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Weekend reading: Woodford is done, Brexit isn’t, but at least Vanguard is cutting fees

Weekend reading logo

What caught my eye this week.

Nobody beats Vanguard for low-cost product innovation. However the fund giant isn’t the most proactive when it comes to promotion.

For instance, wouldn’t you agree it’d be worth throwing a measly gazillionth of your turnover in the direction of a UK blog that has championed passive investing for a decade and makes diddly squat from those particular efforts?

If you were, you know, the largest provider of passive index funds in the world? And thus with the most to gain from there being an independent voice making the case for passive investing in a country where until recently almost nobody else did?

In a world where the only fund advertisers that really pay are active managers?

I know, right?

Go figure, as they might say.

Cut and dried case

My grumbling aside, you have to applaud the timing of Vanguard’s latest price cuts.

The implosion of super-slumped fund manager Neil Woodford continues. People like Robin Powell are daily urging journalists to encourage more readers towards index funds.

And now here’s Vanguard with an easy story to write about even lower charges.

To quote CityWire:

Vanguard’s 22-strong index fund line up will now levy an average of 0.15%, with its 13 ETFs on 0.1%.

Combined, the average OCF across its passive funds is now 0.14%, down from 0.19% previously.

The OCF on Vanguard’s UK Gilt ETF has dropped from 0.12% to 0.07%, on its US$ Corporate Bond 1-3 Year Bond ETF from 0.15% to 0.09%, while its FTSE Emerging Markets ETF is now 0.22%, down from 0.25%.

ThisIsMoney says we haven’t entirely got Woodford to thank:

From today, savers in these ‘robot’ funds will pay an average annual management fee of 0.2 per cent of the amount they have saved – and as little as 0.06 per cent.

Many investors in Woodford’s doomed flagship Equity Income fund had been paying 0.75 per cent until his empire collapsed last week.

Vanguard was planning to make its move before the Woodford debacle, in which thousands of investors have been denied access to their money since June while continuing to pay millions of pounds in management fees.

But the American firm, which runs around £100bn in the UK, is hoping the negative publicity surrounding the downfall of Britain’s most feted stockpicker may encourage more savers to switch to cheaper tracker funds.

Have you decided to go fully passive? Get started at our passive investing HQ.

From Monevator

10-year retrospective: UK-dedicated passive investors pay the price of home bias – Monevator

From the archive-ator: They don’t tax free time – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Over-50s savers to get new updates and alerts on their retirement pots from next week – ThisIsMoney

Retailers cut 85,000 jobs in the past year – Guardian

A mortgage lenders trade body […] claims buying a home will leave you far better off versus renting, even if house prices never rise – ThisIsMoney

Peer-to-peer lender Funding Secure goes into administration – Guardian

[Click to enlarge the megalopoleis]

The world’s top cities in 2035 by GDP, population, and economic growth – Visual Capitalist

Products and services

If cash is becoming obsolete, why are citizens in rich countries holding ever more of it? – Yahoo Finance

Start-up Penfold sets up self-employed pensions in five minutes, but looks pricey versus DIY – ThisIsMoney

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Nationwide scraps loyalty accounts held by 1.6m, offers its members 1.5% bonds – ThisIsMoney

Seaside destinations dominate the top 20 most popular places to search for a home – ThisIsMoney

Homes for sale on islands [Gallery]Guardian

Comment and opinion

Save lots, spend little… how a shop caretaker built an $8m fortune [Search result]FT

Revisiting the ’87 Crash – Novel Investor

Psychology and the good life – Humble Dollar

Long shot – Indeedably

How to measure your portfolio’s returns [with spreadsheet]UK Value Investor

Ignore your portfolio to avoid falling for ‘regret aversion’ – Klement on Investing

How much time should you spend on your finances? – A Wealth of Common Sense

The things we do for work – The Simple Dollar

Naughty corner: Active antics

Angel investing in the UK: Some examples of what happened next  – Fire V London

Useful biases – Morgan Housel

Looking for great share tips? Join the club [Search result]FT

Glamour stocks have been on an historic tear, but are they starting to fade? – Yahoo Finance

