Vanguard New Factor Funds Portfolio Statistics

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comeinvest
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by comeinvest » Fri May 04, 2018 9:02 pm

If low liquidity does indeed have merit, I would have liked to see it combined in a multifactor product, for the obvious reasons of turnover efficiencies, cost-per-factor, and not having to allocate separate capital to this separate factor using a long-only vehicle.

mucgoo
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by mucgoo » Sat May 05, 2018 10:24 am

comeinvest wrote:
Fri May 04, 2018 8:23 pm
lack_ey wrote:
Fri May 04, 2018 8:10 pm

One relatively recent paper is "Liquidity as an Investment Style" by Ibbotson et al. (2013, with a 2016 update).
Liquidity should be given equal standing to size, value/growth, and momentum as an investment style. Liquidity, as measured by stock turnover, is an economically significant indicator of long run returns. The returns from liquidity are sufficiently different from the other styles, so that it is not merely a substitute.
Image
Returns for quartiles for different styles in US stocks, 1972-2015.
www.zebracapm.com/files/Liquidity%20as% ... Update.pdf
Thanks. I would have expected some paper from Vanguard specific to the strategy of their new low liquidity fund.
Based on the Ibbotson table above, the trick would be to avoid Q4 of liquidity. But if the liquidity is absolute turnover, not relative to size, wouldn't that largely overlap / correlate with small size? Assuming that a stock with n times the number of shares and n times the market cap and n times as many owners would trade n times often, all other parameters being equal.
The next question would be how it fits into a portfolio. Since it's a long only fund, available capital would be "wasted" on this strategy, that could not be spent on alternate factors and strategies. Vanguard needs to supply facts, correlations, historical and expected returns of what they are doing here.
They have for Europe where they've got the global factor funds. It's effective even within size and value stocks.

The data below is for the Russel 3,000 since 1991.

Image

And within the value stocks as well
Imagehttps://www.institutional.vanguard.co.u ... quidity-eu

columbia
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by columbia » Sun May 06, 2018 12:18 pm

I could see VG putting together a bond factor fund, combining it with the new 4 factor equity fund and selling a series of Life Strategy Factor funds.

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sun May 27, 2018 10:35 am

According to ETF.com, the funds now have the following AUM and daily volume:

VFMF - $35.95 MM ($1.03 MM daily) (plus $26.1 MM in VFMFX as of 4/30/18)
VFVA - $23,62 MM ($538.62K daily)
VFMO - $12.19 MM ($232.61K daily)
VFMV - $8.03 MM ($287.19K daily)
VFLQ - $8.05 MM ($89.01K daily)
VFQY - $8.04 MM ($108.53K daily)

All have had an average 0.08% ($0.06) spread since day one. With 1/3 small caps and 1/3 mid caps, we probably won't ever see penny or two-penny spreads.

VFMF and VFVA have continued to slowly add assets, and trading is picking up. VFMO has had no further asset flows this month. VFMV, VFLQ, and VFQY have had no asset flows since inception. (It's impossible to know how many of the initial 100,000 shares Vanguard has sold off and how many they still hold.)

By comparison, a few of Vanguard's other value ETFs:

VIOV - $339.69 MM ($1.49 MM daily) (0.12% / $0.16-$0.17 spread) (Vg S&P 600 Small Cap Value)
VBR - $13.46 Billion ($34.11 MM daily) (0.08% / $0.11 spread) (Vg Small-Cap Value)
VOE - $8.69 Billion ($27.51 MM daily) (0.04% / $0.04-$0.05 spread) (Vg Mid-Cap Value)
jhfenton wrote:
Fri May 04, 2018 2:18 pm
All of the funds:

VFMF - $26.82 MM
VFVA - $19.08 MM
VFMO - $11.52 MM
VFMV - $7.77 MM
VFLQ - $7.73 MM
VFQY - $7.71 MM

comeinvest
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by comeinvest » Sun May 27, 2018 5:45 pm

Thanks for the information. I believe whether the spread is at 0.1%, a penny, or anywhere in between, is pretty irrelevant for almost all investors except for frequent traders. Most Bogleheads stick to their strategy over their accumulation phase, if not their investing life, and even rebalancing can often be done with new assets. Even if we assume a conservative estimated holding period of only 10 years, a spread of 0.1% translates to an annual... I would say nothing. Especially compared to the sometimes vastly different outcomes of the various factor strategies, even the different implementations of one and the same factor, like the different "value" factor strategies. If anything, the strategy itself deserves scrutiny.

