Best International Small Cap Option

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billy269
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Best International Small Cap Option

Post by billy269 » Fri Jan 19, 2018 9:08 pm

I'm at TDA and GWX and DLS are commission free options.

PRIDX is a no fee fund option but has a high expense, but I have seen people make the case that active international funds may be a good idea vs indexing...

Have had it in VSS in the past but it is no longer commission free at TDA.

This fund will represent 8% of my total portfolio. It is in a retirement account.

Which option would you go with?

Thank you for your thoughts!
Last edited by billy269 on Sat Jan 20, 2018 12:09 am, edited 1 time in total.

livesoft
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Re: Best International Small Cap Option

Post by livesoft » Fri Jan 19, 2018 9:14 pm

VSS of course. It still trades free if you get your rep to give you a free trade every time you will need it.
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Re: Best International Small Cap Option

Post by ThePrince » Fri Jan 19, 2018 10:13 pm

I own both PRIDX and VSS.

billy269
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Re: Best International Small Cap Option

Post by billy269 » Fri Jan 19, 2018 11:06 pm

ThePrince wrote:
Fri Jan 19, 2018 10:13 pm
I own both PRIDX and VSS.
Do you split them 50/50?

MnD
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Re: Best International Small Cap Option

Post by MnD » Fri Jan 19, 2018 11:25 pm

GWX is a capital gains distribution disaster. AVOID!
https://us.spdrs.com/en/resources/distr ... x_code2=NA

How much is a trade commision on VSS? $7?
If you just must have a seperate small cap international position and a $7 trade is a big deal in the quantities you buy, buy a no commission broad international fund regularly. And then once per year or whatever, sell a portion and buy VSS.

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grabiner
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Re: Best International Small Cap Option

Post by grabiner » Sat Jan 20, 2018 12:10 pm

The commission for something like VSS (Vanguard's international small-cap ETF) is a trivial cost. If you buy 100 shares at the current market price of $124.30, an $8 commission to buy, and another $8 when you sell, is an extra 0.13% expense. And that's a one-time expense; if you hold the fund for 13 years, it's equivalent to paying an extra 0.01% annual in expenses.
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billy269
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Re: Best International Small Cap Option

Post by billy269 » Sat Jan 27, 2018 1:14 am

Still debating. I think I will hold the vss I have and add DLS. I think they complement each other pretty well. I like that DLS is smaller cap and more valuey than vss. I'll probably do 4% of each to make up my 8%.

Is that a bad idea? Is the main objection to DLS it's ER? This is for a tax sheltered account.

lazyday
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Re: Best International Small Cap Option

Post by lazyday » Sat Jan 27, 2018 4:16 am

I wouldn't pay the ER for DLS.

You could look at ISCF and FNDC. FNDC is free to trade at Schwab.

I don't own intl small today, but if I were to buy I'd consider ISCF and VSS.

Longtermgrowth
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Re: Best International Small Cap Option

Post by Longtermgrowth » Sat Jan 27, 2018 4:50 am

DLS is pretty sweet for developed small value, even given the expense ratio. I hold DLS, by the way. It is currently in Paul Merriman's best in class ETF list: https://paulmerriman.com/best-in-class- ... portfolio/

Sometimes getting deeper into small value territory is worth the added expense. There's an article from Larry Swedroe about that, but please don't make me search for that link :beer

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Re: Best International Small Cap Option

Post by lazyday » Wed Jan 31, 2018 4:39 am

Longtermgrowth wrote:
Sat Jan 27, 2018 4:50 am
Sometimes getting deeper into small value territory is worth the added expense.
Of course that might come with more negative exposure to momentum and quality. And depending on the fund, perhaps you might overweight distressed "lottery tickets"--though I haven't looked for that in any fund.

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Re: Best International Small Cap Option

Post by Longtermgrowth » Wed Jan 31, 2018 5:01 am

lazyday wrote:
Wed Jan 31, 2018 4:39 am
Longtermgrowth wrote:
Sat Jan 27, 2018 4:50 am
Sometimes getting deeper into small value territory is worth the added expense.
Of course that might come with more negative exposure to momentum and quality. And depending on the fund, perhaps you might overweight distressed "lottery tickets"--though I haven't looked for that in any fund.
Haha, I think you may have read a few of my other posts based on the lottery ticket comment. That should really be more centered towards the small growth side of the Morningstar style grid though.
Larry Swedroe also recommended DLS in his "Big Rocks" portfolio.
Guess I really need to dig up that link from Larry about expense ratios...(10 mins later haha)http://www.etf.com/sections/index-inves ... -etfs.html

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Re: Best International Small Cap Option

Post by lazyday » Wed Jan 31, 2018 5:12 am

Longtermgrowth wrote:
Wed Jan 31, 2018 5:01 am
Haha, I think you may have read a few of my other posts based on the lottery ticket comment. That should really be more centered towards the small growth side of the Morningstar style grid though.
Larry Swedroe also recommended DLS in his "Big Rocks" portfolio.
Guess I really need to dig up that link from Larry about expense ratios...(10 mins later haha)http://www.etf.com/sections/index-inves ... -etfs.html
Maybe :) I did read Larry's recent article and skimmed the thread on it.

