Managed Funds Vanguard

Discussion in 'Shares & Funds' started by Redwing, 23rd Feb, 2017.

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  1. Nodrog

    Nodrog Well-Known Member

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    Ok curioisity got the better of me so I rang Vanguard:

    1. VGS although it invests in the underlying unlisted wholesale fund it is still a totally independent "separate" class of units hence all ETF unit holders are treated equallly. CG event from one unitholder in VGS ETF should not impact another. Importantly any CG event in the w'sale fund should have NO impact on VGS unit class. VGS should closely resemble the MSCI index it tracks with CG mostly due to rebalancing.

    2. Large income distribution in last 12 months for w'sale fund is due to CG events being spread across ALL unitholders. The age old problem. The vanguard guy said that he had received calls from numerous agitated investors concerned about high capital gains distributions in the unlisted funds. This is why the w'sale fund capital / income distribution is out of whack with the MSCI index it tracks.

    3. Good news is AMIT should eliminate most / all of the CG problem historically experienced with the unlisted funds.

    4. So we should see reporting of VGS and w'sale fund more closely aligned in the future. That is with introduction of AMIT the w'sale fund will just like VGS attribute capital gains to each individual unit holder.

    5. End result is that VGS / w'sale fund should track the MSCI index closely and be reflected in future marketing / performance literature. Vanguard said their distribution yield will generally be a little higher than the "real" yield of the MSCI index due to rebalancing which of course is obvious.

    Will be interesting to see if the reply to @Il Falco's request matches what I was told:). Or blame my memory:confused:.
     
    Last edited: 25th Aug, 2017
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  2. The Falcon

    The Falcon Well-Known Member

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  3. The Falcon

    The Falcon Well-Known Member

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    Vanguard have responded to my query ;

    Q.
    I note that recent distributions from the International Shares Wholesale Managed Fund has been significantly higher than the ETF VGS, which I understand is a class of the wholesale fund.

    Is this due to redemptions in the wholesale fund, causing capital gains events that does not apply to the ETF, and how will this change with the implementation of the new attribution scheme?


    A.
    Yes that is correct, it is due to the different share classes of the Wholesale Managed Funds and the ETF. Going forward the new AMIT regime will help manage this discrepancy and we will see the splits being a lot closer together.
     
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  4. Snowball

    Snowball Well-Known Member

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    Excellent work guys! Thanks a lot.

    You guys should be on the payroll here...

    Maybe you can be offered discounted property management services by one of the affiliate partners here somewhere ;)
     
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  5. Nodrog

    Nodrog Well-Known Member

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    Property management service, I'm feeling ill:
    IMG_0403.JPG
     
  6. The Falcon

    The Falcon Well-Known Member

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    That volume of vomit really sums it up. Looks like at least 50l/minute
     
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  7. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Does this now tip the balance in favour of the wholesale fund over the ETF equivalents? Does the wholesale fund allow rebalancing without fees?
     
  8. The Falcon

    The Falcon Well-Known Member

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    Good question. If one is keen on the pre-mixed multi asset wholesale funds (the lifestrategy products) then it makes them more attractive, same with all the individual asset funds. Your rebalancing question goes to the multi asset funds and yes there is no fee for rebalance.
     
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  9. Nodrog

    Nodrog Well-Known Member

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  10. Alex McDonald

    Alex McDonald Active Member

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  11. Nodrog

    Nodrog Well-Known Member

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    Not recommending the fund, just posting that it's a new offering from Vanguard.

    I don't like bond funds especially in the current low rate environment and much prefer Gov't guaranteed ($250k per banking group) cash and term deposits. But some investors use Bond funds as a volatility dampener through rebalancing etc rather than seek the best income return.

    An international bond fund of course helps protect against home country risk.

    It just depends on the investors goals and preferred strategy, no right or wrong answer.
     
