ETF Vanguard Global Value Equity Active ETF (VVLU)

Great thread here guys and learnt about "value stocks" now too. Awesome stuff from @dunno.
Question: how does this VVLU compare to VTV (US based) and is VVLU underlying fund listed in other countries? Hence would the Australian market cap not be a concern for delisting as there is global demand to support the hard work they behind it?

 

I was hoping @dunno might have answered your question by now. Perhaps he’s injured his typing finger.

 

Thank you mods for extracting me to my own thread
Yeah I hope @dunno is still interested to talk value investing and whether Vanguard have any ability in creating good quant models.

 

Hi @Pleep

I’m still invested in and interested in VVLU.

I have seen your posts on the ETF, thread, its good to see you researching, I’m guessing you have answered most of your own questions by now. Thumbs up on finding Wesley Gray.

VVLU is not the same as VTV which tracks a US S&P 500 Value index provided by a third party.

VVLU does not track an index, they have a universe they select from but does not attempt to track any valuation index. They do that for more flexibility to keep the factor load high. VFVA is only US stocks but is more similar to VVLU in being a non-index tracking value fund. US doesn’t seem to have a global active value option. As you have found, though some other countries do, not sure if Vanguard is spreading costs over these multiple country offerings or not.


I don’t know much about the Vanguard algorithm, I don’t think anybody can in detail unless they worked for Vangaurd. I do recall seeing at one stage an overview of the criteria which was standard value factor fare P/B, P/FCF, P/Operating profit. I can see it keeps the factor exposure high which is what I want.

To keep the factor high they will continue to rebalance into the lowest quantile stocks. Worse and worse stocks maybe (that’s the risk), but that’s the way the value factor operates, you’re looking for excessive and hopefully unwarranted pessimism to be corrected. Being a multi size fund at least a stock isn't kicked out just because it gets larger.

A multi factor fund attempts to ride winning stocks longer than a value fund does, by giving them a momentum and quantity loading as well, so as something loses its value rating it may be kept because of its increasing momentum rating etc.

 

Thanks so much for your comprehensive reply.

Yes I did answer most of my own questions. I think I shot off my questions before spending enough time with Google.

I feel much more educated now around the subject without going waaaay into depth reading PhD dissertations etc.

I can see why VVLU is 'active', to achieve its goals.

Fascinating is the @Nodrog comment that he would quietly switch away from value once it's comes back into Vogue. I hope to start VVLU at a good time so that over 20 years or more it is a good return and generally acts a bit contrary. But I can't see myself knowing the time to ever sell....

Due to the black box nature of their quant model and it being active, I will only try to make it a good part of my world ex Aus exposure but not the majority of that exposure.

This has been an enjoyable journey. I think the reason PC conversations and financial analysis won't die is because the puzzle of investing and financial markets is unsolvable, there is so much detail and it is forever moving/changing. And there is always a tasty carrot involved in understanding it.... $$$$... humans can't resist.

 

I must have been in an altered state when I said that if I did. Senility appears to be more advanced that I first feared.

 

@Pleep personally I think Value, and small factors, ideally in combination are the most robust, and give the best chance of long term outperformance. (There is a question to my mind whether price/book is even relevant anymore, concentrating in asset intensive industry but thats for another time).

Re Value and Small, I think they are not as valuable as they once were being now very well understood and known. They probably are still worthwhile as they are hard to stick with. Major caveats though; You will pay higher fees, you will incur more tax and you can expect decades of underperformance which will test your resolve to stay the course. Only in 30-40 years will you know if it was worthwhile or a failed experiment.

For that reason I think your suggested approach of splitting exposures between market cap and value is a sensible course of action.

 

Thanks @The Falcon
It does feel like you are putting your faith in theory and quant ability. You will almost never know if it worked out or not, since timeframe and staying the course is extremely long term. How do you know if it's just not working 10 years in? You don't...

 

Right. In the past I’ve looked at research affiliates (Rob Arnott) methodology, read the papers etc. Back tested it looks great. Outperformance against XJO is solid. Come 2013 put the theory into practice QOZ.AX ;

1. You are handicapped by 50bps (cost)
2. Turnover (tax) is significant

Net result 6 years in, better off with cap weight. Now, this may look different in 20 years...if the product survives (!).

There is theory, and then there is execution.

 

Good points in that example. I'll consider those two issues as well. Great to draw on your experience and that of others in here.
I'm very grateful!

 

For better or worse that’s my view as well. I think it will persist by my observation of investors giving up on well proven Mgrs in the current market with value being well and truely on the nose.

But for ASX it offers more than that given the massive concentration in the top 10 - 20. It provides some much needed diversification for me whether imagined or real.

I’m willing to pay even more than the fee for Smart Beta product in using traditional active management. But by choosing to do this in the LIC environment hopefully by taking advantage of deep discounts this in part offsets that handicap. Responsible LIC boards are likely to use Buybacks to reduce the discount when it gets too deep assisting further in reducing any handicaps.

It’s not a large part of the Portfolio so I’m not bothered by any negatives.

 

I hold VVLU (25% of global Asset Allocation), but I agree totally with the above few comments on the risks.

Holding and agreeing with the risks - A contradiction, probably.


I’m happy to discuss VVLU, but there can never be too many warnings in this thread that chasing factors are potentially hazardous to your wealth.

 

@dunno I think it’s might be easier for those of us with larger portfolios to stay the course given that significant underperformance is unlikely to have much impact on our lifestyle.

I might be crazy but I get some additional comfort from having diversification that’s not all just standard cap weighted indexing. It’s more than simply hoping to eek out additional performance and greater rebalancing opportunities. For me it provides some additional risk management.

 

I think I have posted this video before. Really worth a watch in my view.

It best describes my justification for doing anything active.

 

In my mind this is really important. There's lots of great ideas, experience and some very sophisitcated investing minds on PC but given the significant impact individual behaviour has on long term wealth creation, well..... you need to know yourself, be clear on your goals and what risk and oppertunity you are signing yourself up to based on some historical perspective.

Good point. Someone starting off at 23 years old having acculated $50K, is in a very different position in so many ways to a 65yo with $2M+ net wealth.

It's also pretty clear from reading posts of some of the most experienced on this site and other sites that everyone is on a journey of learning. Nothing is static.

 

Excellent video, I enjoy this guy’s videos.

This last statement by the author stood out and would likely meet @SatayKing ‘s most important criteria: “it’s all about me”:

 

Vangaurd going even further down the rabit hole of Active Funds. One of the reasons I'm not too concerned about the closure of VVLU - Vangaurd seems determined to want to disrupt more traditional active management in Australia.

Vanguard Australia - Vanguard announces a new series of funds providing lower cost choice in active management for Australian investors

 

What I find baffling is that they’re offering new active / Smart Beta Funds not really knowing whether these will succeed and yet they still don’t have any traditional index Global Property ETFs.

 

Before chucking my money into international shares a while back I did an obsessive amount of backtesting on Portfolio Visualizer.

There is of course debate about the relevance of backtesting, and especially backtesting with US centric data.

But, over the long term, it seems a value tilt either pays off or does no massive harm according to said backtesting.

Given my natural contrarian inclinations, usually proven each year when the asset quilts come out, the dismal performance of value in recent years makes a tilt in that direction tempting.

There was no VVLU when I made my initial investment (50/50 VGS/VISM wholesale funds), but I'm strongly considering re-allocating a chunk into the Value fund (50/50 or so).

The above-average distributions compared to other international funds add to the intrigue.

 

An older value post

Russell Value Index YTD