SG lottery tickets--I suppose most lottery tickets are in SG. But companies that are nearly bankrupt might be in SV. This might not be a problem with DLS depending on its methodology. But I could see some fund that weights on value loading up on them during a bad economy.

I wonder if Larry would still pick DLS today. When the Edge Multifactor funds were new, he commented positively about them.

Unfortunately it seems difficult to analyse international funds, especially new ones. I tentatively like ISCF because the methodology seems like it might be good, but it's harder to follow than in most other funds. Maybe someday we'll have a decent factor analysis to see what loadings it has.

billy269
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Re: Best International Small Cap Option

Post by billy269 » Fri Feb 02, 2018 8:39 pm

I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?

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Re: Best International Small Cap Option

Post by sergio » Fri Feb 02, 2018 8:59 pm

billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Maybe, just maybe, because VSS sucks?

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Re: Best International Small Cap Option

Post by jhfenton » Fri Feb 02, 2018 9:10 pm

billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Over the trailing 12 months (through yesterday), VSS is just a hair behind DLS, 31%-32%.

Any performance differences are due to substantial differences between the country weightings. VSS has 12% in Canada. DLS 0%. VSS has far less in Japan (16% vs 27%), but 6.5% in Taiwan and 4.7% in South Korea vs 0% and 0% for DLS. And of course VSS has 20% emerging markets, while DLS has more developed Europe.

And it wasn't as if EM dramatically outperformed. VWO was up 34% over the same 12 months through yesterday, not much of a boost over the rest of the world. And on the flip side, EWC (IShares Canada) was only up 12% during those 12 months. So VSS's stake in Canada was probably a relative drag.

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Re: Best International Small Cap Option

Post by triceratop » Fri Feb 02, 2018 9:13 pm

sergio wrote:
Fri Feb 02, 2018 8:59 pm
billy269 wrote:
Fri Feb 02, 2018 8:39 pm
I still don't understand why VSS underperforms so badly. A couple years ago when EM was weak people said that was why since VSS is 15% EM. Recently EM have been strong, yet VSS is still underperforming in the last year in comparison to DLS and the few mutual funds I have been tracking: PRIDX and FISMX. What is going on with it?
Maybe, just maybe, because VSS sucks?
As some would say: "Big if true".

But no, 5-year trailing returns as of the annual report 10/31/2017:

FTSE All-World ex-US Small-Cap Index Fund ETF Shares NAV: 9.04%
FTSE Global Small Cap ex US Index: 8.87%

It seems to be tracking its index well. ;) Your complaints are with the index construction, on which jhfenton goes into some detail.
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cookymonster
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Re: Best International Small Cap Option

Post by cookymonster » Fri Feb 02, 2018 9:19 pm

VSS has lousy tax efficiency with a QDI ratio of 0.41. SCHC is at 0.72 and is where I put new $ in the class.

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jhfenton
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Re: Best International Small Cap Option

Post by jhfenton » Fri Feb 02, 2018 9:23 pm

cookymonster wrote:
Fri Feb 02, 2018 9:19 pm
VSS has lousy tax efficiency with a QDI ratio of 0.41. SCHC is at 0.72 and is where I put new $ in the class.
I agree that VSS is a poor choice in taxable. It's our largest holding, but I wouldn't hold it in taxable.

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Re: Best International Small Cap Option

Post by caklim00 » Fri Feb 02, 2018 9:56 pm

I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF ishares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.

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Re: Best International Small Cap Option

Post by Theoretical » Fri Feb 02, 2018 9:56 pm

I think the best liquid option for a taxable account is the Schwab Fundamental International Small Cap FNDC at an ER of .39% or the PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio PDN at .49%. Both have been pretty good in taxable.

Going into tax-advantaged space, I'd strongly consider DLS, as it's much smaller than either of the two funds and has been a good DFA clone for some time now. But stay far away from it in taxable.

If you're willing to go Active TDA has a couple of genuinely interesting funds, but only hold them in tax-advantaged:

One is the Segall Bryant and Hamill International Small Cap Fund Class A SBHSX at 1.28%. It is an explicitly quantitative Quality, Value, and Momentum fund focused on International Small Caps. http://bit.ly/2DWXIdU Here is a list of factor regressions, and it has behaved as a DFA clone, including having very stable factor loadings. It has about 450 stocks.

Another is even more daring, but actually hits the real small and micro caps, on a global scale, and that's the Actively Managed METAX Global Microcap Value Fund - This one has a 2.11% ER (1.71 if you're putting in 100K). This one's average market cap is less than 300 million, and has about 300 companies, with a 20/30/50 US/Japan/Global-Ex-US and Japan weighting at the moment, including Emerging Markets. Its valuation measures are extremely valuey, but you must be aware that this is a fund built on fundamental analysis not quantitative analysis, so its style box/factor loadings are more likely to vary.

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Re: Best International Small Cap Option

Post by MikeMak27 » Fri Feb 02, 2018 10:04 pm

SCZ an ishares international small cap has performed well in the past for me. I will be purchasing more of it in the future.
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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Re: Best International Small Cap Option

Post by Theoretical » Fri Feb 02, 2018 11:00 pm

SCZ and VSS have one thing definitely going for them: Their holding cost is below their expense ratio. In VSS's case, the fund pays you to own it.