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  12. Redwing

    Redwing Well-Known Member

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    An interesting read

    Today in Market History, The First Index Fund

    Well last week anyhow, on the 31st August

    42 years ago today, Vanguard’s First Index Investment Trust was born. Bogle’s goal was to launch with $150 million, but there was little appetite for “average returns” and it gathered just $11.5 million, missing its target by more than 90%. Not only did they fall short in terms of money raised, but the product itself was not exactly a home run. From The Index Fund Revolution by Charley Ellis:

    As a ‘load’ fund, with an 8.5 percent sales charge, aiming to achieve only average performance, it could not gain traction….To minimize costs, the portfolio did not own all the smaller-capitalization stocks in the S&P 500. Instead, it sampled the smaller stocks just as that group enjoyed an unusually strong run, so the fund failed to deliver on its ‘match the market’ promise.
    Small stocks absolutely crushed larger ones in the five years after the launch, and not owning all of them was a significant drag on returns.

    The index fund did not take to investors immediately. Vanguard didn’t have any competition until 1984, when Wells Fargo created the second index fund. The First Index Investment Trust, renamed the Vanguard 500, didn’t reach $1 billion in assets until 1990. Today, however, there are more index funds than species of insects, and $3 billion is going into exchange-traded funds and index funds every day! Vanguard has been the biggest beneficiary of the shift towards index-based investing.

     
  13. Redwing

    Redwing Well-Known Member

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    Vanguard (Aus) have a post about Bonds here

    The role of fixed income in portfolios

    [​IMG]
     
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  14. Nodrog

    Nodrog Well-Known Member

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    Last edited: 22nd Nov, 2017
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  15. Hodor

    Hodor Well-Known Member

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  16. Redwing

    Redwing Well-Known Member

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  17. Nodrog

    Nodrog Well-Known Member

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    Been thinking just now about issues associated with Vanguard diversified funds:

    With individual funds the investor can rebalance by adding new cash to the relevant fund so there’s no tax event. Does Vanguard’s periodic rebalancing result in a tax event or do they use new inflows in part / full to achieve this?

    Vanguard will periodically change the asset allocation based on their forecasting model. Does this result in a tax event? Will the changed asset allocation suit the investor? Another tax event if investors are unhappy with changes and have to sell.

    The inclusion of hedged equities and bonds results in unfavourable tax events and erratic distributions.

    The bond funds also include a sizable quantity of non-government bonds which in times of trouble tend to behave more like equities.

    If investors as they approach retirement decide they want a more conservative asset allocation there’s no way to change it using their existing diversified fund. You have to sell the current fund and replace it with another or add single funds to achieve the desired asset allocation.

    When investors retire and need to drawdown funds they have to sell units in the fund which means they are in effect selling all asset classes. They can’t choose to sell the outperforming asset class to maintain balance. Although Vanguard will be rebalancing periodically so this may help but does the timing suit the investor?

    Despite a little extra work I still tend to favour investing in single asset class funds as you have much greater flexibility and control over asset allocation and tax events. But there’s no doubt the simplicity of owning a diversified fund is appealing.

    These are just some issues that popped into my head as I type. What do others think?
     
  18. Redwing

    Redwing Well-Known Member

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    And tax loss harvesting is frowned upon by the ATO
     
  19. Nodrog

    Nodrog Well-Known Member

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    @Il Falco, thoughts if time permitting?

    As for me I’m about to take my wife for a date to Bunnings. Fine dining at the sausage sizzle as usual. Then will follow up with shopping at Dan Murphy’s. A romantic day planned:).
     
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  20. Nodrog

    Nodrog Well-Known Member

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    Another reason why I’m not a fan of Vanguard HEDGED International Index Funds. The perceived security some investors get in choosing a fund that attempts to remove currency risk comes with the disadvantage of erratic / missed income distributions at times. Total return is one thing but gee the following period of missed distributions in the Hedged International Fund is getting a bit rediculous:

    Wholesale “Unhedged” International Fund:
    171F5BE7-910D-429A-902F-31A9F1ED5419.jpeg

    Wholesale “Hedged” International Fund:
    9BBEF80A-C954-4DC0-89D8-45E240874C70.jpeg
     
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