Vanguard Emerging Markets Stock Index Fund completes transition to new index

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TIAX
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Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by TIAX » Sun Sep 18, 2016 6:06 pm

The transition to the new index, including small caps and China-A shares, is complete.

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arcticpineapplecorp.
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by arcticpineapplecorp. » Sun Sep 18, 2016 9:11 pm

Thanks for the info! Does anyone know if this has any affect on the Total International Stock Market Index Fund as well since there's a percentage of that fund that is considered emerging market (18.9% to be exact according to https://personal.vanguard.com/us/funds/ ... IntExt=INT)?
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TIAX
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by TIAX » Sun Sep 18, 2016 10:09 pm

arcticpineapplecorp. wrote:Thanks for the info! Does anyone know if this has any affect on the Total International Stock Market Index Fund as well since there's a percentage of that fund that is considered emerging market (18.9% to be exact according to https://personal.vanguard.com/us/funds/ ... IntExt=INT)?


No, Total International Stock Market Index Fund's index hasn't changed. I think someone mentioned that China was limiting the amount of China-A shares so Vanguard couldn't transition its other funds.

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whodidntante
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by whodidntante » Sun Sep 18, 2016 11:35 pm

MSCI has chosen not to index China A shares. They gave it a fresh look, and decided to pass. Are their concerns about China A shares unfounded?

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by saltycaper » Mon Sep 19, 2016 12:57 am

Measuring my life in index-transition completions of my investment funds. My how fast the past year went by.

I wonder what the future availability of A shares will be and how it will affect fund composition down the road.
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PeteyDink
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by PeteyDink » Mon Sep 19, 2016 3:24 am

Chinese government control of the market might suppress free enterprise, increasing tail risk and the possibility of lower returns, but in the long run (decades) I'd rather be exposed to the risk. The emergence of this developing nation is too much of an opportunity to ignore. If I was in retirement I probably wouldn't be as excited to switch funds if I didn't want the extra risk.

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Nearing_Destination
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by Nearing_Destination » Tue Sep 20, 2016 2:44 am

As a recent retiree, I've dialed DOWN my EM per my IPS to reduce volatility; changing an index fund to a more volatile index says to me -- no thanks

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by Engineer250 » Tue Sep 20, 2016 4:21 pm

I've read their release (and they emailed me the notification as well since I'm invested in this) but I admit I still don't entirely understand what it means. Does China make up a greater % of their EM index fund now? Are there mid and small cap that there weren't before?
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by jhfenton » Tue Sep 20, 2016 6:07 pm

Engineer250 wrote:I've read their release (and they emailed me the notification as well since I'm invested in this) but I admit I still don't entirely understand what it means. Does China make up a greater % of their EM index fund now? Are there mid and small cap that there weren't before?

Yes. And yes. They made two changes.

1. As with the Developed Markets Index Fund and ETF, they switched to an all-cap index rather than the old large-cap-only index.

2. They added a 5% stake in China A shares--mainland shares traded in Shanghai with limited accessibility by foreign investors--that were not in the index before. As China slowly opens up that equity market, other funds will probably add A shares, and their representation in Vanguard EM may increase. But for now, it's an extra 5% to go with the existing China H shares (mainland companies traded in Hong Kong).

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by gkaplan » Tue Sep 20, 2016 8:59 pm

Engineer250 wrote:I've read their release (and they emailed me the notification as well since I'm invested in this) but I admit I still don't entirely understand what it means. Does China make up a greater % of their EM index fund now? Are there mid and small cap that there weren't before?



Hmm, I invest in this fund (Admiral Shares), and I don't believe I received that email notification.
Gordon

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by abuss368 » Tue Sep 20, 2016 10:01 pm

Thank you for the update. I have never invested in this fund and opted for the market weight with the Vanguard Total International Stock Index Fund.
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by triceratop » Tue Sep 20, 2016 10:14 pm

abuss368 wrote:Thank you for the update. I have never invested in this fund and opted for the market weight with the Vanguard Total International Stock Index Fund.