SCZ last year had $27.6 Million in expenses and $15.8 Million in securities lending revenue, so you end up with an effective ER of .13% for its $8.7 Billion in net assets.

VSS last year had $6.3 Million in expenses and $11.8 Million in securities lending revenue, so you end up an effective ER of -.10%.

The State Street ETF GWX is also great at lending, but it is terrible in taxable as State Street does not seem to either care or know how to manage for taxes, so the fund routinely spits out capital gains.

livesoft
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Re: Best International Small Cap Option

Post by livesoft » Fri Feb 02, 2018 11:05 pm

VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
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Re: Best International Small Cap Option

Post by grabiner » Fri Feb 02, 2018 11:35 pm

Theoretical wrote:
Fri Feb 02, 2018 11:00 pm
SCZ and VSS have one thing definitely going for them: Their holding cost is below their expense ratio. In VSS's case, the fund pays you to own it.

SCZ last year had $27.6 Million in expenses and $15.8 Million in securities lending revenue, so you end up with an effective ER of .13% for its $8.7 Billion in net assets.

VSS last year had $6.3 Million in expenses and $11.8 Million in securities lending revenue, so you end up an effective ER of -.10%.
Another way to see this is that the fund has positive tracking error. Over the last five years, VSS has outperformed its index by 0.14% NAV. It isn't clear how much of this comes from securities lending, and how much from good trading practices. (When Small-Cap Index tracked the Russell 2000 which was vulnerable to front-running, it beat the index by 1% per year, possibly just by avoiding the front-runners.)
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Re: Best International Small Cap Option

Post by lazyday » Sat Feb 03, 2018 5:12 am

grabiner wrote:
Fri Feb 02, 2018 11:35 pm
(When Small-Cap Index tracked the Russell 2000 which was vulnerable to front-running, it beat the index by 1% per year, possibly just by avoiding the front-runners.)
That's just amazing!

I've seen a couple complaints over the years about Vanguard funds deviating from their indexes, but maybe they knew what they were doing. I suppose to avoid front runners, you'd have to differ from the index for a while, but if expected returns are higher than it might be well worth it.

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Re: Best International Small Cap Option

Post by fennewaldaj » Sat Feb 03, 2018 11:25 pm

So I have been using a principal international small cap separate account (from wifes 401k) that appears to be 1/2 DFA international small cap 1/2 principal international small cap with an expense ratio of 0.69.
The fund
https://www.principal.com/InvestmentPro ... mbol=ISC97
and its commonents
DFA
http://beta.morningstar.com/funds/XNAS/DFISX/quote.html
Principal active about 200 companies
http://beta.morningstar.com/funds/XNAS/PISMX/quote.html

So the end result is a portfolio with all 4000 or so companies of the DFA account but with about 200 over weighted. It seemed worth using to me. Do others agree with that assessment. I like the DFA side and the principal side seems fine as far as active funds go. The expense is not horrible for this asset class (and is only slightly higher than the DFA account on its own)

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Re: Best International Small Cap Option

Post by TropikThunder » Sat Feb 03, 2018 11:41 pm

livesoft wrote:
Fri Feb 02, 2018 11:05 pm
VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
Discount! :P

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Re: Best International Small Cap Option

Post by snodog » Sun Feb 04, 2018 10:06 am

DLS, PDN and FNDC are all good.

Full disclosure: I own a nice chunk of FNDC.

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Re: Best International Small Cap Option

Post by triceratop » Mon Feb 05, 2018 12:38 pm

livesoft wrote:
Fri Feb 02, 2018 11:05 pm
VSS lost 2.62% today, but its cognate mutual fund VFSVX was down only 2.20% today. This means that come Monday morning, something's gotta give.
I guess we know now what gave. I hope there weren't large withdrawals on Friday; that could hurt the returns of the ETF investors as well as the other mutual fund investors.
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Re: Best International Small Cap Option

Post by sunnywindy » Mon Feb 05, 2018 2:28 pm

caklim00 wrote:
Fri Feb 02, 2018 9:56 pm
I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF iShares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.
I, too, like the iShares Edge MSCI Multifactor suite of funds and thought the International Small Cap ETF (ISCF) might not survive due to low AUM, trading volume, etc... As of today, it still only has $33 million, but I am fairly confident it will survive. For one, I think it will slowly keep gathering assets and supposedly once an ETF crosses the $30 mil hurdle, it is profitable. But secondly, iShares/Blackrock is coming out with a competitor or complement to the Morningstar Style Box that revolves around factors and is called the "Factor Box". Because of this, I don't see them cutting low AUM factor funds because they are perfect advertisements for the "Factor Box."

