Vanguard's Hidden Factor ETFs?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
cnh
Posts: 22
Joined: Mon Dec 09, 2013 7:27 pm

Vanguard's Hidden Factor ETFs?

Post by cnh » Mon Nov 26, 2018 7:19 pm

Does anyone know why Vanguard doesn't include its factor and multifactor ETFs in its provided "list of all Vanguard ETFs"?

https://investor.vanguard.com/etf/list# ... nd-returns

Are they ashamed of offering them? Do they believe one should only invest in them after consulting one of their advisors? Is it just a manifestation of a poorly managed web site? Or am I missing something? I'm merely curious.

User avatar
whodidntante
Posts: 4313
Joined: Thu Jan 21, 2016 11:11 pm

Re: Vanguard's Hidden Factor ETFs?

Post by whodidntante » Mon Nov 26, 2018 7:23 pm

Oh! A guessing game! My favorite. :D

Vanguard has to keep advisors and institutional investors happy. When they say "jump!" Vanguard asks "how high?"

That doesn't mean they want to market those funds, or that they think they are appropriate for the unwashed masses though.

AlohaJoe
Posts: 3930
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Vanguard's Hidden Factor ETFs?

Post by AlohaJoe » Mon Nov 26, 2018 7:24 pm

What did Vanguard say when you emailed them or called them and asked?

Asking Vanguard why Vanguard did something seems like a more direct, effective approach than asking people who aren't Vanguard.

User avatar
nisiprius
Advisory Board
Posts: 37072
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard's Hidden Factor ETFs?

Post by nisiprius » Mon Nov 26, 2018 7:38 pm

One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

For example, here:

Image

This isn't hugely different from the situation with Dimensional funds and AQR funds, which mostly are intended to be sold through advisors, and have huge minimum purchase requirements... even though people in this forum find and publish ways to get around that.

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
Image

In short, Vanguard supports advisors who give advice different from Vanguard's advice.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

HEDGEFUNDIE
Posts: 1229
Joined: Sun Oct 22, 2017 2:06 pm

Re: Vanguard's Hidden Factor ETFs?

Post by HEDGEFUNDIE » Mon Nov 26, 2018 7:45 pm

nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

For example, here:

Image

This isn't hugely different from the situation with Dimensional funds and AQR funds, which mostly are intended to be sold through advisors, and have huge minimum purchase requirements... even though people in this forum find and publish ways to get around that.

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
In short, Vanguard supports advisors who give advice different from Vanguard's advice.

Image
I don’t buy it. Vanguard has offered retail investors Large Value and Growth funds since the beginning. Jack Bogle himself has said that he sees Large Growth as suitable for accumulators and Large Value as suitablefor retirees.

Give the smart beta ETFs a few years, I suspect you’ll see them “graduate” to the front page once a solid track record has been established.

User avatar
vineviz
Posts: 2322
Joined: Tue May 15, 2018 1:55 pm

Re: Vanguard's Hidden Factor ETFs?

Post by vineviz » Mon Nov 26, 2018 7:46 pm

nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

For example, here:

Image

This isn't hugely different from the situation with Dimensional funds and AQR funds, which mostly are intended to be sold through advisors, and have huge minimum purchase requirements... even though people in this forum find and publish ways to get around that.

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
Image

In short, Vanguard supports advisors who give advice different from Vanguard's advice.
I think there are 15 or 20 Vanguard ETFs that are not listed on the retail website. I suspect that the cost of explaining them to the typical retail customer exceeds the income they’d expect.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

stan1
Posts: 6081
Joined: Mon Oct 08, 2007 4:35 pm

Re: Vanguard's Hidden Factor ETFs?

Post by stan1 » Mon Nov 26, 2018 7:51 pm

vineviz wrote:
Mon Nov 26, 2018 7:46 pm

I think there are 15 or 20 Vanguard ETFs that are not listed on the retail website. I suspect that the cost of explaining them to the typical retail customer exceeds the income they’d expect.
That was my thought also. Help keep advisors in Vanguard only portfolios but try to avoid the customer support costs that would come with explaining factor investing to retail investors.

columbia
Posts: 1112
Joined: Tue Aug 27, 2013 5:30 am

Re: Vanguard's Hidden Factor ETFs?

Post by columbia » Mon Nov 26, 2018 7:52 pm

I was unaware that they offer ETFs for each of the S&P sectors.

