinations -I just need a set it and forget it portfolio
Thanks

Hello Jam / The Investor / As

I’ve been really busy following all the suggestions on this forum. I’ve been learning a lot of things in all areas of investing. I’ve been scouring the web and also listening to pod casts as well as YouTube.
Thanks to you all for giving me the motivation (monevator) – I really appreciate it.

I’ve now come up with a portfolio and would be happy for any critiques you all may have / anyone has:

Core port:
HSBC FTSE All World Index Acc (OCF 0.13)
Vanguard FTSE All World UCTIS ETF (OCF 0.22)

Bolt ons:
Vanguard FTSE Dev Europe UCTIS ETF (OCF 0.10) (VEUA)
Vanguard Lifestrategy 60% Eq Acc (OCF 0.22)
Vanguard Global Small Cap Index £ Acc (OCF 0.38)

Rationale: Core funds to cover the whole world (although I believe US has bigger representation)
Bolt ons:
Europe fund to cover European sector
Life Strategy 60/40 – get some bond exposure
Global Small Cap index to get some small cap exposure -as this can add additional 1 or 1.5% growth

Couldn’t find any great funds for small cap -if anyone has a suggestion I should look into -please feel free!

I believe the above port with low OCF and global representation and some bond is diversified.
I have not included any commodities / gold / tech / emerging markets specialist funds

Tell me what you think!

AS, thanks for your feedback – I do value your opinions as I too want to have a retirement without looking at funds all the time. I want the set it and forget it approach, as like you I am a foodie and also lately started on the cruising bug!

I have noticed that all the small cap funds are high in OCF -so maybe I will forego those.
As for bond funds I thought best to get some exposure -but wary of the recent performance so opted for the 60/40.
I am looking into aggregate global bond funds and also short bond funds -will post what I find -this may help in balancing the overall risk.
I will try and find out the weighting of European shares in the 2 core funds -and if high enough I can potentially ditch the European funds.

I do like the keep it simple approach -as I am a rookie but lucky enough to have comments and opinions from all you peeps here.
I will dig some more and come up with my final port -just sharing as a thank you to everyone!
BTW I use Interactive Investor as its fixed fee and I like their service.

Hi Manish,

As I said before, we know nothing more than what you have told us and nothing of your sister’s non-ISA or non-SIPP holdings, income job prospects, etc., so these can be at best pointers and not advice, so please do your own research, or as The Investor suggested, find a good IFA.

Both the HSBC FTSE All World Index Fund and the Vanguard FTSE All World Tracker are IMHO excellent and I have holdings in both of them myself.

With regards to the developed Europe Fund you have found, you must remember that stock markets are broadly efficient. If investors thought the Developed Europe Market would outperform, they would buy into it, forcing prices to rise until such times as future prospective returns from it fell to the same level as other markets/stocks. So there is no reason to think holding this would add any extra value compared to holding a world tracker fund. (Unless you have some unique and special insight into why it would outperform, i.e an investing ‘edge’. Wisdom is realising that you don’t have such an edge acting accordingly.)

Similarly, I would not be too worried about smaller companies for similar reasons.

Both these funds track the FTSE All World Index, so will have the same underlying assets. The reason they appear slightly out is I believe due to the date the snapshot of their assets were taken. If you were going to invest in only one of these funds, instead of both, I personally would go for the HSBC one, because it is slightly cheaper is the main reason.

Your idea on buying the life strategy 60/40 to get bond exposure is a strange way of doing it. The equities part is global, but with a UK bias that, in my opinion, you do not need. Yes, it has bonds in it, but it seems to me much simpler to just buy a bond fund instead.

Bond fund returns have been poor, as you noted in your later post, but that means bonds now are cheaper, so going forward look to offer better returns in the future.

Another thing we do not know about you or your sister is how much risk you can stomach. The generally accepted wisdom is to add enough bonds into your portfolio so you can sleep soundly at night.

Again, will you or your sister be buying an annuity in 10 years? This suggest buying long duration bonds. The movement in annuity rates is related to long bond yields, giving you some protection against adverse movements in annuity yields.

If not buying an annuity, you could look at a general bond fund, there are plenty listed on this site, or a shorter duration one, such as IGLS which I personally quite like. YMMV.
Again, speaking personally, I might be inclined to buy a 10 year Gilt and hold it to maturity rather than a fund. However, this all depends on what your plans are for drawing the pension.
Have a think about this some more and do more research here is my recommendation.