Value hasn’t done so badly – as long as you’ve not been shorting growth – Bloomberg Newswire

The US yield curve has now ‘uninverted’ – Wisdom Tree

Remember when active share was the key to finding alpha? Forget about it – Alpha Architect

Malinvestment mini-special

WeWork’s implosion shows how SoftBank is breaking the world – Vice

WeWork, Neil Woodford and the modern ‘bezzle’ [Search result]FT

Howard Marks warns in his latest letter that negative rates are an unknown quantity –  Market Folly

Ben Inker of GMO: Good returns have to be paid back sometime [Podcast]Meb Faber

Brexit

Look, I understand there were some principled sovereignty-based reasons to vote Leave. But does the end (let alone the rubbish economics) justify these means?

We have a prime minister who said he’d never ask for an extension (he has), who said we’d be out by 31 October (we won’t), and who insisted no Conservative prime minister would ever allow a customs border in the Irish Sea (he’s agreed one, turning the hated ‘backstop’ into a feature not a bug).

This isn’t about Project Pangloss versus Project Fear. It’s the leader of our country making promises he knows from day one cannot be achieved, to weaponize your anger that Brexit hasn’t been delivered. He wants you to blame his opponents for doing their job, as he knew they would.

He is playing Leavers like a fiddle.

This stuff has consequences. The fact that more moderate Tory candidates who told the truth didn’t get his job is just the least of them.

British journalists have become part of Johnson’s fake news machine – Open Democracy UK

Most voters think violence is ‘a price to worth paying’ for their Brexit preference… – Guardian

…or do they? – Twitter debunk of same survey

LOL: Production of Brexit 50p coin paused amid exit uncertainty – Guardian

‘According to some reports, Brexit coins minted with the 31 October date “could be worth up to £800”. So could €1 coins, soon enough.’– Marina Hyde

But seriously, Brexit is no laughing matter. No, Brexit is hysterical – Politico

Kindle book bargains

Fooled by Randomness by Nassim Nicholas Taleb – £1.99 on Kindle

Who Moved My Cheese? by Dr Spencer Johnson – £0.99 on Kindle

Grit: The Power of Passion and Perseverance by Angela Duckworth – £0.99 on Kindle

Little Black Book: A Toolkit for Working Women by Otegha Uwagba – £0.99 on Kindle

Off our beat

‘Gladiators … ready!’ Whatever became of Wolf, Jet, Rhino, and the show’s other stars? – Guardian

Waitrose and John Lewis to stop putting plastic toys in Christmas crackers – BBC

The difference between US and UK ingredients are disturbing [Bit old]Ron Project

‘Respect is given’: Australia closes climb on sacred Uluru – Guardian

Do today’s global protests have anything in common? – BBC

And finally…

“Mr Spock would be a natural trader. That’s because, of course, he has no emotions – and being emotionless is exactly what you need in the markets.”
Robbie Burns, The Naked Trader

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Comments on this entry are closed.

  • 51 arty October 27, 2019, 1:00 pm

    @TI
    You may not think sovereignty was the main reason people voted for Brexit, but the best evidence we have, the polling done by Lord Ashcroft, it quite clear on this:

    “Nearly half (49%) of leave voters said the biggest single reason for wanting to leave the EU was “the principle that decisions about the UK should be taken in the UK”. One third (33%) said the main reason was that leaving “offered the best chance for the UK to regain control over immigration and its own borders.” Just over one in eight (13%) said remaining would mean having no choice “about how the EU expanded its membership or its powers in the years ahead.” Only just over one in twenty (6%) said their main reason was that “when it comes to trade and the economy, the UK would benefit more from being outside the EU than from being part of it.”

    https://lordashcroftpolls.com/2016/06/how-the-united-kingdom-voted-and-why/

  • 52 The Investor October 27, 2019, 1:00 pm

    Leave voters had to assess how likely they were to lose their jobs, or their grandchildren losing their jobs

    Employment is at a multi-decade high. Before the referendum hit us for six we were the fastest growing economy in the G7. Immigration has been great, economically speaking, for nearly everyone in the UK. Even despite the stupid Brexit own goal, the economy continues to inch forward.