Who buys such a thing?

cnh
Posts: 22
Joined: Mon Dec 09, 2013 7:27 pm

Re: Vanguard's Hidden Factor ETFs?

Post by cnh » Mon Nov 26, 2018 8:58 pm

nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

...

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
...

In short, Vanguard supports advisors who give advice different from Vanguard's advice.
Thanks, nisiprius. I had a similar take, and I suspect you're assessment is on the mark. Still, notwithstanding the disclaimer, Vanguard does offer both growth and value options to retail investors. I'm left wondering why other factors and multifactor seem like a rubicon they don't want to cross.

gtwhitegold
Posts: 266
Joined: Fri Sep 21, 2012 1:55 pm

Re: Vanguard's Hidden Factor ETFs?

Post by gtwhitegold » Mon Nov 26, 2018 9:33 pm

This is just pure speculation on my part, but I think that the initial demand signal was from registered advertisers and other institutional investors. That or Vanguard pays a lot of attention to this forum.
cnh wrote:
Mon Nov 26, 2018 8:58 pm
nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

...

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
...

In short, Vanguard supports advisors who give advice different from Vanguard's advice.
Thanks, nisiprius. I had a similar take, and I suspect you're assessment is on the mark. Still, notwithstanding the disclaimer, Vanguard does offer both growth and value options to retail investors. I'm left wondering why other factors and multifactor seem like a rubicon they don't want to cross.

NoHeat
Posts: 224
Joined: Sun Sep 18, 2016 10:13 am

Re: Vanguard's Hidden Factor ETFs?

Post by NoHeat » Mon Nov 26, 2018 9:47 pm

columbia wrote:
Mon Nov 26, 2018 7:52 pm
I was unaware that they offer ETFs for each of the S&P sectors.

Who buys such a thing?
Among others, those who adjust their sector weights according to their judgment of the phase of the business cycle, e.g., a heavy weight for consumer staples and health care late in the cycle, vs consumer cyclicals and financials early in the cycle. The sector ETFs allow doing this without picking individual stocks.

This is not a strategy for the average person saving for retirement.

gtwhitegold
Posts: 266
Joined: Fri Sep 21, 2012 1:55 pm

Re: Vanguard's Hidden Factor ETFs?

Post by gtwhitegold » Mon Nov 26, 2018 9:55 pm

Morningstar also has some articles about trend reversals between sectors. I couldn't find one in a brief search though.
NoHeat wrote:
Mon Nov 26, 2018 9:47 pm
columbia wrote:
Mon Nov 26, 2018 7:52 pm
I was unaware that they offer ETFs for each of the S&P sectors.

Who buys such a thing?
Among others, those who adjust their sector weights according to their judgment of the phase of the business cycle, e.g., a heavy weight for consumer staples and health care late in the cycle, vs consumer cyclicals and financials early in the cycle. The sector ETFs allow doing this without picking individual stocks.

This is not a strategy for the average person saving for retirement.

User avatar
nisiprius
Advisory Board
Posts: 37072
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard's Hidden Factor ETFs?

Post by nisiprius » Mon Nov 26, 2018 9:59 pm

columbia wrote:
Mon Nov 26, 2018 7:52 pm
I was unaware that they offer ETFs for each of the S&P sectors. Who buys such a thing?
According to The House that Bogle Built, by Lewis Braham, John C. Bogle has said:
I made a lot of mistakes. ...in a moment of weakness--I was very ill at the time--{I} started our sector funds.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
nisiprius
Advisory Board
Posts: 37072
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard's Hidden Factor ETFs?

Post by nisiprius » Tue Nov 27, 2018 8:19 am

HEDGEFUNDIE wrote:
Mon Nov 26, 2018 7:45 pm
nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen...

but remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
I don’t buy it. Vanguard has offered retail investors Large Value and Growth funds since the beginning. Jack Bogle himself has said that he sees Large Growth as suitable for accumulators and Large Value as suitablefor retirees.

Give the smart beta ETFs a few years, I suspect you’ll see them “graduate” to the front page once a solid track record has been established.
Make the factor ETFs discoverable in the Vanguard ETF list in the "investors" site? Sure. I said it was a "possibility" as my first sentence.

Make them visible by default? I doubt it. The Russell index and S&P index ETFs have been out for eight years and are still not visible by default.

Are you suggesting that Vanguard will change Portfolio Watch to encourage a factor tilt? Add factor exposures to the LifeStrategy and Target Retirement funds? Change the web page shown below to includes factor strategies? I wouldn't "buy" any such suggestions.