Even if you don't read the article, I would recommend scrolling to the diagram.
https://www.bloomberg.com/news/articles ... =etfcenter

Lastly, in early May 2018, we will have three-year data on the Edge Multifactor ETFs, so that will provide some good comparisons. So far, they have done well in the bull market and the recent loses of the past couple of days.
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billy269
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Re: Best International Small Cap Option

Post by billy269 » Thu Mar 01, 2018 7:55 pm

This has been the most difficult part to figure out in my portfolio. I plan to leave $ in these funds for at least 30 years. I'm looking to tilt small/medium (about 50% large, 50% small/medium) and value. Currently at my Roth IRA Edge account (no commissions, so I can buy anything) for my 34% international allocation I am thinking:

13 VEA
8 VWO
9 VSS
2 EEMS
2 FNDC

With this I have about a 50/50 split in Large vs Mid/Small (in both developed and EM) and a little value tilt. I also have about a quarter of my international holdings in emerging markets, which is my target. Upon first glance, it seems like I have more than 25% EM, but VWO is only 83% EM and EEMS is only 63% EM.


For my Roth i401k TDA account I am thinking the following (all below are commission free at TDA):

12 SPDW
6 SPEM
2 EWX
2 DGS
2 GWX
2 DLS
8 PRIDX (I know, high fees but has been a stellar fund for last 30 years and int mid/small is one of the better performing active fund sectors)

With this I don't get much value (since PRIDX is tilted growth), but it is 50/50 Large vs Mid/Small (in both developed and EM) and around a quarter EM. I don't like the lack of liquidity of FNDC, EEMS, DLS, DGS, GWX, and EWX so I am thinking I will just buy a little of each.

Thoughts? I know people won't like how many funds this is, but it doesn't bother me to have a 8-10 fund portfolio. That is much simpler than it used to be!

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Re: Best International Small Cap Option

Post by caklim00 » Wed Aug 22, 2018 10:35 am

sunnywindy wrote:
Mon Feb 05, 2018 2:28 pm
caklim00 wrote:
Fri Feb 02, 2018 9:56 pm
I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF iShares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.
I, too, like the iShares Edge MSCI Multifactor suite of funds and thought the International Small Cap ETF (ISCF) might not survive due to low AUM, trading volume, etc... As of today, it still only has $33 million, but I am fairly confident it will survive. For one, I think it will slowly keep gathering assets and supposedly once an ETF crosses the $30 mil hurdle, it is profitable. But secondly, iShares/Blackrock is coming out with a competitor or complement to the Morningstar Style Box that revolves around factors and is called the "Factor Box". Because of this, I don't see them cutting low AUM factor funds because they are perfect advertisements for the "Factor Box."

Even if you don't read the article, I would recommend scrolling to the diagram.
https://www.bloomberg.com/news/articles ... =etfcenter

Lastly, in early May 2018, we will have three-year data on the Edge Multifactor ETFs, so that will provide some good comparisons. So far, they have done well in the bull market and the recent loses of the past couple of days.
I suppose I might consider ISCF for my IRA, but it just reminds me too much of IEIS (which is the only fund I've ever owned that closed on me). iShares actually just closed a bunch of their Edge ETFs: https://www.ishares.com/us/products/clo ... ds/updates

I would really hate to have a big gain and then they close the fund on me. With IEIS I was actually sitting on a very small loss and only found out about it when I saw my cash position had expectantly increased.

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Re: Best International Small Cap Option

Post by jhfenton » Wed Aug 22, 2018 10:55 am

caklim00 wrote:
Wed Aug 22, 2018 10:35 am
I suppose I might consider ISCF for my IRA, but it just reminds me too much of IEIS (which is the only fund I've ever owned that closed on me). iShares actually just closed a bunch of their Edge ETFs: https://www.ishares.com/us/products/clo ... ds/updates

I would really hate to have a big gain and then they close the fund on me. With IEIS I was actually sitting on a very small loss and only found out about it when I saw my cash position had expectantly increased.
I wouldn't risk ISCF in taxable. I don't think it's at high closure risk. It is up to $42.90 MM in assets. But the risk is non-zero.

I've kept an eye on ISCF, but I haven't seen enough (any?) evidence of a value tilt to find it compelling compared to vanilla VSS (my largest holding). I do own EMGF, the emerging markets multifactor fund, in my HSA.

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Re: Best International Small Cap Option

Post by caklim00 » Wed Aug 22, 2018 11:38 am

jhfenton wrote:
Wed Aug 22, 2018 10:55 am
caklim00 wrote:
Wed Aug 22, 2018 10:35 am
I suppose I might consider ISCF for my IRA, but it just reminds me too much of IEIS (which is the only fund I've ever owned that closed on me). iShares actually just closed a bunch of their Edge ETFs: https://www.ishares.com/us/products/clo ... ds/updates

I would really hate to have a big gain and then they close the fund on me. With IEIS I was actually sitting on a very small loss and only found out about it when I saw my cash position had expectantly increased.
I wouldn't risk ISCF in taxable. I don't think it's at high closure risk. It is up to $42.90 MM in assets. But the risk is non-zero.

I've kept an eye on ISCF, but I haven't seen enough (any?) evidence of a value tilt to find it compelling compared to vanilla VSS (my largest holding). I do own EMGF, the emerging markets multifactor fund, in my HSA.
I just own FNDC and VSS in taxable. But, given how intl has lagged domestic its time to start adding to Intl so was exploring all of the various options.

Just curious, why EMGF over DGS? I used to just own DLS/DGS, but ended up moving DLS to FNDC a few years back (have some VSS as a result of a tax loss harvest).