    Leave voters were entitled to make up their minds however they liked, but it doesn’t make their reasoning right. There is zero economic argument for Brexit.

  • 53 Indecisive October 27, 2019, 1:01 pm

    @Griff, #37: My concern too. The pile-in to passive investing, the overinflation of the price of the shares held (distorted by the demand to buy more of them to keep the correct holding ratio) – when something happens (a small downturn that causes doom and gloom headlines) and passive investors start withdrawing (cf Woodford) I am thinking the effect will be worse. Say it happens to a Vanguard fund; the size of the holding makes the effect of the sell-off on the fund – and the wider market – larger than I can think of happening in an actively managed fund, due to the makeup of the shares held.

    This may be totally unfounded, in which case I look forward to being proved to be an idiot 🙂

  • 54 The Investor October 27, 2019, 1:03 pm

    @arty — Well I read that as immigration, not sovereignty, or at most a mix.

    Additionally it’s the Leave supporters / neutrals on this thread that are telling me sovereignty wasn’t a big issue. One said earlier s/he has never heard it brought up, and it’s all about migration.

    But arguing why Leave voters voted Leave is like trying to tap dance on a water fountain. It’s the ultimate Rorschach inkblot.

  • 55 The Investor October 27, 2019, 1:05 pm

    p.s. Sorry, I misread the order of the percentages. (On phone on tube!) Okay, that evidence does nudge in favour of sovereignty. Still leaves lots of other (stupid or bad) reasons, and given the vote was very close they matter.

    But I’m actually pleased if sovereignty was overall the main motivation, as at least it’s intellectually coherent.

  • 56 arty October 27, 2019, 1:08 pm

    The number one reason given by leave voters, by some margin, is “The principle that decisions about the UK should be taken in the UK”.
    You read that as being about immigration rather than sovereignty?

  • 57 arty October 27, 2019, 1:14 pm

    Posts seem to have crossed – feel free to delete the above if it keeps it more coherent. Though I think we can probably agree that everything and anything on all sides related to Brexit is fairly incoherent so I guess it doen’t really matter.

  • 58 The Investor October 27, 2019, 1:17 pm

    @Griff @Indecisive — Please read back on the other articles we’ve done about this. Passive / index funds can’t inflate prices, because they follow the lead of active fund managers. They can certainly be the vehicle by which a boom is stoked in terms of getting money out of cash/bonds and into equities, but that’s a slightly different matter. (The same thing happened with active funds in the past). Also remember that as active funds must mathematically under-perform whether we’re in an up or downmarket, any bursting of this long bull run won’t favour active funds except to the extent they hold cash or other non-benchmark assets. (Which you can do yourself more cheaply / consistently by selling down some index fund and moving it into, say, short-term bonds).

    @arty — See the post above yours. I was jiggling the Wordpress comments moderator screen while on the move and to my eyes it started with the 33% line. Have since retracted that statement, as above. 🙂

  • 59 RIT October 27, 2019, 1:21 pm

    My replies seem to now not be publishing. Try again…

    @Old_eyes
    Agree with most of what you say. So the Leave campaign were lying at worst and despicable at best. What I think you missed is I think Remain have to also accept some responsibility here as they were somewhere between incompetent and naive on the topic during the campaign.

    @Matthew
    So you’re saying we chose to self harm to maybe get an immigration point across. Do you think it worked? I personally see no evidence that MP’s have listened but I might have missed the acknowledgement. To me it feels like we’re chopping an arm off to maybe heal a wound on our leg.

    Importantly, EU migrants under EU rules do need a certain income to stay beyond 3 months. We just chose not to require it so it was all on us.