Anyway, those were my thoughts on your plans. Good luck with what you decide.

Hi Manish,

If you are looking at bond funds then have you seen the latest Monevator update from TA on the best bond funds – it’s an excellent and really useful post listing all the best/cheapest bond funds available and discussing them – note the first lot are UK Govt bonds (known as Gilts) and the second lot are Global Govt bonds (most think hedged to GBP currency is better)- both types are fine but you do not necessarily need both – one or the other will do.

The Global Govt bonds are more diversified across the world (so not just relying on UK Govt to repay them) but also cost a fair bit more as well. You can find this post here:

https://monevator.com/best-bond-funds/

You mentioned Interactive Investor as a broker – I use them as one of my broker accounts (I use quite a few) and I have found them to be good to deal with and their online account also good (although haven’t done any transfers with them yet and some aren’t so good at those I have found.) Remember though that FSCS protection is up to 85K only with any one broker if you worry about them failing – which is why I have quite a few of the cheapest decent ones to spread the risk – helps keep me off tranquillisers that way.

Yes global index tracker funds aim to track the global market and so will all be about the same percentages/weightings so you are just duplicating them – so best to go for the cheapest and best one which in this case I think is the HSBC fund as it also has FSCS protection. I do hold a few global/Dev world funds but this is just to spread risk for the FSCS again as each fund only has up to 85K protection as well (in unlikely event that fund manager fails you should get 85K returned) but I mainly choose the cheapest FUNDS (as ETF’s aren’t covered by FSCS) and they must be UK domiciled funds.

Personally I don’t stick religiously to 85K limit as there are not enough decent cheaper funds around but I spread the risk between a few of the best/cheapest. I have decided I will soon also have some smaller amounts in ETF’s rather than have to use more expensive, and some worse IMO, funds, but with the larger and so possibly safer ETF providers, but again between 2 or 3 providers just to spread risk – I think better than having it all in one and losing the lot but this depends if you want to just keep your portfolio simple – some do. Some people just decide on just one global tracker fund and one bond fund to do the job.

Re: European funds – as I said before, and others have said – holding additional european funds is not necessary if you just want to invest passively. In simple terms if you want to hold more euro funds as say you have some expertise that this market will outperform the rest then go for it but most professionals can’t even determine this so you have to ask yourself why do you? They may outperform one year but then lag another year. As you found out over 12% of the global trackers you chose for your core holdings are made up of euro funds – they will all be about the same as these index funds are designed to track the world markets and provide a return based on that – based on the best guess of the whole market. There is nothing to stop you investing more in any particular geographical area if that’s what you want – it’s your choice, however it’s making an “active” decision to do that and is not then entirely following a passive approach. However if it’s a smaller additional “bolt on” as you say to your core global holdings then it’s not really going to make a significant difference/deviation in all likelihood anyway.

If you are a beginner, and for most even if you are not, passive investing is the best/simplest way forward. If I were you I would read some articles from Monevator archives on passive investing that have been written and why it is better than active investments for the vast majority before you make these decisions. At least then you will be fully informed.

I found this to be true myself as when I started out a few years back and didn’t know better, I bought a number of tracker funds and one active fund which cost a bit more. I still have them and currently all the tracker funds are in profit whilst the active Baillie Gifford fund is still today showing around a 25% loss – luckily I only invested a small amount (10K) but it’s never gone anywhere and taught me a lesson. May just sell it out soon and put in a tracker – that would be the sensible thing.

My honest advice when you are starting out would be to do your research Manish, before you commit, and read all the articles you can find on passive v active investing so that you do not make the mistakes many of us made including myself at the outset.

All the best.

Hi Manish,

in light of your recent updates I might just go for a Gilts fund, back in the day I used to have a holding in L&G All Stocks Index, which suited me at the time. Something similar to that would not be a bad choice for you, as it is uncorrelated to equities. UK bond/gilt funds are all fairly similar when they track the same or similar index. (Just look for low costs and low tracking error ones).

That gives you a 2 fund portfolio with HSBC FTSE World Tracker and your bond fund, so just chose what proportion of bonds: equities you feel suits your level of risk. 60% equities to 40% bonds is traditional, but with your time horizon of 10-20 years it may make more sense to be heavier equities as they do most of the heavy lifting in generating wealth.

You may end up feeling you have to few gilts if there is a major crash, or you could be fairly nonchalant about it and feel you could live with less and have more equities. You will not know this until there is a major crash, so just stick your initial allocation until you have a much better feel for the risks/rewards involved.