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Re: Best International Small Cap Option

Post by HEDGEFUNDIE » Wed Aug 22, 2018 12:09 pm

caklim00 wrote:
Wed Aug 22, 2018 10:35 am
sunnywindy wrote:
Mon Feb 05, 2018 2:28 pm
caklim00 wrote:
Fri Feb 02, 2018 9:56 pm
I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF iShares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.
I, too, like the iShares Edge MSCI Multifactor suite of funds and thought the International Small Cap ETF (ISCF) might not survive due to low AUM, trading volume, etc... As of today, it still only has $33 million, but I am fairly confident it will survive. For one, I think it will slowly keep gathering assets and supposedly once an ETF crosses the $30 mil hurdle, it is profitable. But secondly, iShares/Blackrock is coming out with a competitor or complement to the Morningstar Style Box that revolves around factors and is called the "Factor Box". Because of this, I don't see them cutting low AUM factor funds because they are perfect advertisements for the "Factor Box."

Even if you don't read the article, I would recommend scrolling to the diagram.
https://www.bloomberg.com/news/articles ... =etfcenter

Lastly, in early May 2018, we will have three-year data on the Edge Multifactor ETFs, so that will provide some good comparisons. So far, they have done well in the bull market and the recent loses of the past couple of days.
I suppose I might consider ISCF for my IRA, but it just reminds me too much of IEIS (which is the only fund I've ever owned that closed on me). iShares actually just closed a bunch of their Edge ETFs: https://www.ishares.com/us/products/clo ... ds/updates

I would really hate to have a big gain and then they close the fund on me. With IEIS I was actually sitting on a very small loss and only found out about it when I saw my cash position had expectantly increased.
Using the AQR factors on Portfolio Visualizer, it is true that ISCF has no significant tilt to any factor other than size, while VSS is tilted to size, value, and quality.

Other the hand, over the past three years of ISCF’s existence, it has handily beaten VSS in both absolute and risk-adjusted returns. Go figure.

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Re: Best International Small Cap Option

Post by jhfenton » Wed Aug 22, 2018 12:51 pm

HEDGEFUNDIE wrote:
Wed Aug 22, 2018 12:09 pm
Using the AQR factors on Portfolio Visualizer, it is true that ISCF has no significant tilt to any factor other than size, while VSS is tilted to size, value, and quality.

Other the hand, over the past three years of ISCF’s existence, it has handily beaten VSS in both absolute and risk-adjusted returns. Go figure.
When comparing VSS to other small cap funds you have to factor in its 20% emerging market stake. Literally no other index fund or ETF in the investment universe combines developed and emerging markets small caps. For the most part, that stake has hurt VSS in head-to-head comparisons. To a lesser extent, I think VSS's stake in Canada has hurt it too, compared to funds that exclude it or underweight it.
caklim00 wrote:
Wed Aug 22, 2018 11:38 am
I just own FNDC and VSS in taxable. But, given how intl has lagged domestic its time to start adding to Intl so was exploring all of the various options.

Just curious, why EMGF over DGS? I used to just own DLS/DGS, but ended up moving DLS to FNDC a few years back (have some VSS as a result of a tax loss harvest).
A few reasons:

1. Bias against dividend strategies as a proxy for value.
2. Higher expense of DGS (although somewhat offset by its being a small cap EM fund).
3. Preferred explicit multifactor portfolio strategy to dividend strategy.
4. EMGF's lower-PE and higher-growth portfolio.

What I really want are low-cost international versions of Vanguard's new factor funds, particularly multifactor and value. They are as pure an expression of long-only factor investing as a retail investor can get at the moment.

Until I see something more compelling I'm sticking to low-cost VSS and VEMAX/VWO at Vanguard. Since TD Ameritrade doesn't have commission-free Vanguard funds available for my HSA (through Lively), I did take the plunge on EMGF when I rolled my HSA over rather than stick with their perfectly-good vanilla EM fund (SPEM at 11 bp).

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Re: Best International Small Cap Option

Post by caklim00 » Wed Aug 22, 2018 1:20 pm

HEDGEFUNDIE wrote:
Wed Aug 22, 2018 12:09 pm
caklim00 wrote:
Wed Aug 22, 2018 10:35 am
sunnywindy wrote:
Mon Feb 05, 2018 2:28 pm
caklim00 wrote:
Fri Feb 02, 2018 9:56 pm
I hold FNDC/SFILX (Dev) and DGS (Emerging) in tax-deffer-ed. I originally held DLS but I like SFILX/FNDC better. I wish there was something similar in EM space. I got excited when I saw the name for ISCF iShares Edge Multfctr ISC, but then saw the Xray and the lack of assets and trading volume. Looks like it may end with the same fate as IEIS which I actually liked before the closed down the fund.

Taxable I tend to not hold ISC. Its more difficult to tax loss harvest. I think I have some VSS which currently have unrealized gains.
I, too, like the iShares Edge MSCI Multifactor suite of funds and thought the International Small Cap ETF (ISCF) might not survive due to low AUM, trading volume, etc... As of today, it still only has $33 million, but I am fairly confident it will survive. For one, I think it will slowly keep gathering assets and supposedly once an ETF crosses the $30 mil hurdle, it is profitable. But secondly, iShares/Blackrock is coming out with a competitor or complement to the Morningstar Style Box that revolves around factors and is called the "Factor Box". Because of this, I don't see them cutting low AUM factor funds because they are perfect advertisements for the "Factor Box."