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Runalong
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by Runalong » Wed May 30, 2018 11:50 am

VFLQ intrigued me enough, mostly for reasons stated above, that I invested early (3/5/18).

It does appear to be equal to other factors historically with the advantage of not being an overcrowded trade (yet).

And I already own a portfolio of stocks that I trade based on a multi-factor approach (liquidity is not one of my factors here) so it provides a measure of diversification.

Since inception it is up 5.8% (VTI up 0.7%), so so far, so good.

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Tue Jun 12, 2018 9:18 pm

The last two weeks have seen continued steady growth in Multifactor and Value, a pickup in Momentum, and the first new shares for Min Vol. There have still been no new shares created for Quality or Liquidity.

VFMF - $43.05 MM (+ $7.10 MM) (+50,000 shares) (plus $26.1 MM in VFMFX as of 4/30/18, no data yet for 5/31/18)
VFVA - $30.15 MM (+ $6.53 MM) (+50,000 shares)
VFMO - $20.93 MM (+ $8.74 MM) (+75,000 shares)
VFMV - $10.25 MM (+ $2.22 MM) (+25,000 shares)
VFQY - $8.33 MM
VFLQ - $8.24 MM
jhfenton wrote:
Sun May 27, 2018 10:35 am
According to ETF.com, the funds now have the following AUM and daily volume:

VFMF - $35.95 MM ($1.03 MM daily) (plus $26.1 MM in VFMFX as of 4/30/18)
VFVA - $23,62 MM ($538.62K daily)
VFMO - $12.19 MM ($232.61K daily)
VFMV - $8.03 MM ($287.19K daily)
VFLQ - $8.05 MM ($89.01K daily)
VFQY - $8.04 MM ($108.53K daily)

lack_ey
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by lack_ey » Fri Jun 15, 2018 5:19 pm

I saw this in a recent ETF.com article:
http://www.etf.com/sections/features-an ... nopaging=1
The Cost Of Active Management

Vanguard has explained that its main motivation for active management in factor funds is not to avoid front-running, but to maintain high factor exposure by allowing for adjustments daily, rather than truing up only quarterly or semiannually. The new Vanguard factor funds have shown evidence of high turnover since their launch in February.

The Vanguard U.S. Multifactor ETF (VFMF), the series asset leader, had 43.13% portfolio turnover between Feb. 26 (the first date that holdings are available to FactSet) and June 7, 2018. That’s 265.4%, annualized. Even with the ratcheted-up factor-based exposure, it’s hard to square sky-high turnover with Vanguard’s historic caution toward the trading floor.

Since their inception, none of Vanguard’s actively managed factor funds has had an outflow. That means these funds are at risk of making significant capital gains distributions. Without redemptions, these high-turnover products are on the same footing as mutual funds. No index to track means no capital markets leakage, but it also means no rebalancing flows that magically wash out capital gains.
Sounds like a lot of turnover there. I'm not sure exactly how FactSet defines it, though.

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jun 15, 2018 7:38 pm

lack_ey wrote:
Fri Jun 15, 2018 5:19 pm
Sounds like a lot of turnover there. I'm not sure exactly how FactSet defines it, though.
Thanks for sharing the article. It's a worthwhile discussion.

I'm also not sure how they calculate turnover on a new fund, and I'm a bit skeptical of the number.

I did notice the realized/unrealized gains numbers when I looked at the asset numbers this week. They're only through April 30 at this point, but VFMF had a realized gain (loss) of (0.05%). VFVA is the one that caught my eye, because it had a realized capital gain of 0.56% as of April 30.

It is quite possible to manufacture outflows to wash out unrealized gains, and as long as there is a bit of volatility, there will always be shares on which they can realize some losses to offset the already recognized gains.

All of the funds' realized gains (losses) as of April 30:

VFMFX (0.12%)
VFMF (0.05%)

VFVA +0.56%
VFMO (0.68%)
VFQY (0.06%)

VFLQ +0.27%
VFMV +0.14%


(The red reflects potential distributions.) We should have May 31 data soon.

