ETF Vanguard Global Value Equity Active ETF (VVLU)

VVLU - for some unknown reason I decided to check in on VVLU. I’m still surprised that such a well constructed fund after two years has still only managed $35 Mil FUM across the unlisted fund and ETF. Perhaps because Value is out of favour whilst Growth has been going gang busters. What would a contrarian investor do? I don’t invest in it myself but it would be a shame if this fund didn’t succeed as it’s offering a quality product of a similar standard to DFA which are more expensive especially given the only access is through financial advisors.

The other thing I hadn’t noticed before is that the funds are classified as NON-AMIT.

Anyhow after that thought time to do more important things such as feed the chooks who are going off their brain screaming out for breakfast. Blowing a gale outside so hope I can stay upright which is often difficult after Friday nights.

 

Interesting that Vanguard is showing NON-AMIT for VVLU as I received an Attribution Annual Tax Statement.

VVLU made one distribution last FY for the quarter ending 30 June 2018.

Distribution was $2.46847792 per share. I received $7084.53 cash.

The AMIT statement breakdown was as follows:
13U Unfranked Income $55.18
13C Franked Income $10.75
18A Net Capital Gains $2500.88 (for super fund)
20M Foreign Source Income $981.79

Taxable Income = $3,548.6

Tax on taxable income @ 15% = $532.29

Less

13Q Franking credit = $3.84
20O Foreign Income Tax Offset $ 180.88
Tax payable on Tax Return = $347.57

Summary:

Cash Received $ 7084.53
Tax still Payable $347.57
Net distribution $6,736.96

AMIT cost base reduction required $3,169.67

AMIT helped tax efficiency enormously in this case.

 

Thanks for correcting that. I didn’t think to check the distribution announcement but took Vanguard’s fact sheet info as being accurate.

 

Thanks @dunno I'm interested in VVLU after reading and listening to Paul Merriman, considering your own interest and realising I should have a larger allocation to international outside super. But I am still not clear if VVLU is under AMIT and whether the tax efficiency would apply outside super in a discretionary trust where income must be distributed or paid at the company tax rate. Are you saying that the capital gains were distributed as part of the dividend you received? Sorry for what may seem like a stupid question.

 

I’m not sure if Vanguard has changed tax status of VVLU recently or if they can even do that without notifying or is it just a mistake on their website, probably requires a phone call to clarify.

Tax efficiency ‘emanating’ from VVLU would be the same for both but trusts and super have their own inherent tax regimes that alter the net tax outcome - ie distributed trust income maintains the 50% Capital gains tax discount but incurs tax at marginal tax rates whereas superfunds only get 33.3% discount but have flat 15% tax rate.

VVLU as an international diversifier is riskier than a capitalisation index like VGS. Get your ducks in a row and really understand it before proceeding. To have a chance of outperformance over a standard market cap index it will be imperative that you stay the course during times of underperformance – It will underperform at times and maybe even permanently. It also has a risk of being closed one day due to its small size which could take staying the course out of your hands.

 

@dunno
Any thoughts on the idea of VVLU purely for diversification?
Or would the companies in VVLU be a subset of VGS and/or VTS/VEU ?

 

I understand the risks. I read some articles explaining how "value investing" may not be able to continue to track it's past performance due to arbitrage being sucked out of the markets by algorithmic trading etc. I also know that it is an active approach fully dependent on Vanguard's algorithm and therefore contrary to the fundamental passive approach I take. As a satellite to VGS I use PMC, FGG and VLVU would be the next piece in the puzzle along with an international small cap like IJR.

 

Hi @Anthony Brew
60% VTS 40% VEU 6,262 stocks (7.08% emerging market.)


VGS 1,576 stocks (0.29% Emerging Market)


VVLU 1,194 stocks (0.9% emerging Market)


VVLU obviously tilts to value but also has more Small and Mid concentration than either VTS/VEU or VGS.

VVLU doesn't have the same exposure to emerging that VEU does, but it has more than VGS.
Excluding emerging markets, I think VVLU draws from a similar universe as VTS/VEU, but is obviously selective to obtan the value laoding.

edit
This is what a 50% VVLU 50 VGS looks like (2,249 stocks)

 

@Zenith Chaos
Eyes wide open and building something to suit you - great work.

 

Yeah I suspecting that it most likely would be purely tilt and not adding diversification, but just wanted to check.
Also I had no idea it had quite a lot more small/mid caps in there! What site or software did you use to get thoss graphs?
Thanks @dunno.

 

Check my edit above for adding VVLU to VGS it adds about 670 stocks.

Vangaurd Australia financial advisor site - Portfolio builder tool.

 

Thank you and the other gurus around here who always give honest and pragmatic advice. I understand the risks and I take full accountability for my decisions. It's doubtful that my decisions will be the best in hindsight, as long as I make the best risk/reward decisions with the information available.

This while the banks provide criminally bad advice at a criminally high fee.

 

I'm no guru, just a fellow traveller. It's great to have a place to share the journey, discuss and learn. There certainly seems to be no shortage of wolf's in sheep's clothing out there that seek to fleece the uneducated.

 

Does anyone have a view on what the steady state VVLU dividend yield may converge to?

 

Vangaurd are indicating 2.72% for dividend component currently, which makes sense becuase you would expect value to yield slightly higer than average.

Capital Gain distribution's are the big unknown. Best held in low tax super environment if possible.

 

Thanks @dunno. Appreciate your help.

Found this in a report

"For the remaining Funds (except Vanguard Global Minimum Volatility Fund), their net assets attributable to unitholders remain disclosed as a liability as their multi-class structure means they have not met the strict criteria for recognition as equity, despite their election into the AMIT tax regime also. Vanguard Global Minimum Volatility Fund lost its AMIT status as of 3 April 2018, and as a result, the units in this Fund are classified as a liability as at 30 June 2018."

https://www.google.com/url?sa=t&source=web&rct=j&url=http://member.afraccess.com/media?id=CMN://2A1103172&filename=20180910/VAE_02020825.pdf&ved=2ahUKEwjk3o77yezgAhUVXn0KHUMRCpkQFjAFegQIBxAB&usg=AOvVaw37sO_20ynBY8dPl5cIT2zw

That is not ideal for my situation.

 

Hi @Zenith Chaos

The annual report you referenced also solves the AMIT confusion around VVLU in earlier posts.



Non-AMIT makes it even less tax efficient. Not ideal at all.

 

Geez, pays to read the fine print. I wasn’t aware of that.

 

Am I missing something here. Most vanguard funds including VAS are multi-class where the ETF is just a separate unit class investing in the wholesale unlisted trust.

So is VAS, VGS etc impacted by this also?

 

These stocks haven’t been so cheap since 2000

Out-of-favor value stocks are ripe for bargain hunting