Even if you don't read the article, I would recommend scrolling to the diagram.
https://www.bloomberg.com/news/articles ... =etfcenter

Lastly, in early May 2018, we will have three-year data on the Edge Multifactor ETFs, so that will provide some good comparisons. So far, they have done well in the bull market and the recent loses of the past couple of days.
I suppose I might consider ISCF for my IRA, but it just reminds me too much of IEIS (which is the only fund I've ever owned that closed on me). iShares actually just closed a bunch of their Edge ETFs: https://www.ishares.com/us/products/clo ... ds/updates

I would really hate to have a big gain and then they close the fund on me. With IEIS I was actually sitting on a very small loss and only found out about it when I saw my cash position had expectantly increased.
Using the AQR factors on Portfolio Visualizer, it is true that ISCF has no significant tilt to any factor other than size, while VSS is tilted to size, value, and quality.

Other the hand, over the past three years of ISCF’s existence, it has handily beaten VSS in both absolute and risk-adjusted returns. Go figure.
Volume is pretty pathetic on ISCF (its actually much better than PDN).

See the following spreads right now 2:20pm:
PDN: .89%
ISCF: .42%
EMGF: .23%
FNDC: .03%
VSS: .03%

I originally though PDN would be a good harvest partner for FNDC but it looks like an awful choice.

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Re: Best International Small Cap Option

Post by international001 » Thu Aug 23, 2018 11:04 am

jhfenton wrote:
Wed Aug 22, 2018 12:51 pm

When comparing VSS to other small cap funds you have to factor in its 20% emerging market stake. Literally no other index fund or ETF in the investment universe combines developed and emerging markets small caps. For the most part, that stake has hurt VSS in head-to-head comparisons. To a lesser extent, I think VSS's stake in Canada has hurt it too, compared to funds that exclude it or underweight it.
If you have SFILX/DGS, it still beats VSS

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Re: Best International Small Cap Option

Post by jhfenton » Thu Aug 23, 2018 11:55 am

international001 wrote:
Thu Aug 23, 2018 11:04 am
If you hadve SFILX/DGS, it still beats VSS
I fixed it for you.

VSS is a rational, well-constructed plain vanilla index fund that has slightly outperformed its index. I have yet to see a fund compelling enough for me to pay up to switch.

(I've also discussed a few times how I add about 2% per year arbitraging between VSS and VFSVX. I couldn't do that with any other fund.)

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Re: Best International Small Cap Option

Post by MotoTrojan » Thu Aug 23, 2018 11:59 am

billy269 wrote:
Thu Mar 01, 2018 7:55 pm
This has been the most difficult part to figure out in my portfolio. I plan to leave $ in these funds for at least 30 years. I'm looking to tilt small/medium (about 50% large, 50% small/medium) and value. Currently at my Roth IRA Edge account (no commissions, so I can buy anything) for my 34% international allocation I am thinking:

13 VEA
8 VWO
9 VSS
2 EEMS
2 FNDC

With this I have about a 50/50 split in Large vs Mid/Small (in both developed and EM) and a little value tilt. I also have about a quarter of my international holdings in emerging markets, which is my target. Upon first glance, it seems like I have more than 25% EM, but VWO is only 83% EM and EEMS is only 63% EM.


For my Roth i401k TDA account I am thinking the following (all below are commission free at TDA):

12 SPDW
6 SPEM
2 EWX
2 DGS
2 GWX
2 DLS
8 PRIDX (I know, high fees but has been a stellar fund for last 30 years and int mid/small is one of the better performing active fund sectors)

With this I don't get much value (since PRIDX is tilted growth), but it is 50/50 Large vs Mid/Small (in both developed and EM) and around a quarter EM. I don't like the lack of liquidity of FNDC, EEMS, DLS, DGS, GWX, and EWX so I am thinking I will just buy a little of each.

Thoughts? I know people won't like how many funds this is, but it doesn't bother me to have a 8-10 fund portfolio. That is much simpler than it used to be!
This level of complexity is pretty intense. I would never hold an asset at 5% of portfolio, let alone 6 assets at 2% of my holdings. I would wager you can track this with far fewer funds. Investing is simple but not easy.

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Re: Best International Small Cap Option

Post by international001 » Thu Aug 23, 2018 12:58 pm

jhfenton wrote:
Thu Aug 23, 2018 11:55 am
international001 wrote:
Thu Aug 23, 2018 11:04 am
If you hadve SFILX/DGS, it still beats VSS
I fixed it for you.

VSS is a rational, well-constructed plain vanilla index fund that has slightly outperformed its index. I have yet to see a fund compelling enough for me to pay up to switch.

(I've also discussed a few times how I add about 2% per year arbitraging between VSS and VFSVX. I couldn't do that with any other fund.)
Sorry.. I don't get the html irony. Are you saying that VSS is likely to beat SFILX/DGS in the future?