    Your mention of Farage is an important one though. He is why IMHO we had the referendum in the first place. It was never about what’s better for the people as a collective, which we know under every scenario published has us worse off, it was about stopping the conservative party disappearing into obscurity with the party being pincer moved with Labour/Lib Dems on the left and UKIP growing on the right. Latest polling suggests that they also might just have saved themselves. An amazing recovery but for how long. I know I’ll never forgive them.

  • 60 The Investor October 27, 2019, 1:21 pm

    If you don’t believe me that there is…

    zero economic argument for Brexit.

    …then perhaps you’d like to hear from key Government insider, Sajid Javid MP, who has said:

    One of the advantages of EU membership is that we get to negotiate wider and deeper trade deals from a position of strength. If we leave, the boot will be on the other foot – and that will put Britain at a serious disadvantage.

    The remaining EU nations will want to secure a deal that’s good for their economies. So Germany will want to protect its carmakers from British imports. France will want to protect its farmers from UK rivals. Even little Luxembourg will want to protect its financial services industry from the global hub of London.

    And who could blame them? If I was in their shoes, I’d do the same. If Germany left the EU tomorrow, I’d make damn sure any trade agreement we reached put British businesses first. I’d be failing in my job as Secretary of State if I didn’t.

    Business leaders from kitchen-table start-ups to vast multi-nationals are already telling me that the uncertainty over the referendum result is causing them to delay investment decisions, to think twice about creating new jobs.

    If we vote to leave, that uncertainty won’t end the morning after the referendum. Even the most conservative estimates say it could take years to secure agreements with the EU and other countries.

    Having spent six years fighting to get British businesses back on their feet after Labour’s record-breaking recession, I’m not about to vote for a decade of stagnation and doubt.

    https://www.sajidjavid.com/news/sajid-javid-only-thing-leaving-eu-guarantees-lost-decade-british-business

    I wonder what it was about getting the job of Chancellor that changed his mind? 😉

  • 61 Passive Investor October 27, 2019, 2:03 pm

    @RIT Party manifestos pledged a Referendum at elections as follows: Labour 2005 (broken commitment) LibDem 2010 and Greens (!)2015 Somewhere there is even a nice video of Jo Swinson demanding a referendum in the Commons. So it wasn’t JUST about the Conservative party. A more plausible analysis is that the country has been deeply divided for more than a generation. With the steady acquisition of powers by the EU and the intention to pursue Ever Closer Union a referendum was becoming an inevitability.

  • 62 Matthew October 27, 2019, 2:39 pm

    It depends of course on what sector you work in as to how exposed to Brexit you are,

    Bad for the overall economy, not disputed (at least in the short term), but its not the national interest we’re concerned about, right 😉 – winners and losers. We agree on that I think, so it really comes down to how many people percieved themselves to be winners

    You do reach a point of thinking “why should I care about the greater good?” – that’s the difference between leave and remain, remain voters care about the country, care about migrants, care about the environment, etc – leave voters are jaded opportunists, who have endured years of serious competition for jobs, suppressing wages, and housing, increasing rents (since houses hardly get built nowadays) and austerity. They are generally left behind while businesses grew on cheap labour.

    The education system sort of conditions you to be remain – to care about your fellow man, and when you’re young you don’t care so much about money, and there is an elitism that looks down upon leave stereotypes, but as you get older you become less conditioned.

    Part of the shock too was because of the degree of self-censorship – true feelings don’t get expressed in opinion polls or out loud because leave (or trump) voters fear how they will be judged or have to explain themselves

    @ Rit – we were suprised mp’s even listened enough to invoke article 50 at all, and the conservatives certainly listened, albeit (I agree) because of Farage, and I agree, without farage in the first place Cameron would never have held the referendum. You couldn’t say Farage was wrong to be there however, because he represented a significant number of voters. Farage is not, however, the best horse to deliver this, at least not while a deal is on the table and Boris is trying (and popular)