But of course if the Emerging Markets Stock Index Fund is only now including Chinese A shares, your choice to invest only in Total International Stock Index Fund is a tilt away from market weights...

If my understanding of this transition is correct, the closest you can get to market weights with Vanguard funds is to use a combination of Developed Markets and Emerging Markets funds.
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jalbert
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by jalbert » Tue Sep 20, 2016 11:13 pm

It is interesting that as of Aug. 31, 2016, per the
Vanguard website, the fund holds 4093 stocks, but the index is comprised of only 3560 stocks.

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triceratop
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by triceratop » Tue Sep 20, 2016 11:23 pm

jalbert wrote:It is interesting that as of Aug. 31, 2016, per the
Vanguard website, the fund holds 4093 stocks, but the index is comprised of only 3560 stocks.


The listed index is the FTSE Emerging Markets All Cap China A Inclusion Index not the transition index which was still being tracked as of 08/31. This makes sense to me, and my explanation is that the "Equity characteristics as of 08/31" table for the index switched to the new index even as the underlying fund data is as of the end of last month.
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by saltycaper » Wed Sep 21, 2016 7:13 am

triceratop wrote:
But of course if the Emerging Markets Stock Index Fund is only now including Chinese A shares, your choice to invest only in Total International Stock Index Fund is a tilt away from market weights...

If my understanding of this transition is correct, the closest you can get to market weights with Vanguard funds is to use a combination of Developed Markets and Emerging Markets funds.


I myself think you're right--it's "closest" to use VEA and VWO if using Vanguard funds, but it still doesn't get you to market weight (yet). It also raises the question, what is the market weight anyway? Or more specifically, if one says "free float" market weight, what is "free float"? There might be more than one answer to that question. While I own VWO, if someone said they didn't think China A shares should be considered free floating, I'm not sure I'd feel strongly enough about it to try to convince them otherwise.
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4th and Inches
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by 4th and Inches » Wed Sep 21, 2016 9:17 am

I really like this move. More small caps, more extension into China, the number of companies owned has gone up significantly, no increase in the expense ratio.

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siamond
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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by siamond » Wed Sep 21, 2016 11:49 am

4th and Inches wrote:I really like this move. More small caps, more extension into China, the number of companies owned has gone up significantly, no increase in the expense ratio.

Yup, me too. On the long run, this should pan out nicely, although the road will be rocky for sure... Let's sit tight and wait...

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by jhfenton » Wed Sep 21, 2016 12:04 pm

I'm 100% behind the addition of small caps. And I'm fine with the small addition of China A shares.

But long run, I don't want an EM fund with a 50% China stake. At that point, I'd prefer to split China into a separate fund for rebalancing purposes, much like the Pacific ex-Japan funds that used to be popular when Japan was a market-cap behemoth.

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by am » Thu Sep 22, 2016 9:05 am

Is this one of the only low,priced index funds to include China A shares or small cap emrging? Do any of the Fideltiy funds offer this? How about total international from Vanguard?

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Re: Vanguard Emerging Markets Stock Index Fund completes transition to new index

Post by frisco » Thu Sep 22, 2016 11:07 am

am wrote:Is this one of the only low,priced index funds to include China A shares or small cap emrging? Do any of the Fideltiy funds offer this? How about total international from Vanguard?


Fidelity’s emerging market index mutual fund (FPEMX/FPMAX) tracks the MSCI Emerging Markets Index, which excludes small caps. iShares’ emerging market index ETF (EEM) also tracks this index.

iShares’ newer emerging market index ETF (IEMG) tracks the MSCI Emerging Markets Investable Markets Index, which includes small caps.

MSCI does not include China A shares in either index. MSCI has considered inclusion, but in June 2015 and again in June 2016 announced further developments are necessary.

Schwab’s emerging market index ETF (SCHE) tracks the FTSE Emerging Index, which I’m less familiar with. The FTSE website won’t load for me at the moment, but the Bogleheads Wiki indicates this index excludes small caps and China A shares.

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