Can you summarize this 2% arbitrage. I'm not familiar with it

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Re: Best International Small Cap Option

Post by jhfenton » Thu Aug 23, 2018 1:14 pm

international001 wrote:
Thu Aug 23, 2018 12:58 pm
Sorry.. I don't get the html irony. Are you saying that VSS is likely to beat SFILX/DGS in the future?
No. You used the present tense, implying continuing outperformance. I changed it to the past tense, because neither you nor I know the future.
international001 wrote:
Thu Aug 23, 2018 12:58 pm
Can you summarize this 2% arbitrage. I'm not familiar with it
The short version: Sell VSS on a high premium day* near the close and buy VFSVX, wait a few days, call Vanguard and convert VFSVX to VSS at NAV, repeat on the next high premium day. On average I do it about 4x per year and net ~50 bp each time. I could do it more often, but I don't want to be too blatant about it.

* Vanguard uses fair value pricing on the mutual fund, so what looks like a 1% premium live will end up being 50-60 bp.

In theory you could sell and buy in the other direction as well if a big discount shows up, but it seldom works out to be very profitable, plus you are then locked out of buying back into VFSVX for 30 days.

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Re: Best International Small Cap Option

Post by international001 » Thu Aug 23, 2018 2:10 pm

jhfenton wrote:
Thu Aug 23, 2018 1:14 pm

No. You used the present tense, implying continuing outperformance. I changed it to the past tense, because neither you nor I know the future.
Well.. of course you don't know the future.. But I'm assuming that because the difference has been there for the past decade it will tend to be there for the next. I assumed it was because of small differences of how the index is tracked. I could be wrong and that it is an exception, but I'd like to understand why.

On top of that FNDC seems to be more tax efficient. Would you use it instead of VSS in a taxable account?

international001 wrote:
Thu Aug 23, 2018 12:58 pm


The short version: Sell VSS on a high premium day* near the close and buy VFSVX, wait a few days, call Vanguard and convert VFSVX to VSS at NAV, repeat on the next high premium day. On average I do it about 4x per year and net ~50 bp each time. I could do it more often, but I don't want to be too blatant about it.
I guess I don't understand it.
If you sell on a premium day you are saying that the VFSVX price will be lower the next day? Wouldn't this be the case for any pair of equivalent funds?
Doesn't this hit the wash sale rule? (or you are talking only tax-sheltered)

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Re: Best International Small Cap Option

Post by jhfenton » Thu Aug 23, 2018 3:05 pm

international001 wrote:
Thu Aug 23, 2018 2:10 pm
Well.. of course you don't know the future.. But I'm assuming that because the difference has been there for the past decade it will tend to be there for the next. I assumed it was because of small differences of how the index is tracked. I could be wrong and that it is an exception, but I'd like to understand why.
That was my only real point. VSS has outperformed its broad, vanilla index. Any outperformance by another small cap fund is due to differences in the coverage of the fund.
international001 wrote:
Thu Aug 23, 2018 2:10 pm
On top of that FNDC seems to be more tax efficient. Would you use it instead of VSS in a taxable account?
I don't own VSS in taxable. Our taxable investments are 1-2% of our portfolio, and there are more tax-efficient choices for taxable than VSS.
international001 wrote:
Thu Aug 23, 2018 2:10 pm
jhfenton wrote:
Thu Aug 23, 2018 1:14 pm
The short version: Sell VSS on a high premium day* near the close and buy VFSVX, wait a few days, call Vanguard and convert VFSVX to VSS at NAV, repeat on the next high premium day. On average I do it about 4x per year and net ~50 bp each time. I could do it more often, but I don't want to be too blatant about it.
I guess I don't understand it.
If you sell on a premium day you are saying that the VFSVX price will be lower the next day? Wouldn't this be the case for any pair of equivalent funds?
Doesn't this hit the wash sale rule? (or you are talking only tax-sheltered)
I only do it in my Roth IRA and my wife's traditional IRA, where we hold our VSS.

Background:
1. VSS and VFSVX are share classes of the same fund, not merely equivalent funds.
2. VFSVX is convertible to VSS at NAV with a phone call to Vanguard.
3. VSS generally trades at a modest premium to NAV. On some days, it is more than modest.

How it works:
Yesterday the closing price on VSS was $113.86. According to Vanguard, the NAV at close was $113.45. That is a premium of 30 bp, quite average for VSS, and not a day I would pick for my arbitrage.

You can capture that premium by selling VSS at $113.86, buying VFSVX at NAV ($43.27), and then--some day later--converting VFSVX to VSS at NAV. It doesn't matter what day you make the conversion of VFSVX to VSS because they will have the same ratio every day (~2.622-to-1) because they are the same fund. If the NAV of one goes up, the NAV of the other goes up the same amount, and vice versa.

Let's say I had 1,000 shares of VSS and sold it yesterday at $113.80. $113,800.00 would have purchased 2,629.998 shares of VFSVX at $43.27. Assuming I could call immediately and convert my VFSVX to VSS, they would convert my VFSVX to 1,003.085 shares of VSS. (It might vary by a few tenths or hundredths depending on how the NAV rounding works out on any given day.)