After that just leave it well alone. Don’t interrupt your portfolio while it is busy compounding as someone once said.

Anywhere sell PRWU? I’ve got PRIW (the distributing version) in iweb, but PRWU seems hard to come by.

It wouldn’t make me switch though – though I’m always curious what the “hidden” costs are in the dividend going to your broker and being reinvested rather than staying in the fund.

Hi
Great thread – thank you.
Can you confirm 0.03% for US large cap SPY5 – ii says 0.09% and fx fees as poriced in USD and SPDR website says TER is 0.09%. Same on ii for SPX5 the GBP priced variant which says OCR is 0.09%

@The Accumulator, thanks for keeping this up to date, it is very useful.

@Mat109 That ETF tracks the the Solactive GBS Developed Markets Large & Mid Cap index. Nothing wrong with that, but if you look it up on justetf.com the base currency for the ETF is only in GBP for ‘PRIW’, which is distibuting, not accumulating. There is no Accumulating version in GBP, only Eur and USD, so you probably won’t want that unless you want to pay your platform’s foreign exchange charges?

@The Accumulator, good to see Invesco FTSE All-World UCITS ETF on the list, which I own. It was that that made me notice that the correct ticker for the GBP version is FTWG (dist) and FRWG (acc). (again according to justetf.com and the platform I own it through.)

@Martin T #853.
Hargreaves Lansdown added FTWG for me, so should be able to add FWRG too. I will send them a secure message, it might help if we gand up on them. 😉

#Martin T
Ouch nearly 30 years!
I moved from HL because of percentage charging.
I worked out that I had paid over 5k in fees in just over 4 years.
I moved to Interactive Investor. Flat fee platform charging. They are really good for SIPP and stocks and shares ISAs. Check em out.

@Martin T #858
Noted!
For my wife I use the Vanguard Platform -as she only has Vanguard funds.
For me and my sister -we both use II.
I do like II for the choice provided -managed to get any fund I wanted.
Good to ensure your eggs are not in one basket as you wisely have done 🙂

@onedrew
Excuse my ignorance. What and where are the moguls and their piece in bhmg I hood that IT and analysis aside Kepler Partners would be interesting.

@ Genghis – that’s interesting on Irish domiciled funds as opposed to ETFs. Do you have a source? I’ve had a hunt around and can’t find anything to back up a different WHT regime for funds. Really don’t want to have to comb through the taxation treaty!

I did a quick Google search when you asked the questions and couldn’t find anything to support what I was saying.

However, delving into the financial statements of some Vanguard funds as a proxy:

There’s the “Vanguard U.S 500 Stock Index Fund” (no idea where this is available) with financial statements at https://fund-docs.vanguard.com/AReportEN.pdf

This is a Irish based “mutual fund” under UCITS: https://www.vanguard.co.uk/professional/product/fund/equity/9901/us-500-stock-index-fund-usd-acc

In the footnotes on page 246, it notes, “Index returns are adjusted for 30% withholding tax on dividends paid by US securities”

Looking at the numbers, $44m (page 1193) withholding tax was paid on $157m of dividends (page 257), so a rate of 28%.

This of course contrasts to say to the an Irish based ETF, Vanguard S&P 500 UCITS ETF (https://fund-docs.vanguard.com/etf-annual-report.pdf) where it notes on p369, “The return of the S&P 500 UCITS ETF is adjusted by 15% for the withholding tax on dividends paid by US securities”

Looking at the numbers, $83m (page 951) withholding tax was paid on $588m of dividends (page 377), so a rate of 14%.

So there’s at least some prima facie evidence that there is a difference between Ireland domiciled funds and ETFs.

@Martin T #853.

Although Hargreaves Lansdown added FTWG for me, I have not been able to get a coherent answer out of them why they cannot add FWRG, the accumulation version of the fund. This is despite going back to them several times.

Shame really, it tracks The FTSE All World Index, just like the Vanguard equivalent, which is VWRP/VWRL, but is 7 bps cheaper, which is a good saving that adds up over the years.

Anyway, both accumulation and distribution versions of it (FTWG and FWRG) are available on Interactive Investor and X-O. (Plus probably available via other platforms that I do not use.) That makes it all the more baffling that HL can only add the distributing version of the ETF.

Anyway, since HL cannot/won’t list it, I am investing in it through II.