VBR has been out for fourteen years and hasn't made it onto the "Choose your Vanguard ETFs" page yet, and I don't expect the new factor ETFs to be any different. On this web page, Vanguard is on record as saying you get adequate "diversification" without any factor tilts.

Choose your Vanguard ETFs
Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

maxDrawdown
Posts: 13
Joined: Mon Oct 29, 2018 6:49 pm

Re: Vanguard's Hidden Factor ETFs?

Post by maxDrawdown » Tue Nov 27, 2018 10:11 pm

columbia wrote:
Mon Nov 26, 2018 7:52 pm
I was unaware that they offer ETFs for each of the S&P sectors.

Who buys such a thing?
One application would be sector-level momentum strategies. The abstracts cited there sound promising, but the usual caveats about the past and the future apply of course.

User avatar
AlexisAtEasternState
Posts: 32
Joined: Wed Apr 18, 2018 6:45 pm
Location: Earth

Re: Vanguard's Hidden Factor ETFs?

Post by AlexisAtEasternState » Wed Nov 28, 2018 12:22 am

I believe Vanguard offers different websites tailored to what different audiences are most likely to be interested in. Additionally, there is merit to the argument that investors without a deep understanding, commitment to, and behavioral tolerance for factor investing (tracking error) would most likely behave in a momentum / performance chasing manner. E.g. selling value in 1999 to buy momentum / tech / growth funds.
columbia wrote:
Mon Nov 26, 2018 7:52 pm
I was unaware that they offer ETFs for each of the S&P sectors.

Who buys such a thing?
Not to derail the thread but there are also S&P 500 ETFs which exclude one sector. http://www.proshares.com/funds/spxt.html
This could be very useful to someone who works at an energy/tech company and has many RSUs and their employer is a large component of the index or very correlated to that sector's fortunes and does not wish to hold even more energy/tech.

User avatar
nisiprius
Advisory Board
Posts: 37072
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard's Hidden Factor ETFs?

Post by nisiprius » Wed Nov 28, 2018 9:11 am

AlexisAtEasternState wrote:
Wed Nov 28, 2018 12:22 am
...Not to derail the thread but there are also S&P 500 ETFs which exclude one sector. http://www.proshares.com/funds/spxt.html
This could be very useful to someone who works at an energy/tech company and has many RSUs and their employer is a large component of the index or very correlated to that sector's fortunes and does not wish to hold even more energy/tech...
I was a software engineer, I was let go in 2008 when my employer's sales dropped 70%... and the whole time I was drawing my unemployment benefits, I don't think it ever occurred to me even to wonder how my retirement account would have looked if my Total Stock Market holding had been Total Stock ex-technology.

So, I went and looked. Of course, SPXT didn't exist in 2008-2009. But I can use PortfolioVisualizer to show me a comparison between:
a) Vanguard Total Stock, which I held; blue.
b) 120% Total Stock, -20% VITAX (Vanguard Information Technology Index Fund, red.

That should be a reasonable approximation to how I would have done if only I could have eliminated the correlation with my career by excluding the technology sector from my investments.

Source

Image

There's virtual no difference... and what difference there was was the wrong way. Excluding technology would have actually made my investment performance (very, very) slightly worse during the six months I was out of a job.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Broken Man 1999
Posts: 1578
Joined: Wed Apr 08, 2015 11:31 am

Re: Vanguard's Hidden Factor ETFs?

Post by Broken Man 1999 » Wed Nov 28, 2018 6:37 pm

Ha!

If the factor ETFs info had been prominently displayed, I'm pretty sure there would have be at least one long thread about how awful Vanguard was acting by enticing the stalwart Bogleheads to buy the dangerous investments. :D

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

User avatar
AlexisAtEasternState
Posts: 32
Joined: Wed Apr 18, 2018 6:45 pm
Location: Earth

Re: Vanguard's Hidden Factor ETFs?