I have said, though, that although I own a fair amount of VFMFX and VFVA now, I own them in retirement accounts. I am not ready to add VFMF or VFVA in taxable. I want a track record of tax efficiency before I consider crossing that bridge.

I should remind folks that, from all indications, VFMFX and VFMF are completely separate funds. VFMFX will probably never be a good holding in taxable.

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AndrewXnn
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by AndrewXnn » Fri Jun 15, 2018 8:00 pm

I'm finding alpha consistently with VFMF and VFMFX.
So, both appear to have been a wise switch from VOO.

A little surprised to notice that these do not track each other consistently every day.
However, over longer periods they are nearly identical.

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jun 15, 2018 9:19 pm

AndrewXnn wrote:
Fri Jun 15, 2018 8:00 pm
I'm finding alpha consistently with VFMF and VFMFX.
So, both appear to have been a wise switch from VOO.
Indeed. So far, my VFMFX has been great. It is up 6.04% from 2/16/18 through yesterday compared to 2.43% for VFIAX (Vanguard 500 Index).

Not too surprisingly, given its holdings, it has tracked closer to small cap (value) funds than large cap funds:

VSIAX (Vanguard Small Cap Value) +6.07%
VSMAX (Vanguard Small Cap) +8.08%
DFSTX (DFA Small Cap) +8.25%
DFSVX (DFA Small Cap Value) +8.60%
IVOV (Vanguard S&P 400 Mid Cap Value) +5.80%

VMVAX (Vanguard Mid Cap Value) +0.06% (outlier)
VVIAX (Vanguard Value) (large cap) -0.32%

LRGF (iShares Edge MSCI Multifactor USA ETF) +3.69%

So a lot of the performance may be due to its relatively large allocation to small and mid-cap stocks.
AndrewXnn wrote:
Fri Jun 15, 2018 8:00 pm
A little surprised to notice that these do not track each other consistently every day.
However, over longer periods they are nearly identical.
I think that is an artifact of VFMF's light trading. There are days when there is no trade close to the close, so the "closing" price of VFMF isn't representative of the fund's NAV at the close. If you compare charts of VFMFX and VFMF from 02/16/18 through 06/14/18, they line up well.

AE81
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by AE81 » Fri Jun 15, 2018 9:21 pm

jhfenton wrote:
Fri Jun 15, 2018 7:38 pm

I should remind folks that, from all indications, VFMFX and VFMF are completely separate funds. VFMFX will probably never be a good holding in taxable.
I had assumed that VFMFX and VFMF were different share classes of the same fund as is the case with Vanguard's passive ETFs.
Your comment prompted me to use Vanguard "compare" feature and the two certainly do look different.
As of 5/31 the number of holdings are different and only 5 of the top 10 holdings are the same.

If the $50,000 minimum for the fund isn't a barrier, and an investor has no preference for mutual fund vs. ETF, how is one to choose between VFMFX and VFMF?

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jun 15, 2018 9:30 pm

AE81 wrote:
Fri Jun 15, 2018 9:21 pm
If the $50,000 minimum for the fund isn't a barrier, and an investor has no preference for mutual fund vs. ETF, how is one to choose between VFMFX and VFMF?
I opted for VFMFX in my retirement accounts for simplicity and in order to avoid the spreads and light trading on a new ETF. But if I ever buy any in taxable, I will buy VFMF. At a minimum that won't be until we get past the first-year and see what the tax-efficiency looks like.

I assume that performance on the funds will be virtually-identical over the long-term. But I noticed as soon as they published the prospectuses, that the VFMFX shares were not convertible to VFMF. And after they launched, I noticed that they weren't listed as "Also Available in" share classes of the other fund. And daily ETF NAV vs MF NAV doesn't track exactly. It is very, very close, but it seems to be off by more than a rounding error on some days.

columbia
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by columbia » Mon Jun 18, 2018 1:17 pm

For those who purchased VFMV (US minimum volatility):

Has it performed as expected?

Bulgogi Head
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by Bulgogi Head » Sun Jun 24, 2018 9:14 pm

I was looking for more information on these factor ETFs, and found a paper/report that seems to only be accessible to advisors. It's called "Get more Targeted Vanguard Factor ETFs". It requires an advisor login which I do not have. Any one here know how I could read it?