Would welcome feedback on whether there is value in diversifying my index funds to mitigate risk of fund manager failure.
I.e buy a different global tracker in my SIPP than my ISA to diversify further.
Like the good Monevator disciple I am my global tracker is the largest single fund I own by some margin.

#892 Hello Pikolo
I think if you are already in the HSBC all world fund it would not be worth going for FWRG in the sense you want to hold one or the other and not both.
As they track the same companies albeit in different proportions.
You don’t want to double up.
It’s like having the Vanguard 100% equity fund and also getting some of the funds within it eg the Vanguard SP500 or FTSE as additional funds. You end up doubling up.
Not sure if the overall gain would be more or less the same.

Any thoughts?

@Nick
#894
Makes absolute sense to me now. Especially if you use another platform.
TBH, I never thought of diversification we definitely should consider it.
I will now have to revisit my whole approach too!
Thx Nick.

@Lady Beancounter

It depends what you want to do/how you want to invest. It is your own choice at the end of the day but from what I have read and understand you sound a bit like my name – confused (without the z).

Yes I worry as well about your concerns all the time – that US is overvalued (again, apparently) and that those large stocks dominate the US market and that around 64% of global trackers is US dominated and that at some point that is going to revert and have a “correction.” Also how world events will affect the market i.e. wars, oil prices, the shipping problem around Yemen with the Houti’s etc. etc.- all having an effect on economies/our wealth. But something is always going to happen, that’s the way the world is. Also that emerging markets are going to have their day sometime soon they say (also yet again) – but this doesn’t seem to happen either. But don’t forget some people said this for years about bonds – and then it did happen as it is bound to at some point – we know that – but WHEN is the question.

What can you really do about it – you may think you have superior knowledge (I don’t and not many do to be honest – even the experts who work in the industry and think they are “genius level” don’t seem that expert – they just think they are and mostly fail to beat index trackers).

Ask yourself – what do you know that others don’t – can you say which markets are going to outperform this year – the UK, Asia, Europe, EM or commodities or gold perhaps – because I can’t. That’s why many decide on a strategy to invest passively i.e. with the markets best guess on what is going to happen.

The market ebbs and flows in cycles all the time. That’s the volatility and risk we all take with investing. We may hit a bad bear market for years but what’s the alternative – to sit it out in just cash or bonds and make either next to nothing anyway (and maybe even lose after inflation) or risk investing at least some and aim to do better over a longer time frame, hopefully.

If you believe in the passive investing strategy, which is the stated aim of this site, then you invest passively with the whole global market. If you start deviating from this, like you talk about, by diluting your tracker with non US ones, then you are not investing passively and are saying you have superior knowledge to the rest of the market. I am not a seasoned investor – but we all know the things you are talking about – it is common knowledge and nothing “new” and how the global tracker is weighted is the way the wider market has chosen to invest – so you either stick with this and take the “average” return minus costs – as we know over time it has generated reasonable returns – even after inflation – or you don’t and think you know better and take your chances – but know that you could be worse off that way. It may come off sometimes but often does not. As I said emerging markets have supposedly been going to have a good run for years but have we seen that much over the recent past – but who can say in the future? Nobody.

That doesn’t mean you can’t do what you want as you can, but know that you are then investing actively and are not following a purely passive investing strategy. I currently don’t for instance invest purely passively, as although I hold a few global trackers because of diversifying for safety (i.e. splitting between different brokers & fund managers) it is difficult to find enough reasonably priced funds/ETF’s that are global, so I hold some developed world as well (which are generally cheaper as well) and don’t always bother with the faff of then getting separate EM trackers to balance to the correct global weighting (and then also have the rebalancing and extra broker charges suffered there). So I just accept that risk and from what I have seen over the recent past (by luck more than my judgement) Dev World has outstripped Global by a fair margin because emerging markets have not performed that well. So I am happy with this at the moment but this may turn around – who can say when EM will do well – it is more risky by it’s nature but could have some outperformance as these markets have shown rapid growth at times.

So do what you like but understand what you are doing. Most of the time the markets decisions are about “confidence” investors have in those markets. Not so much about what you know is happening in world events – political/economic or whatever, will make much difference to your investment performance – such as buying in or out of any market at any time as by the time we investors know it, it has already been priced in anyway.