Result: 3.085 bonus shares of VSS.

Negatives:
1. You can roughly track premium by using the Intraday Indicative Value ticker for VSS, but it is not perfect. It will overstate the ultimate premium because Vanguard will adjust the fair market value up to account for markets that were closed when VSS traded higher. But you learn from watching how much they will adjust. If the IV ticker shows a 1% premium, it will probably end up at 50-65 bp.
2. I have a fair amount of VSS, and it can be hard to sell ~2,000 shares at one time near the close (in two accounts) and leave enough time to place two mutual fund orders. So sometimes I only get one account done.
3. It requires a phone call to Vanguard that takes about 10 minutes. I have to be transferred to the right person. I have to listen to the same disclosures each time.

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Re: Best International Small Cap Option

Post by international001 » Thu Aug 23, 2018 6:37 pm

Ok... then I guess I prefer this other index of FNDC (RAFI™ Developed ex US Small). Better performance, more risk, better return-adjusted-risk

About your arbitrage, I understand it's because the price is higher than the NAV. Why do you specifically do it with VSS (and not other Vanguard ETFs)? Because of the high spread?

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Re: Best International Small Cap Option

Post by jhfenton » Thu Aug 23, 2018 9:25 pm

international001 wrote:
Thu Aug 23, 2018 6:37 pm
About your arbitrage, I understand it's because the price is higher than the NAV. Why do you specifically do it with VSS (and not other Vanguard ETFs)? Because of the high spread?
Yes. VSS has the highest and most prevalent premium among any of Vanguard's ETFs. The domestic ETFs basically never have a meaningful discount or premium. Emerging Markets (VWO/VEMAX) sometimes has noticeable premiums and discounts, but they are less consistent. Developed markets (VEA/VTMGX) even less so.

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Re: Best International Small Cap Option

Post by caklim00 » Thu Aug 23, 2018 10:19 pm

jhfenton wrote:
Thu Aug 23, 2018 9:25 pm
international001 wrote:
Thu Aug 23, 2018 6:37 pm
About your arbitrage, I understand it's because the price is higher than the NAV. Why do you specifically do it with VSS (and not other Vanguard ETFs)? Because of the high spread?
Yes. VSS has the highest and most prevalent premium among any of Vanguard's ETFs. The domestic ETFs basically never have a meaningful discount or premium. Emerging Markets (VWO/VEMAX) sometimes has noticeable premiums and discounts, but they are less consistent. Developed markets (VEA/VTMGX) even less so.
Where do you track the NAV?

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Re: Best International Small Cap Option

Post by jhfenton » Fri Aug 24, 2018 8:01 am

caklim00 wrote:
Thu Aug 23, 2018 10:19 pm
jhfenton wrote:
Thu Aug 23, 2018 9:25 pm
international001 wrote:
Thu Aug 23, 2018 6:37 pm
About your arbitrage, I understand it's because the price is higher than the NAV. Why do you specifically do it with VSS (and not other Vanguard ETFs)? Because of the high spread?
Yes. VSS has the highest and most prevalent premium among any of Vanguard's ETFs. The domestic ETFs basically never have a meaningful discount or premium. Emerging Markets (VWO/VEMAX) sometimes has noticeable premiums and discounts, but they are less consistent. Developed markets (VEA/VTMGX) even less so.
Where do you track the NAV?
It has limitations, but I use the VSS.IV ticker. I also do a reality check with the premium/discount reported by Vanguard on the previous day's close, the underlying movements in global markets today, and the relative movement in U.S. markets that might drag VSS higher after Europe and Asia have closed. That is where VSS's median 25 bp premium can turn into a 50 bp premium. It's not hard to spot the days when there's a good chance of a large premium. The IV ticker generally overstates the premium that you will see when Vanguard reports at 6 PM.

The premiums haven't been as high on average this year as they were the previous two years because of the relative underperformance of ex-US markets, but the median premium has still been about 25 bp.

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Have to say been looking for Int small caps

Post by Socrates28 » Fri Aug 24, 2018 7:53 pm

and I like iShares Edge MSCI Multifactor ETF. It has out performed FNDC and SCHC


ISCF 1yr 14.65 3 yr 10.64 exp .4

FNDC 1 yr 8.57 3 yr 9.62 exp .39

SCHC 1 yr 10.25 3 yr 8.64 exp .12

I have 6% of my international with VINEX

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Re: Have to say been looking for Int small caps

Post by caklim00 » Fri Aug 24, 2018 8:42 pm

Socrates28 wrote:
Fri Aug 24, 2018 7:53 pm
and I like iShares Edge MSCI Multifactor ETF. It has out performed FNDC and SCHC


ISCF 1yr 14.65 3 yr 10.64 exp .4

FNDC 1 yr 8.57 3 yr 9.62 exp .39

SCHC 1 yr 10.25 3 yr 8.64 exp .12

I have 6% of my international with VINEX
Looks interesting, but no way I'm touching a fund thats under 100M in assets again. I learned my lesson with IEIS. I'll stay with FNDC for the time being.

Also, I've always wondered why these fund companies come out with a factor/fundamental small developed but not small emerging. I'm staying with DGS for em small as I don't see any other compelling options (yet).

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