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jul 06, 2018 9:23 am

The last four weeks finally saw the first shares created for the Liquidity Factor ETF. Multifactor and Value are still growing slowly, but steadily. Trading is still quite light for all but Multifactor. Some days, Value still trades less than 1,000 shares.

Quality is the sole factor ETF with no shares created since it launched with 100,000 shares.

VFMF - $49.56 MM (+100,000 shares) (plus $32.2 MM in VFMFX as of 5/31/18)
VFVA - $33.43 MM (+50,000 shares)
VFMO - $20.36 MM
VFMV - $12.26 MM (+25,000 shares)
VFLQ - $12.12 MM (+50,000 shares)
VFQY - $8.15 MM
jhfenton wrote:
Tue Jun 12, 2018 9:18 pm
The last two weeks have seen continued steady growth in Multifactor and Value, a pickup in Momentum, and the first new shares for Min Vol. There have still been no new shares created for Quality or Liquidity.

VFMF - $43.05 MM (+ $7.10 MM) (+50,000 shares) (plus $26.1 MM in VFMFX as of 4/30/18, no data yet for 5/31/18)
VFVA - $30.15 MM (+ $6.53 MM) (+50,000 shares)
VFMO - $20.93 MM (+ $8.74 MM) (+75,000 shares)
VFMV - $10.25 MM (+ $2.22 MM) (+25,000 shares)
VFQY - $8.33 MM
VFLQ - $8.24 MM

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vineviz
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Fri Jul 06, 2018 9:59 am

Bulgogi Head wrote:
Sun Jun 24, 2018 9:14 pm
I was looking for more information on these factor ETFs, and found a paper/report that seems to only be accessible to advisors. It's called "Get more Targeted Vanguard Factor ETFs". It requires an advisor login which I do not have. Any one here know how I could read it?
It's just a PDF version of the same content that the website contains.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

yousha
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by yousha » Fri Jul 06, 2018 7:50 pm

Where would VFMFX be listed. I looked at US Stock funds at Vanguard and could not find it. Please help.

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vineviz
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Fri Jul 06, 2018 8:06 pm

yousha wrote:
Fri Jul 06, 2018 7:50 pm
Where would VFMFX be listed. I looked at US Stock funds at Vanguard and could not find it. Please help.
https://advisors.vanguard.com/web/c1/fa ... earch=true
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jul 06, 2018 8:22 pm

vineviz wrote:
Fri Jul 06, 2018 8:06 pm
yousha wrote:
Fri Jul 06, 2018 7:50 pm
Where would VFMFX be listed. I looked at US Stock funds at Vanguard and could not find it. Please help.
https://advisors.vanguard.com/web/c1/fa ... earch=true
VFMFX is on the investor site here, but you have to look the factor funds up by ticker. They don't have them listed on their browseable mutual fund or ETF pages. I don't know if they will eventually list them or if they are going to hide them from retail investors indefinitely.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by yousha » Fri Jul 06, 2018 8:57 pm

Ok. Where can one find it in the financial paper in terms how it performed daily? Is that available to the public?

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jhfenton
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Fri Jul 06, 2018 9:09 pm

yousha wrote:
Fri Jul 06, 2018 8:57 pm
Ok. Where can one find it in the financial paper in terms how it performed daily? Is that available to the public?
They are all quoted daily in all of the usual places Morningstar.com, Yahoo Finance, ETF.com (for the ETFs):

VFMFX - Vanguard US Multifactor Admiral Shares
VFMF - Vanguard US Multifactor ETF
VFVA - Vanguard US Value Factor ETF
VFMO - Vanguard US Momentum Factor ETF
VFMV - Vanguard US Minimum Volatility ETF
VFLQ - Vanguard US Liquidity Factor ETF
VFQY - Vanguard US Quality Factor ETF

M* is probably the best place to follow them.

The factor ETFs are perfectly ordinary ETFs available at virtually any broker. VFMFX is an ordinary Vanguard mutual fund that is probably available few places, if any, other than directly from Vanguard. (Very few brokerage firms offer Vanguard Admiral Shares.) VFMFX has a $50,000 minimum initial investment because Vanguard classifies it as an active fund. (There is no Investor share class.)