Ones of the things that really made me think was seeing various Asset Allocation Quilt’s – Monevator have a good one which is updated and so do other investing sites. When you study those, you see how random it is and how anything can happen/outperform and that you rarely see it coming. If ever you have big doubts about not investing passively then study that from year to year and see if you can ever figure out what is likely to come near the top in any year – I can’t. Even saying this I know I’m not investing purely passively as I said, I try to as much as possible but accept what I am doing- simply for sake of safety (FSCS etc.)/diversification purposes and keeping things simple but it is an active decision on my part to do that. It’s not that I think that EM won’t do well in the next few years – it may do.

Passive investing is about investing as the market does and following the market index – sitting and holding investments for perhaps decades and taking the average market return – accepting it is about getting richer slowly – as fast is not feasibly going to happen – nobody made a fortune overnight except by gambling/luck or unless you believe you are a Warren Buffett (not that I am a big fan as I don’t hero worship anyone). Even then I believe his main initial break/good fortune was when he was able to “charge” others for investing their money and not from just investing his own monies – rather like an advisor does and charges for the pleasure at a large fee (and who I wouldn’t touch with a bargepole after earlier experiences with them).

Just my thoughts on your question – hope it helps!

Amundi Prime All Country World UCITS ETF seems to have 1444 holdings at the moment, going by the downloaded spreadsheet from here: https://www.amundietf.co.uk/en/professional/products/equity/amundi-prime-all-country-world-ucits-etf-dist/ie0009hf1mk9 (I assume the ones listed as “0.00%”, eg Ocado, are less than 0.005% and have been rounded down).
It says the full index it tracks is 3468 constituents. Total assets are $80 million; I guess it’s quite hard to get something like this going when the units that are created would each, ideally, hold all your constituents in the right proportion. Do they get to say to one participant “please create one including small stock X” and another “with small stock Y”?

@Todd: Note that the HSBC MSCI World Small Cap ESG ETF (HWSS) mentioned in the article (I presume that’s the one you mean) may not be available on many platforms – it’s not on interactive investor, for instance. It’s denominated in dollars.

20% in small cap would be ‘overweight’; you’d be “taking a view” that it’s worth the extra risk because you think it’ll outperform. 10% would be more careful (still more than many do)

@Todd – there is nothing wrong with investing as you have said although I wouldn’t be paying 4% of anything to so called “financial advisors” anytime soon. In my experience they are a rip off – my investments & pensions have done far better in a few years since I moved them from managed pensions/investments to SIPPs and self managed investments as they are not extracting hidden fees by the back door. I wondered why my pensions/investments were rubbish for years. Best to read investing websites, such as this, and DIY. It’s easier in the end, costs you much less and will do better at the end of the day. You don’t really need a financial advisor to tell you to buy a cheap global tracker and they usually don’t push them anyway.

There is nothing wrong with Lifestrategy if you want bonds without the rebalancing. It does overweight the UK but at the minute that would seem to be to your advantage anyway- how long it lasts…….? I don’t know how old you are but since you said you are new to investing I thought you might be quite young so not needing to live off your investments in the next 10 years. If you are many years off, LS60/40 is a fairly high allocation to bonds if you are accumulating (and not decumulating/near to retirement) and can be a drag on returns but depends on how paranoid you are when the market crashes. If you can’t stomach it then go with higher bonds if you wish but the global market has always recovered if you have time on your side.

Personally I don’t hold any bonds and don’t work now, although have some income to cover bills. Just have equities/some cash savings -prefer to keep it simple without all the palaver/faff with rebalancing as this also costs in fees and tax if you have a large proportion in GIA accounts outside tax shelters, as I do, as would involve CGT in selling stuff out (with the miserly tax allowances we now get courtesy of this Govt.)

Similarly nothing wrong with an allocation to small caps – who knows what will win out in any year – it may not be passive at the higher allocation but over a number of years probably will balance out and not make that much difference anyhow to your overall return at the end of the day. It all comes around/goes around – just look at the asset allocation quilts over a decade or two.

You don’t have to be a “pure passive” if you don’t want to be. I’m not although I’m not an “active” investor as such either – I’m not interested in trading regularly or in company accounts or similar. I invest a fair proportion in global trackers, but have held some active funds and also am overweight US funds now even though every man and his dog have been saying is the wrong thing for about the last decade or so but is still working in 2024 anyway…………..for now?