    And unskilled immigrants certainly listened – hence the rotting food in fields

  • 63 ZXSpectrum48k October 27, 2019, 2:50 pm

    @arty. The Lord Ashcroft poll, taken just after the referendum was probably the most illuminating about why Leave won and with a sample over over 12,000 sample cannot be easily dismissed. Unsurprisingly it recorded 80% of Leavers see immigration as a “force for ill”. What is even more interesting is what else they see as a force for ill: multiculturalism 81%, Social liberalism 80%, Feminism 74%, the Green Movement 78%, Globalization 69% and, most odd, the Internet 71%. If that is what the balance of this country really thinks then I have little further interest in being British. I’ll stick to being part of the socially liberal, multicultural, elite in London.

  • 64 The Investor October 27, 2019, 3:04 pm

    @Matthew — You write:

    And unskilled immigrants certainly listened – hence the rotting food in fields

    There is surely a bit of the ‘hostile environment’ vibe behind this, for which I personally am deeply regretful if not ashamed of my country. But I think it’s also down to the fall of the pound against the Euro for the past few years. Wages in Euro terms have fallen 20-25% for most of the period, as the pound (and hence Britain and British citizens) have become poorer in global terms. As someone said earlier, to the extent we’ve damaged ourselves to make a point then, I guess it worked.

    @ZXSpectrum — You write:

    What is even more interesting is what else they see as a force for ill: multiculturalism 81%, Social liberalism 80%, Feminism 74%, the Green Movement 78%, Globalization 69% and, most odd, the Internet 71%. If that is what the balance of this country really thinks then I have little further interest in being British.

    I give you my artistic personification, Leave voter and celebrator Barry Blimp:

    https://monevator.com/day-three-in-the-big-brexit-house/

  • 65 Matthew October 27, 2019, 5:45 pm

    @TI – I think this shame is partly due to how we are told we ought to feel, we are taught to be overly respectful and careful of other cultures to the point where “political correctness” feels like a one way thing – theres no protection against them criticising our culture (eastern european tell me they don’t like how sly or quiet English people can be) – and you start to feel like an underdog, worshipping our protected and venerated guests, for fear of being outcasted and judged, by them and other liberals, because liberals rate the uk underclass below migrants.

    We come to feel like they sort of own the jobs in this country they are born with the right to live here and stopping that is infringing that right, but you couldn’t go to their countries and expect superior treatment or the freedom to follow every aspect of english culture unchallenged on their land.

    And you have to remember that the ones who come generally chose to leave their parents behind in persuit of money – you are dealing with the more mercenary fraction of that country’s population

    Also a parent will do whatever they can to give their children an advantage, and by having strong personal finances helps you support that family

    You could argue it is merely righting a wrong that the political and business elite have been getting away with for years – flooding the market with cheap labour for their profit which rhe underclass never felt like they saw

    Also the assumption is that existing migrants living here would be ok and its new ones in that face a barrier, like we’d face barriers going into other countries around the world. In fact pre existing migrants should see wage rises too, there is a case for them to want to stop their countrymen coming

  • 66 Mr Optimistic October 27, 2019, 10:27 pm

    Perhaps people like cultural security, knowing how they fit in, and cultural stability, not worrying about a too fast changing world. The most manifest presentation of challenges to these were the visible and audible evidence of others, on the street and in their towns. I thought it obvious then, and beyond argument now. Might be irrational, and cause self harm through economics, but……

  • 67 The Investor October 27, 2019, 10:45 pm

    @TI – I think this shame is partly due to how we are told we ought to feel, we are taught to be overly respectful and careful of other cultures to the point where “political correctness” feels like a one way thing – theres no protection against them criticising our culture…

    No, the shame I feel is shame that the sort of sentiments you express here — which I’ll charitably assume you’re articulating but may not hold in full yourself — have been allowed to capture the national conversation and led to this lamentable Brexit.

    What on earth are you on about? EU migrants are mercenary because they come here, but British workers who don’t pick apples because the wages aren’t high enough, as someone said down the thread, are not mercenary?