Vanguard is just choosing not to market the factor funds to their retail customers, believing that they are best used as tools by advisors.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by yousha » Fri Jul 06, 2018 9:31 pm

This fund is sort of unusual in that it is not marketed to retail customers....being used as a tool by advisors means what? Too, WSJ does not have it listed

I am confused as to why any investor would choose the fund ?

jmk
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jmk » Fri Jul 06, 2018 9:31 pm

It took a couple of days for the data to show up, but ETF.com now shows
VFMF - $26.82 MM
VFVA - $19.08 MM
VFMO - $11.52 MM
VFMV - $7.77 MM
VFLQ - $7.73 MM
VFQY - $7.71 MM
1) Does anyone know when there will be enough data to calculate the factor loadings of the Vanguard funds?

2) Will the large size of Vanguard funds set a natural limit on factor loadings?

jmk

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Fri Jul 06, 2018 9:34 pm

jmk wrote:
Fri Jul 06, 2018 9:31 pm

1) Does anyone know when there will be enough data to calculate the factor loadings of the Vanguard funds?
You can do this now.
jmk wrote:
Fri Jul 06, 2018 9:31 pm

2) Will the large size of Vanguard funds set a natural limit on factor loadings?
No.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Fri Jul 06, 2018 9:41 pm

yousha wrote:
Fri Jul 06, 2018 9:31 pm
This fund is sort of unusual in that it is not marketed to retail customers....being used as a tool by advisors means what? Too, WSJ does not have it listed

I am confused as to why any investor would choose the fund ?
Vanguard has many such funds, which are primarily marketed to advisors or institutions. Mostly that are niche funds or, like this one, more likely to confuse a novice investor than a total stock market fund would.

Vanguard says funds like this should be bought, not sold. If you’re the kind of investor who should own it then you’ll be able to find it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sat Jul 21, 2018 6:02 pm

I noticed today that Vanguard U.S. Quality Factor ETF finally had its first new creation unit spawned on July 10, meaning that it finally sold off the last of its original 75,000 shares and saw demand for more. Every factor fund had at least one new creation unit in the last two weeks.

VFMF - $54.82 MM (+50,000 shares) (plus $36.5 MM in VFMFX as of 6/30/18)
VFVA - $35.85 MM (+25,000 shares)
VFMO - $23.09 MM (+25,000 shares)
VFMV - $14.58 MM (+25,000 shares)
VFLQ - $14.47 MM (+25,000 shares)
VFQY - $10.53 MM (+25,000 shares) (yay!)
jhfenton wrote:
Fri Jul 06, 2018 9:23 am
VFMF - $49.56 MM (+100,000 shares) (plus $32.2 MM in VFMFX as of 5/31/18)
VFVA - $33.43 MM (+50,000 shares)
VFMO - $20.36 MM
VFMV - $12.26 MM (+25,000 shares)
VFLQ - $12.12 MM (+50,000 shares)
VFQY - $8.15 MM

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by letsgobobby » Sat Jul 21, 2018 9:38 pm

jhfenton wrote:
Thu Mar 08, 2018 1:14 pm
I was a bit impatient for portfolio statistic on the new factor funds, so I've started calculating them, at least roughly. You can export the portfolio's from Vanguard, tweak the CSV file, and import the portfolio into M*'s portfolio manager. The big limitation is a limit of 200 holdings. So I have to split the portfolios into segments by market cap, pull the statistics, and then do a weighted average.

I've done VFVA (Vanguard US Value Factor ETF) so far.