I would say keep it simple if you don’t want hassle and complexity – stick mainly with cheaper passive global funds to save costs and spread your risk but otherwise do what you feel is right for you – if you want a decent allocation to small caps, prefer to overweight the UK (maybe because you live and spend here) and need 40% in bonds to help you sleep then go for it. You will still likely do okay over time – I wouldn’t be too hung up about it – nobody knows what will win out over the next 20 to 30 years and you will still likely do better than investing via a financial robber ……….sorry meant “advisor”.

I appreciate your comment but there’s a lot of information there for a beginner like me. I want to set and forget. How about this? I don’t really wish to rebalance.

Initial investment: 7500 GBP
VLS 80/20 (90% allocation) – 0.24%
iShares property (5%) – 0.4%
HSBC small cap (5%) – 0.26%

Hi there
All of this just overwhelms me. Will go with a financial advisor who charges 0.5% and from there I’ll learn a few things to eventually go solo with a platform like Interactive Brokers.

I actually went against an IFA. I decided to go with a self investment platform (Interactive Brokers). No custodian fees. It’s costing me about 1 gbp to buy 1000gbp worth of shares in my chosen fund.

The article says to [ignore] “an eye-watering minimum purchase figure (such as £100,000) to buy into a fund.”

Incredibly, I cannot buy the HSBC global tracker in Interactive Brokers (IBKR) b/c they state a minimum initial purchase of £1M, and that it’s not their fault but HSBC…

Apparently IBKR didn’t read the Monevator article! Ahem…

#922 @kishore kumar
Hi
Where have you got info on XMWX please? I can only find USD exus etf from xtrackers not a gbp share class – which would be great 🙂 assume really new share class or etf? not on ii atm

@TA
Another update

*World equity – developed world only
Franklin FTSE Developed World UCITS ETF Acc- (LSE:WORL)
TER 0.09%

iweb tells me that PRIW and PRWU are to merge into a non-ISA-compliant ETFs shortly.

https://www.londonstockexchange.com/news-article/PRWU/amundi-investment-solutions-amundi-etf-important-information-mergers-on-amundi-funds-22-11-2024/16718313

Indeed. I hope they’re happy.

The iweb warning that they would move any merged shares out of my ISA and into my trading account was enough for me to bin it across all of my family’s ISAs and SIPPs. That’s not risk I can tolerate!

Oh my first comment seemed to not make it through…

I think I just said, re the Amundi Prime Global funds mergers, that it seems to be for the purpose of moving the domicile to Ireland to get lower withholding tax on company dividends – so not apparently Brexit-related. But they will become foreign-listed (on Xetra, from what the Amundi customer service people told me) and lose UK tax reporting status.

I would also just sell any holdings in an ISA. But in taxable accounts it creates a headache of considering whether to hold and hope all the tax reporting side gets sorted out and one can find a way to sell without incurring large fees, or sell before the merger and incur capital gains tax. This is an advantage of tax shelters that I’d not thought about before!

It does seem kind of extraordinary to me that a large fund provider could just decide to delist a $1.5 billion fund and create potential tax havoc for investors with a month’s notice, just to get a minor reduction in costs, without waiting for the new fund to get the UK approvals. The people at Amundi didn’t seem to care about this much, and I’m thinking to steer clear of their funds in future.

If my original comment shows up, this can be deleted.

Actually I also realised I don’t know whether the listing being moved to Xetra means holders of shares would need to sell them on Xetra later (with large fees on many UK platforms), or whether if the new funds gain London listings, then they can just be sold on the LSE again i.e. if we hold shares of an ETF, are those attached to a particular stock exchange, or can they be sold on any exchange where the ETF is listed at the time of sale? It might depend on whether a new share class is created along with a new London listing? It’s not something I’ve thought about before!

Re above issue with amundi – are FSC delays affecting adoption of WEBG and WEBN – 0.07%ocf dev world trackers which we’d all like to see -still not on iweb, Invest engine or T212?

Excellent work TA. I realise it’s a ball ache but the cheapest way to get global exposure is to combine the US and EM funds you have with EU, JP and AP funds (you don’t have).

Thank you for this. I knew you’d find a way to get a list of equivalent ETFs together without explicitly referring to CG harvesting (though I think your worry in that regard borders on superstition, I personally don’t believe in jinx).
Now, can we please put this in a table format, add a column to indicate which ones are physical and which ones synthetic, and stick it into the main menu next to the low cost broker list?

Great read, thank you @TA.

I’m sorry if someone has already said the same — in the 948 comments this week! But isn’t the GBP version of ‘SPDR S&P 500 ETF’ SPXL (rather than SPYL)?