Post by AlexisAtEasternState » Wed Nov 28, 2018 8:09 pm

nisiprius wrote:
Wed Nov 28, 2018 9:11 am
There's virtual no difference... and what difference there was was the wrong way. Excluding technology would have actually made my investment performance (very, very) slightly worse during the six months I was out of a job.
This simulation is overly simplistic and does not include cash flow contributions to investments which would have ceased during unemployment. Per Andrew Ang's Systematic Investing book (Asset Management: A Systematic Approach to Factor Investing), investing is all about "bad times". Changes of job loss and low stock prices tend to occur together, which is a large part of why the equity risk premium is rewarded. Every investor has different "bad times" which affect them differently than the marginal market participant. Saudi Arabia and Kuwait sovereign wealth funds should underweight oil in their investment portfolios, as they are more likely to be withdrawing from portfolios during a time of low oil prices.

columbia
Posts: 1112
Joined: Tue Aug 27, 2013 5:30 am

Re: Vanguard's Hidden Factor ETFs?

Post by columbia » Wed Nov 28, 2018 8:59 pm

If a Saudi were investing for the legacy of their great-grandchildren, they should overweight energy: they will be out of oil in another 70 years.

AlphaLess
Posts: 1061
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky

Re: Vanguard's Hidden Factor ETFs?

Post by AlphaLess » Wed Nov 28, 2018 9:06 pm

nisiprius wrote:
Mon Nov 26, 2018 7:38 pm
One possibility is simply that they haven't gotten around to it, yet, because it probably require some nontrivial changes on their "filters" screen. But another possibility is that they are only "for" advisors. They seem to be shown on the advisors' site, and only on the advisors' site: advisors.vanguard.com. There are other examples of funds found only on the advisors' site, such as the institutional fund share classes that have million-dollar or higher purchase minimums.

For example, here:

Image

This isn't hugely different from the situation with Dimensional funds and AQR funds, which mostly are intended to be sold through advisors, and have huge minimum purchase requirements... even though people in this forum find and publish ways to get around that.

Remember, on the Investors' site, Vanguard says, specifically:
We believe that your portfolio should be style-neutral, not biased toward either growth or value stocks.
Image

In short, Vanguard supports advisors who give advice different from Vanguard's advice.
I checked some of those ETFs.

Oh, boy. Where do we start with the problems:
- hardly any volume,
- very very small AUMs,
- not much history.
"You can get more with a kind word and a gun than with just a kind word." George Washington

HEDGEFUNDIE
Posts: 1229
Joined: Sun Oct 22, 2017 2:06 pm

Re: Vanguard's Hidden Factor ETFs?

Post by HEDGEFUNDIE » Wed Nov 28, 2018 9:13 pm

AlphaLess wrote:
Wed Nov 28, 2018 9:06 pm
I checked some of those ETFs.

Oh, boy. Where do we start with the problems:
- hardly any volume,
- very very small AUMs,
- not much history.
None of these are actually problems if:

1. You understand how ETFs trade, and
2. You subscribe to factor investing methodology

User avatar
AlexisAtEasternState
Posts: 32
Joined: Wed Apr 18, 2018 6:45 pm
Location: Earth

Re: Vanguard's Hidden Factor ETFs?

Post by AlexisAtEasternState » Thu Dec 06, 2018 3:04 am

HEDGEFUNDIE wrote:
Wed Nov 28, 2018 9:13 pm
AlphaLess wrote:
Wed Nov 28, 2018 9:06 pm
I checked some of those ETFs.

Oh, boy. Where do we start with the problems:
- hardly any volume,
- very very small AUMs,
- not much history.
None of these are actually problems if:

1. You understand how ETFs trade, and
2. You subscribe to factor investing methodology
VFMF max premium to NAV is 7 basis points... :confused
Image
From https://institutional.vanguard.com/VGAp ... undId=4421

HEDGEFUNDIE
Posts: 1229
Joined: Sun Oct 22, 2017 2:06 pm

Re: Vanguard's Hidden Factor ETFs?

Post by HEDGEFUNDIE » Thu Dec 06, 2018 6:27 am

AlexisAtEasternState wrote:
Thu Dec 06, 2018 3:04 am
HEDGEFUNDIE wrote:
Wed Nov 28, 2018 9:13 pm
AlphaLess wrote:
Wed Nov 28, 2018 9:06 pm
I checked some of those ETFs.

Oh, boy. Where do we start with the problems:
- hardly any volume,
- very very small AUMs,
- not much history.
None of these are actually problems if:

1. You understand how ETFs trade, and
2. You subscribe to factor investing methodology
VFMF max premium to NAV is 7 basis points... :confused
Image
From https://institutional.vanguard.com/VGAp ... undId=4421
You’re cherry picking one day’s max. On most trading days the premium is only one or two cents (much smaller than even one basis point)

Post Reply