Code: Select all

Pos#s	Total Value	P/PE	P/B	ROA	ROE	PEG	Yield	Avg Mkt Cap 	LCV	LCB	LCG	MCV	MCB	MCG	SCV	SCB	SCG
001-200	$4,174,389.08 	11.43	1.49	5.25%	14.8%	8.44%	2.10%	$26,127MM 	41	19	2	18	3	1	9	3	1
201-400	$1,596,208.67 	11.67	1.29	3.58%	13.99%	9.11%	2.08%	$2,515MM 	4	1	0	19	6	4	48	12	3
401-600	$1,154,778.84 	13.01	1.43	3.33%	5.95%	9.74%	1.79%	$1,780MM 	0	0	0	9	7	0	44	31	7
601-785	$727,221.83 	13.49	1.57	2.56%	21.55%	10.63%	1.49%	$1,270MM	1	0	0	2	1	1	44	44	7
Total	$7,652,598.42 	11.91	1.45	4.36%	13.94%	8.98%	1.99%	$15,166MM 	23	11	1	15	4	1	26	13	3
P/PE = Price / Projected Earnings
PEG = Projected 5-year EPS Growth %


On a first impression, it seems very value-y. It has a much lower forward P/E than any of Vanguard's other value funds, large, mid, or small. P/B is much lower. And it has a *lot* of small and mid cap. They said it would be an all cap fund, and it is.

I'm going to do the multi-factor fund next. It's probably the only other one I care enough about.
Thank you for doing this. I'm thinking of using VFVA as my core US holding in a moderate equity portfolio (60/40). Any comments?

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sun Jul 22, 2018 8:17 am

letsgobobby wrote:
Sat Jul 21, 2018 9:38 pm
Thank you for doing this. I'm thinking of using VFVA as my core US holding in a moderate equity portfolio (60/40). Any comments?
I think it's reasonable if you're a die-hard value believer (as I am) and can stick with it through thick and thin. I believe VFMFX would be a good core position as well.

Which I guess is why I split all of our non-401(k) US between VFMFX and VFVA. At the moment, that leaves us with roughly equal amounts of VFMFX, VFVA, VMVAX (Vanguard Mid-Cap Value Index Admiral), and DFSTX (DFA US Small Cap I), the latter two in my 401(k). Over time, though, the two 401(k) positions will grow faster.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by Jeff Albertson » Thu Aug 09, 2018 7:52 pm

What's next, factor funds for bonds? Actually yes, there are bond factor funds.
AQR’s first dedicated fixed-income offering, a fund of American high-yield (that is, junk-rated) bonds, was launched in mid-2016. It outperformed the benchmark index by 2.1 percentage points in its first year, and 2.6 points in its second.
...
Among the mass-market offerings are BlackRock’s first smart-beta bond fund, launched in 2015. It switched from active management to index-tracking in 2018, and the firm now has several index-tracking bond ETFs that use factors (mostly quality and value). Fidelity Investments launched two bond factor ETFs in March, and Invesco launched eight on July 25th.
https://www.economist.com/finance-and-e ... s-to-bonds

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by garlandwhizzer » Fri Aug 10, 2018 1:58 pm

Jeff Albertson wrote:

AQR’s first dedicated fixed-income offering, a fund of American high-yield (that is, junk-rated) bonds, was launched in mid-2016. It outperformed the benchmark index by 2.1 percentage points in its first year, and 2.6 points in its second.
Wait until a recession hits and see what happens to fund performance. It's a good idea to measure performance through at least one full market cycle (both ups and downs) before determining its worth for the long term. Stretching for yield in fixed income necessarily increases risk. The bond market is IMO more efficient at pricing risk than the stock market. I suspect that there is not a great deal of exploitable inefficiency in bond pricing relative to stock pricing. I agree with Larry that bonds are primarily for safety in equity storms and that taking on risk is best rewarded in equity.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Tue Aug 14, 2018 1:04 pm

We don't have end of July figures for VFMFX yet, but the two multifactor funds collectively probably passed the $100 MM mark in July.

Trading volumes are still very low for VFVA. (They are low for VFMO, VFMV, VFLQ, and VFQY too, but I don't own or watch those.) Stale last trade prices well away from the bid-ask are quite common on many trading days. As advisor-focused ETFs, I suspect trading volume will always be light in relation to their AUM, much like VIOV (Vanguard S&P 600 Small Cap Value) and the other S&P and Russell ETFs.

