Are you tracking cash within the ETF?

Hi guys
I was double checking some VTI information and from the vanguard webpage I see in “holdings” that VTI has 0.89% of “short term reserves” in liquidity market (=cash). Just about 10 billions of “reserve” :smiley: with some small bonds it comes up to 0.9% of cash. Since VTI is by far my biggest position, this amount of cash starts getting some importance.
https://investor.vanguard.com/etf/profile/overview/VTI/portfolio-holdings

so questions:

  • are you tracking cash content from ETFs?
  • is my interpretation correct that 0.9% is basically cash? Because on Yahoo Finance, the ETF is reported as having 99.99% of stocks…so maybe Yahoo finance is overlooking the short term reserves?
  • if you are tracking, did you arelady developed some kind of scraper toget that information back in google sheets?

Thanks!

If you’re tracking all other 3721 positions separately, then it makes sense to do the same for cash.

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Well we are talking about different assets. the 99% of stocks are not like the 1% of cash. I see you want to be crowned the sarcastic king of the forum, but usually your posts are helpful.

I understand you may want to ignore a +/- 1% in your asset allocation, but 1% cash within the ETF does makes a difference for your asset allocation. It may not be a lot, and maybe you don’t care if the split stocks/cash is 75/25 vs 74/26, but I like to get my precision down to at least 1%, and for that the cash position within VTI is not negligible.

thanks for nothing though.

How often do you course-correct?
I let my tolerances run quite a bit wider (say ~3%), as equity and some other assets can fluctuate quite a bit within a month or a few.

I actually am not that hard on keeping a perfect allocation split - for instance I really don’t like selling stocks so I run things quite wide and up until now never sold any stocks

is more a matter of principle/precision, a thing of pride to know that I’m tracking things down to 1%. I’m not interested in going unto 0.1% precision. It seems a big enough thing 1% cash in VTI while being quite easy to track, and was wondering if and how constant this is (I just noticed today - maybe 1% is a momentary flctuations and usually VTI runs much less cash), and if others were tracking as well.

The ETF holds cash; but you don‘t have any cash exposure. The ETF likely took out Swaps to buy the Index Return; where the Cash constitutes Collateral. So de facto, you don‘t hold Cash.

2 Likes

Thanks that’s helpful. Maybe can you help me understand such a table as you can find on morningstar? It’s very difficult to understand what the different column means:
image

Short, Long and Indey are understandable. but Net of what? and Cat.?
Thanks!
source:
https://www.morningstar.com/etfs/arcx/vti/portfolio

What do you try to achieve here? This Fund holds about 99% of US Equity in aLong position, about 0% of ES Equity in a Short Position; and the Net Equity Position is still 99%. This in contrast with a Market Neutral Fund that might have 50% Long, 50% Short and Zero Net Equity Exposure.

The Index of this Fund still foresees about 99% of Net US Equity and the Morningstar Fund Category (aka all funds in this category) hold a bit a lower US Equity Exposure.

And actually, this is not 1% Cash but 0.01%…

oh sorry yes I understood your comments that thanks to swap the cash exposure is only 0.1%, or even less.
So I will not bother anymore tracking fixed income part on VTI.
The question on the morningstar table was just to understand what I was reading, and what lead to my error assuming that the fund would give me cash exposure. Simply trying to improve my knowledge

It makes a difference that is negligible. Funds will invariably hold some cash - so do VIAC and finpension.

The performance of 100% equity vs. 99% equity and 1% will be …the same, essentially. Less than 0.1% p.a., so way less than daily variation. Or comparable to the fund’s current premium over NAV.

(And before anyone chimes in, that’d still within the differences of expense ratios between different funds: true - but then you’d better start comparing tracking error! Does that mean I’m advocating to ignore expense ratios? Certainly not. But it’s nothing you should track down to the exact amount, I believe).

Principle, precision, pride - but not necessarily prudent.

(…in terms of your personal effort and resources).

Do they, actually?
In the prospectus I’ve found exactly one mention of the word, and, honestly, not much in their other figures on the web site.

…in the “portfolio”.

As Vanguard themselves are stating:
Portfolio holdings may exclude any temporary cash investments

It would line up with OP’s original post and link provided above above:
3722 stock holdings.
1 bond holding (with a maturity date in june), at a total 0.01% of holdings
2 short-term reserve holdings (liquidity funds), for a total of 0.89% of holdings

https://investor.vanguard.com/etf/profile/overview/VTI/portfolio-holdings

I think that physical, IE based ETF could invest up to 5% in Swaps, CFDs or other Index Trackers. This simply as a physical replication is expensive - particularely in case of small increments of AuM. But this is my gut; I am not fully sure on this and I have no clue about the US; but suspect the same. Instead of Swap, you probably better loom for CFD.

When we have a look at the above Vanguard Wording; you need to remeber that VT covers several B. They will probably treat settlement a bit different than on your normal brokerage account. Meaning that of they buy Shares of 100k now; they will probably keep these 100k as collateral within the Funds‘ books until settlement (after 3 days I think); and they probably book the Delta of buy vs. current share price as an accounting provision only. This can lead to what I think they refer to as these temporary cash positions.

This is different than when you directly buy a share in your account. Even though exactly the same happens underneath; your broker will already debit the cash amount and show you a virtual share; even though the share was technically not yet yours until settlement.

Thanks @San_Francisco , that’s already a more useful post than your first one :wink:

Yes from a performance point of view I totally agree. But I’m not talking purely about performance here, but to keep your asset allocation on track (so to manage your risk and don’t risk your asset to go to far away from your investment plan).

If you have 50/50, then 99% stocks makes no difference.

but if you have 90/10, 99% stocks in the fund instead of 100 translates to 89.1/10.9 which yo ucan round as 89/11. if you have a “rebalancing trigger” at 3%, ie you rebalance when 87/13 or 93/7, if you are not considering the underlying cash you are already off by 1/3 of your 3% threshold. That maybe negligible, maybe not.

What resources? Just need to find a website to scrape this information from and use it in my spreadsheet to multiply my ETF assets. Once setup no effort at all.

They never buy shares directly, right? Only exchange them with authorized participants. (that’s the magic of vanguard ETFs so they avoid capital gain tax)

From a perspective of risk management, it’s negligible.

What’s the risk of cash? About 0%
What’s the short- to mid-term risk of equity? Shall we say 10%?
(just an assumption to make for a good, quick example. I’m not saying it’s always limited to that)

At a 90/10 split, that’d be about 9% overall.
At a 93/7 split, it’d be about 8.7% overall.
Accounting for 1% in your equity fund, you’d reach the rebalancing threshold a bit later or earlier.
By about one percentage point - again, overall that’s a difference of just 0.1% of your portfolio.
Again, much less than intraday variation.

I’d call the 1% short-term cash reserve merely a minuscule “inefficiency in your “all-equity” fund.

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