Vanguard wholesale fund

According to Vanguard's website, the wholesale management fee is higher than the ETF version. Investment Products

I thought the wholesale fund should have a lower fee?

I would like to gradually invest some cash into Vanguard funds, but if I invest in wholesale fund, how how does it take to process the buy and sell order?

What's the disadvantage if I invest around $2M in VDHG via ETF? The only disadvantage I can see is that it may take a while to fill the order. I am relatively new to this so any comments are welcome. Thanks.

 

Managed funds aren’t on the ASX. They’re basically unit trusts which vanguard sets the sell/buy price based on the NAV/Market price. I’m not 100% confident in that process but each to their own...

 

I’ve just been in a similar situation.

The wholesale funds do have a slightly higher fee than the ETFs. But we’re talking .27% vs .29 so not a big thing.

On the other hand they don’t have brokerage fees and take BPay so if you are doing regular investments it is usually cheaper to use the wholesale fund than pay brokerage on every transaction.

There are also differences in returns. Whilst total returns end up virtually the same, for some reason that Vanguard has never been able to explain the international managed funds usually have a higher distribution than the ETFs.

In the case of VDHG, the managed fund has had a 2% higher distribution than the ETF over the past two years, and thus 2% lower capital gain.

This may have tax implications.

For me, the advantage of the ETFs is timing. You can buy and sell right away, and you know exactly what the price is. Except when you try to buy in big chunks like you are talking about. I’ve been annoyed a few times by the lack of transparent liquidity in ETFs.

If I were you I would not do such a trade via an online platform (I use Nabtrade). I’d phone them up and get them do it personally.

In the end, this is why I ended up doing all my Vanguard investments with the wholesale funds. There is less price volatility when you buy, and I suspect less if you sell. I like their record keeping too.

And I like that the managed funds make it harder to be impulsive.

On the downside, I don’t like the slowness. I added some money on Monday this week to an existing fund, but it wasn’t recorded until Friday. Admittedly this saved me money given market gyrations, but the promise on the site that if you do an order before 1pm it will go through that day is ********.

 

Wholesale fund advantage is you can bpay in small amounts and rebalance to your own allocation. VDHG is fixed to Vanguard's high growth allocation - changing would require sell and buy. I'm not clear on the buy sell spreads of the wholesale fund or the comparative yield - I would assume it would be the same as the ETFs.

There is no obvious choice.

 

Zenith has touched on the other thing that may or may not sway you.

Vanguard ETFs do not invest directly in their underlying index. Instead they invest in the underlying Vanguard wholesale fund.

So their Daily NAV is not the NAV of their investments, but the fund.

If you have Sharesight you can see this in action by back-testing the managed fund and using the ETF as the index.

Generally the ETF lags the fund by a day, but in volatile times the ETF jumps around more.

During the March slump, for example, VGB had triple the dip of its underlying fund.

 

Thanks for all the replies. I will probably split in to 3 or 4 ETFs VDHG, VAS, VGS and may be VAGD or HACK. I think this way will reduce the liquidity issue.

 

I think this only applies to the 'Diversified' ETFs, not all of them.

eg VDBA has on it's page: Investment Products
"Allocation to underlying Vanguard funds"

while VAF has an actual 'basket':
Investment Products

 

I've bought both vanguard ETFs and wholesale funds. A wholesale fund opening or additional purchase always seems to be priced at the buy price of the following day, and the actual allocation is a day or two after that. I believe you can get today's buy price if you contact them directly with proof of the bank transfer on the day.

 

I am also planning to start regular investment in an index fund investing in US market. Looks like Wholesale funds needs initial investment of $500K and has management fees of 0.18% and buy/sell spread cost of 0.06%

Investment Products

Firstly, I dont have an initial investment of $500K and secondly, it looks like that I can get same benefits of no brokerage (using BPAY) by opening a Vanguard Personal account as well and investing in VTS with even lesser management fee of just 0.03%

https://www.vanguard.com.au/personal/en/eligibility

Investment Products

Am I missing something here? Does Vanguard Personal account has any per investment or annual fees in addition to the management fees of 0.03%

Thanks for your help.

 

Looks like The Vanguard Personal Investor Accounts charges an Account Fee of 0.20% per annum based on the overall value of your investments with Vanguard, including any cash held.

https://www.vanguard.com.au/persona...fee-on-the-vanguard-personal-investor-account"

So, Investing in VTS through Self wealth or IVV through CommSec Pocket may be cheaper as they dont have account keeping fees of 0.2%.

Am I thinking this correctly?

 

Apparently you can call them and start with $100k

 

I might be wrong but I thought I saw recently that is no longer allowed like in the past?

 

I asked recently and it seems to be the case

"The $100k discretionary offer is no longer available for individual accounts. you must have $500k minimum per fund if you wish to access the wholesale products directly."

 

So for retail investor - self wealth is better option than given it does not have account keeping fees of 0.2% unlike Vanguard Personal account. [ I am plan to invest 50K at market dip and then regularly investment of 2-3k per month for next 20 years]

 

I think there is probably a behavioural edge with the wholesale fund. Being able to set up an Automatic BPAY every paycheck and not have to make a buy decision would be nice. However the 500k investment requirement is not a reality for most investors. If you fit into that category though, thats probably what I would do.

 

Likely because they want retail investors to use their new Personal Investor platform.

 

What liquidity issue are you referring to?

 

It's the trading volume of VDHG, according to Yahoo the average trading volume is about 26,695. So if I want to buy/sell $2m worth of VDHG, I believe I need to do it across multiple days (unless I just accept whatever bid/offer available in the market).

 

I don't think that is an issue for ETFs because of the open ended structure. Vanguard will just create the units you want to buy.

 

It is open ended (thanks uncle drew) so the liquidity will be the trading volume of VDHG plus the underlying securities and trade as close to NTA as possible.

Possibly Vanguard could create additional liquidity between cross holdings, ie VDHG and VAS share many holdings so someone selling VAS could create liquidity for someone buying VDHG - this is pure speculation and have no idea if they do this.