    People feel like the underclass because someone from Poland is serving them a coffee in Costa?

    …you couldn’t go to their countries and expect superior treatment or the freedom to follow every aspect of english culture unchallenged on their land.

    Have you been to Spain? This is exactly how the British in places like Benidorm have behaved for decades.

    Here’s (apparently for some) a secret. The ones who come here are mostly somewhat dynamic self-starters who want to make the best of their lives, just like the people in this country who are prepared to move city etc for jobs rather than moan and blame migrants who have to cope with no family, language barriers and, self-evidently, a hostile attitude from a segment of the population. They are not mercenary. They are doing what people wanting to better their position have been doing for millennia.

    More: https://monevator.com/what-everybody-needs-to-learn-from-recent-immigrants/

    Perhaps Remainers feel a kinship with these people because it’s exactly what many of us have done. (E.g. Moved to London instead of staying in the provinces and moaning). As I articulated in my first rant post after the EU Referendum result here:

    https://monevator.com/my-brexit-rant/

    You then write:

    We come to feel like they sort of own the jobs in this country they are born with the right to live here and stopping that is infringing that right

    No, they are simply taking advantage of the single market that many Britons also take advantage of in Europe, and more could if they wanted to.

    As I say, I’m not going to shoot the messenger here and I’ll presume you realize that EU migrants are exactly like us.

    I’m very clear on why I feel this is on balance a shameful decision by Britain, and Leave apologists telling me it’s mostly because people were worried about Regulation 5845845 (b) about the amount of toxins you could have in petrol being thrust on them by Brussels won’t dissuade me.

    And you’ve helped me remember it.

  • 68 Matthew October 27, 2019, 11:46 pm

    Superior effort should be rewarded, I hear you, but whether we go to the extraordinary lengths of learning a new language ad upping sticks, or doing a feindish university course, our reward; our pay; is valued on our value to our employer, regardless of whether the opportunity exists to be fully utilised, and these migrants get the same pay – have the same value – as a local. At the end of their working life they wouldve contributed something similar. The market is the judge. It is’t fair when people don’t get extra pay for these lengths, but the markets not there to reward effort it can’t value

    They calculate that learning a new language and travelling will be rewarded, I don’t, I think they miscalculate. Even moving to London is a miscalculation in some careers. They have the opportunity to go somewhere with notably higher pay, but people already in wealthy countries have nowhere significantly better to migrate to, that would be worthwhile

    I admit to being mercenary as I had to become to give my family the best house and most family time I can. I admit to using what methods I can to achieve that, just like the migrants using what laws they can utilise, ultimately we have more power in our own land and it’s fair game, it’s just a reminder that thats the way it really is

    I think tourist areas like spain and london tolerate cultural intrusion for tourist money (as well as skilled workers in the case of london) – but exurban spain where it’s a competition for jobs might be a different matter

  • 69 The Investor October 28, 2019, 6:48 pm

    @Matthew — We differ much more than your latest post implies, I think (or at least the view you’re articulating). In fact, this back and forth is not a bad proxy for Leave vs Remain.

    You are saying I should feel this that and the other about “them” coming “here” and supposedly feeling “entitled” and “untouchable”.

    I see “them” as basically “us” and the EU as a first step to getting rid of this kind of IMHO toxic thinking, albeit moving too quickly for some people. There are more distinct cultures where assimilation/integration is more difficult (and we’ll probably see more of them migrate here to fill any gap left by EU migrants, ironically) but Europeans are pretty much the same with different stories and spelling. It makes a lot of sense for us to integrate, albeit at a sensible speed.

    I’m not a deeper integration in the next 10 years kind of guy, but over 50-100 years? Bring it on.

    Not least because the alternative end goal — we’re are ‘different’, we ‘look after our own’ — has a truly horrible track record, something the European Union was set-up to avoid repeating.

    p.s. Closing comments here on this one. Let’s see what the next crazy week in Parliament brings us all. 🙂