They have (had) these dual share clases, meaning a mutual fund can have an etf share class and vice versa. And the etf share class is more tax efficient, as it prevents capital gains distributions, that mutual funds have to do under certain circumstances in the US. For example for VT it’s VTWAX.
That patent has recently expired though afaik. For us not releveant, as we can’t invest in US mutual funds anyway.
Interestingly, in europe these dual share classes recently became possible in general.
Tax wise however there are basically no differences though. But for exampel Irish mutual funds have 30% withholding tax with the US, while etfs 15% (weird tax treaty afaik). So some of these are launching an etf class now, to get bette rtax treatment from the US.
UK clients also have access to Vanguard’s UCITS ETFs on the Vanguard UK platform. So, unless Vanguard also lowers the fee on the Global All-Cap mutual fund, the base case for the Global All-Cap UCITS ETF remains 0.23%.
Their only direct competition is State Street SPDR MSCI All Country World Investable Market (IMID in Acc and SPSA in Dist), which has a TER of 0.17% and a yearly transaction fee of 0.01% (per KIID), for a total of 0.18%. But SPSA is only traded in EUR on gettex and XETRA and is tiny. So basically this Vanguard ETF will have 0 competition in Dist.
I don’t think the low AUM of SPSA matters too much for Vanguard’s TER decision. Accumulating share classes tend to be more popular in Europe and IMID has been around for a long time. And accumulating and distributing share classes typically have the same TER.
Competition matters when you set a TER. And in Dist Vanguard Global All-Cap, there is effectively zero real competition. That was my point.
Yes, accumulating tends to be more popular, but it’s not 10x: Vanguard FTSE All-World Acc is at €31bn vs €20bn for Dist.
Another way to guess the fee of Vanguard FTSE Global All-Cap is to look at SPDR:
SPDR MSCI ACWI (SPYY): 0.12%
SPDR MSCI ACWI IMI (SPYI): 0.17%
So the additional cost for the ETF provider of adding global small caps seems to be around 0.05%. Considering that Vanguard FTSE All World is at 0.19% => 0.24%. Which aligns with the 0.23% of their Global All-Cap mutual fund.
Anyway, I hope to be wrong, and that they’ll go lower, but 0.23% is the most likely fee for the upcoming Vanguard FTSE Global All-Cap UCITS ETF.
Competition certainly matters. My point was that I consider the SPDR ACWI IMI ETF to be serious competition with its $5B AUM and a history of nearly 15 years. The low AUM of the Dist share class (which was launched in 2024) wouldn’t make a big difference to me as an investor.
The lack of USD listings for the Dist share class and the lack of CHF/GBP listings for either of the share classes would be a bigger factor, in my opinion, at least for investors from outside the eurozone. Vanguard filling these gaps would provide some value, which some people may be willing to pay a higher TER for.
In the end it’s about AUM. The management cost doesn’t increase that much with a higher AUM (transaction costs probably do but they are a very small part of the TER). If Vanguard sets the TER at 0.23% but its AUM stays low, they are worse off than setting the TER at 0.15% but quickly getting a high AUM.
That said, I obviously have no idea what Vanguard’s marketing strategy is and I’m actually also rather pessimistic with regards to the TER given the TER of Vanguard’s current UCITS ETFs. I think 0.23% is too high for the ETF to become really successful but I also don’t expect them to undercut IMID. I could imagine 0.19%, matching VWCE and only slightly more expensive than IMID. However, I also wouldn’t be surprised with a slightly higher TER as it’s not unreasonable for a all cap ETF to be a bit more expensive than a fund without small caps.
The best case would be Vanguard cutting VWCE’s TER again and then the new ETF could have a slightly higher TER while still being competitive with IMID. However, I’m not expecting that, unless what we’re seeing is Vanguard changing its UCITS strategy to more aggressively gain AUM.
Side-note: I’m wondering whether there is a chance that the new Vanguard FTSE Global All-Cap will actually be a fund of funds, holding Vanguard FTSE All-World and Vanguard FTSE Global Small-Cap, possibly reducing the overall costs.
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Funny, I was wondering the same with my morning coffee today browsing this thread. How would the final TER work out in a way to stay profitable to the provider?
If the provider is itself, would it be more costly for them, seems like they might have ~same profit?
Might even just be a tech thing required for the APs to implement this (I’m not quite sure how APs interact with the ETF provider in practice, but maybe you could have a “sliced” basket?).
Or maybe the issue is legal, e.g. you can’t have different funds sharing the same asset pool?
(If it’s sub-funds based, I can understand why they’d need to charged for it, because the extra layer does incur some cost)
I wondered about it before too, since AFAIK at least one Greek bank is now offering “Greek” (ISIN GR….) ETFs, which are in fact just Vanguard/Blackrock ETFs under a Greek wrapper. And yes, they are 10X more expensive than their IE versions because why not
I always thought that’s what they do. If not at fund level but most likely at enterprise level. I think they pool their buy and sell transactions across the ETFs.
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