Vanguard Global ex-US Real Estate Fund - Fees

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abuss368
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Vanguard Global ex-US Real Estate Fund - Fees

Post by abuss368 » Sun Mar 11, 2018 12:58 pm

Bogleheads -

I am surprised that the Vanguard Global ex-U.S. Real Estate Fund still has a 0.25% purchase and 0.25% redemption fee. The inception date for the fund was 11/01/2010 - over 7 years ago!

Does anyone know what factors are reviewed or how Vanguard decides to remove purchase and redemption fees, if ever?

Best.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

EyeDee
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Re: Vanguard Global ex-US Real Estate Fund - Fees

Post by EyeDee » Sun Mar 11, 2018 2:02 pm

.
Abuss368,

I do not know what officially Vanguard uses for criteria, but in the past they have dropped purchase and redemption fees when the funds got larger. My guess is Vanguard drops the fees when the funds get large enough that the purchases and redemptions are close to balancing out so there is minimal need to actually buy and sell the underlying stocks very often, so the actual transaction costs of buying and selling the underlying stocks becomes insignificant relative to the size of the fund. Or until the trading in the underlying stocks becomes so liquid that the buying and selling of the underlying stocks becomes active enough to reduce the costs.

However, in the case of Vanguard Global ex-U.S. Real Estate Fund it has had an ETF share class (VNQI) since the fund's inception so the lion share of its assets ($6.2 Billion out of $7.0 Billion as of 01/31/2018) are in the ETF version. So unlike some other Vanguard funds that had fees that went away before they had ETF share classes, it will likely take much longer for Vanguard Global ex-U.S. Real Estate Fund non-ETF share classes to lose their purchase and redemption fees. Ironically having an ETF share class from inception has probably greatly reduced the number of people buying the non-ETF share classes. Many on the board have mentioned only having one or two ETFs to avoid purchase or redemption fees, thus increasing the probability that the non-ETF shares will keep fees longer. Also, $7.0 Billion total assets might not be sufficient to reduce the purchase and redemption costs even if all the shares were non-ETF.

abuss368 wrote:
Sun Mar 11, 2018 12:58 pm
Bogleheads -

I am surprised that the Vanguard Global ex-U.S. Real Estate Fund still has a 0.25% purchase and 0.25% redemption fee. The inception date for the fund was 11/01/2010 - over 7 years ago!

Does anyone know what factors are reviewed or how Vanguard decides to remove purchase and redemption fees, if ever?

Best.
Randy

92irish
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Re: Vanguard Global ex-US Real Estate Fund - Fees

Post by 92irish » Mon Mar 12, 2018 11:39 am

Vanguard may also believe that this asset close is prone to hot money coming in and out, coupled with more difficult securities to buy/sell (foreign securities on foreign markets). They might keep this fee indefinitely.

I've owned the admiral class shares for several years and the purchase/redemption fee does not bother me as I am not trading. They just reduced the expense ratio a touch and is now only .14% - that is super cheap. Another large fund in this space (the SPDR ETF - RWX, Global Real Estate Shares) charges .59% expense ratio! So, even with the purchase/redemption fee the fund is a good deal if you are holding as a long-term part of your portfolio. A purchase fee of .25% is a one-time deal; expense ratios are forever.

mikep
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Re: Vanguard Global ex-US Real Estate Fund - Fees

Post by mikep » Mon Mar 12, 2018 11:54 am

Any reason to not use the ETF version instead?

With Vanguard, the fees are paid back into the fund, so you benefit from everyone else paying those fees if you are a long term shareholder. This is probably a good thing in the long run, as the fund is not hurt from short term churning.

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triceratop
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Re: Vanguard Global ex-US Real Estate Fund - Fees

Post by triceratop » Mon Mar 12, 2018 12:04 pm

mikep wrote:
Mon Mar 12, 2018 11:54 am
Any reason to not use the ETF version instead?

With Vanguard, the fees are paid back into the fund, so you benefit from everyone else paying those fees if you are a long term shareholder. This is probably a good thing in the long run, as the fund is not hurt from short term churning.
The ETF appears to be a reasonably efficient way to access the product. The average spread is 0.07%, but watch out for the premium to NAV. However there is sometimes a discount.

As discussed here the secondary ETF market may liquid even while transacting in the underlying is expensive.

One could view this as a convenience of ETFs relative to mutual funds, or depending on your perspective, maybe instead a higher cost for the convenience of investing (0.25% less money) with a mutual fund.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

jrbdmb
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Re: Vanguard Global ex-US Real Estate Fund - Fees

Post by jrbdmb » Tue Apr 23, 2019 5:22 pm

abuss368 wrote:
Sun Mar 11, 2018 12:58 pm
Bogleheads -

I am surprised that the Vanguard Global ex-U.S. Real Estate Fund still has a 0.25% purchase and 0.25% redemption fee. The inception date for the fund was 11/01/2010 - over 7 years ago!

Does anyone know what factors are reviewed or how Vanguard decides to remove purchase and redemption fees, if ever?

Best.
Just to note, as of March 2019 Vanguard Global ex-U.S. Real Estate Index has $6.6 billion in total assets, but only $531 million of that is in the mutual fund; the other $5.9 billion is in ETF shares. Of the funds that charge purchase fees, Vanguard Intermediate-Term Corporate Bond Index has the largest amount of mutual fund shares (VICSX), $1.1 billion.

So perhaps (total guess here) the purchase and redemption fees may go away once total mutual fund share class assets climb above $1 billion.

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