International Small-Cap

From Bogleheads

Jump to: navigation, search

Since domestic large-cap stocks and international large-cap stocks have high correlation, some investors look for international small-cap mutual funds and ETFs to further diversify their portfolios. This page is intended to present a summary of international small-cap mutual funds and ETFs.

Contents

Selection

Ticker
Symbol 		Name Expense
Ratio [1] 		Average
Volume [2] 		Average
Mkt Cap [3] 		Total
Assets [4]
VFSVX Vanguard FTSE All-World ex-US Small-Cap Index Fund [5] 0.60% N/A N/A N/A
VSS Vanguard FTSE All-World ex-US Small-Cap Index Fund ETF 0.38% N/A N/A N/A
VINEX Vanguard International Explorer Fund [6] 0.36% N/A $1,447M $1,079M
DLS WisdomTree International SmallCap Dividend 0.58% 64,324.2 $798M $267M
GWX SPDR S&P International Small Cap 0.59% 264,288.0 $748M $255M
SCZ iShares MSCI EAFE Small Cap Index 0.40% 77,457.6 $1,153M $133M
IFSM iShares FTSE Developed Small Cap ex-North America 0.50% 11,163.6 $1,207M $17M
PDN PowerShares FTSE RAFI Developed Markets exUS S/M 0.75% 12,084.8 $1,178M $13M
EWX SPDR S&P Emerging Markets Small Cap 0.65% 11,183.3 $771M $7M
DGS WisdomTree Emerging Markets Small Cap Dividend 0.63% 26,157.6 $769M $40M
  1. ↑ According to Morningstar.
  2. ↑ Three-month average volume according to Yahoo! Finance. As of 10/24/2008.
  3. ↑ According to Morningstar.
  4. ↑ According to Bloomberg. As of 07/31/2008 for the ETFs and 10/31/2008 for VINEX.
  5. ↑ The fund imposes 0.75% purchase and redemption fees, payable to the fund.
  6. ↑ While all the other tabulated products are ETFs, VINEX is an actively managed open-end fund.

Caution

Tax Efficiency

Vanguard International Explorer Fund has been very tax inefficient at least for the past 10 years. You should strongly consider holding it in a tax-advantaged account.

Vanguard FTSE All-World ex-US Small-Cap Index Fund imposes non-expiring purchase and redemption fees on its mutual fund shares and thus discourages trading by imposing a cost on every trade. Given the volatility of small cap stocks, there are many opportunities for tax loss harvesting, but the redemption cost significantly reduces the benefit.

The purchase and redemption fees can be avoided by using the ETF class; there are still brokerage fees and trading costs, but the fees can be less than purchase and redemption fees. This Calculate and compare costs for Vanguard ETFs and mutual funds calculator can help quantify the fund vs. ETF decision.

The ETFs listed above have not been around for a long time. As such, there is little information on their tax efficiency, and what there is may not be reliable in the long run. However, the WisdomTree ETFs, because they choose stocks which pay high dividends, are likely to be tax-inefficient even if they do not realize gains, and GWX had an 0.87% tax cost in its first year because it distributed a large capital gain. (This may be less of a concern in the future; many ETFs distributed capital gains in their early years but not in later years even in bull markets, and any ETF which was around in 2008 has a large loss to offset gains for several years in the future.)

Volume

Many of the ETFs above are thinly traded. You should expect larger-than-average bid/ask spreads.

Underlying Securities

The products above have quite different sets and weights of underlying securities. One product might include stocks from one country, whereas another product might completely lack them. You are strongly advised to read the prospectus of each product and, if necessary, do additional research before investing in any of the products above.

Resources

Academic Papers

  • Huang, Wei, Eun, Cheol S. and Lai, Sandy, "International Diversification with Large- and Small-Cap Stocks" . Journal of Financial and Quantitative Analysis (JFQA), Forthcoming Available at SSRN: http://ssrn.com/abstract=932961
  • Huang, Wei, "Financial Integration and the Price of World Covariance Risk: Large vs. Small-Cap Stocks " . Journal of International Money and Finance, Forthcoming Available at SSRN: http://ssrn.com/abstract=898067
  • Nicodano, Giovanna and Guidolin, Massimo , "Small Caps in International Equity Portfolios: The Effects of Variance Risk" (December 2005). AFA 2006 Boston Meetings Paper Available at SSRN: http://ssrn.com/abstract=686142
  • Petrella, Giovanni, "Are Euro Area Small Cap Stocks an Asset Class? Evidence from Mean-Variance Spanning Tests" . European Financial Management, Vol. 11, No. 2, pp. 229-253, March 2005 Available at SSRN: http://ssrn.com/abstract=688650

How to Cite

You can link to this page from the Bogleheads Forum by copying and pasting the following text into your forum posting:

Please see [url=http://www.bogleheads.org/wiki/International_Small-Cap]International Small-Cap[/url] on the [url=http://www.bogleheads.org/wiki/Main_Page]Bogleheads Wiki[/url].
Notice something that needs correcting? Notify a wiki editor or become a wiki editor and fix it yourself!


International Stocks
International Stocks Domestic/International • Slice and Dice International • International Small-Cap • S&P/Citibank Global Broad Market Index • Foreign tax credit
Comparing Vanguard International Funds FAQ on Vanguard International Funds • Compare Vanguard International Funds • Vanguard SEC Filings: International & Global Stock Funds
Vanguard International Fund Distributions Vanguard Total International Stock Index Fund Tax Distributions • Vanguard FTSE All-World ex-US Index Fund Tax Distributions • Vanguard Developed Markets Index Fund Tax Distributions • Vanguard European Stock Index Fund Tax Distributions • Vanguard Pacific Stock Index Fund Tax Distributions • Vanguard Emerging Markets Stock Index Fund Tax Distributions • Vanguard International Growth Fund Tax Distributions • Vanguard International Value Fund Tax Distributions
Vanguard International Fund Expenses Vanguard European Stock Index Fund Expenses • Vanguard Pacific Stock Index Fund Expenses • Vanguard Emerging Market Expense Ratios
Retrieved from "http://www.bogleheads.org/wiki/International_Small-Cap"
Personal tools