VFMF - $61.52 MM (+75,000 shares) (plus $36.5 MM in VFMFX as of 6/30/18)
VFVA - $36.31 MM (+0 shares)
VFMO - $25.20 MM (+25,000 shares)
VFMV - $16.63 MM (+25,000 shares)
VFLQ - $14.50 MM (+0 shares)
VFQY - $12.67 MM (+25,000 shares)
jhfenton wrote:
Sat Jul 21, 2018 6:02 pm
VFMF - $54.82 MM (+50,000 shares) (plus $36.5 MM in VFMFX as of 6/30/18)
VFVA - $35.85 MM (+25,000 shares)
VFMO - $23.09 MM (+25,000 shares)
VFMV - $14.58 MM (+25,000 shares)
VFLQ - $14.47 MM (+25,000 shares)
VFQY - $10.53 MM (+25,000 shares) (yay!)

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Mon Sep 24, 2018 6:14 pm

We've seen continued slow growth for Vanguard's factor funds. They all had new shares created in the last 5 weeks.

I'm curious to see if there's a noticeable jump in assets in February when the funds hit their anniversary date.

VFMF - $68.78 MM (+75,000 shares) (plus $38.0 MM in VFMFX as of 8/31/18)
VFVA - $38.99 MM (+25,000 shares)
VFMO - $32.28 MM (+75,000 shares)
VFMV - $21.40 MM (+50,000 shares)
VFLQ - $16.96 MM (+25,000 shares)
VFQY - $15.14 MM (+25,000 shares)
jhfenton wrote:
Tue Aug 14, 2018 1:04 pm
VFMF - $61.52 MM (+75,000 shares) (plus $36.5 MM in VFMFX as of 6/30/18)
VFVA - $36.31 MM (+0 shares)
VFMO - $25.20 MM (+25,000 shares)
VFMV - $16.63 MM (+25,000 shares)
VFLQ - $14.50 MM (+0 shares)
VFQY - $12.67 MM (+25,000 shares)

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by fennewaldaj » Mon Sep 24, 2018 9:37 pm

I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Mon Sep 24, 2018 10:46 pm

fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Tue Sep 25, 2018 7:11 am

vineviz wrote:
Mon Sep 24, 2018 10:46 pm
fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
Almost certainly. I'd be nervous, though, buying 15,000 shares of VFMF or 10,000 shares of VFVA with market orders. It would probably be fine, but I'd probably use a marketable limit order.

At this point, I'm adding to my positions incrementally, and if I'm buying 5 or 6 shares at a time, I just use market orders and hope for price improvement. I often--but not always--get mid-spread execution on small market orders.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by vineviz » Tue Sep 25, 2018 8:31 am

jhfenton wrote:
Tue Sep 25, 2018 7:11 am
vineviz wrote:
Mon Sep 24, 2018 10:46 pm
fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
Almost certainly. I'd be nervous, though, buying 15,000 shares of VFMF or 10,000 shares of VFVA with market orders. It would probably be fine, but I'd probably use a marketable limit order.
In practice, I will often set a limit price that is $0.01 above or below the relevant bid/ask price if I'm trying to not invest more principal than I have in available cash. Just in case.

That said, I don't think I've ever had such an order execute outside the bid/ask spread on an index or quantitatively managed ETF.

Last week I bought nearly 3,500 shares of ISZE (a quantity that was roughly 3x the average daily volume at the time) and the order executed in less than a second at the prevailing ask price. I don't think it traded at all on Thursday and traded only 200 shares yesterday.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by Ketawa » Tue Sep 25, 2018 9:20 am

Is it time for me to swap out QSMLX for VFMF?

I haven't been following these funds. My portfolio is essentially "tilt as much as possible, within reason, have about 1 fund for each asset class per account." The particular funds have changed since I implemented that in August 2012 as offerings became available without any consideration for past performance and I've been with QSMLX since March 2015.

75% equities
15% fixed income
10% alternatives

It ends up being:

Equities
market cap weighted overall across entire portfolio for region splits
IRA: 50/50 domestic/intl, consisting of QSMLX, QICLX, QEELX, will shift to market cap split within IRA once I Fund incorporates emerging markets
TSP: S Fund and I Fund in weights to reach market cap region splits overall

Fixed Income
100% G Fund in TSP with a few 5% prepaid cards/accounts in taxable

Alternatives
100% QSPIX in IRA

VFMF and QSMLX both target the same factors, with VFMF adding a volatility screen. I don't have much of an opinion on volatility screening.

In QSMLX's favor, AQR is supposedly "good" at factor investing and might have a better "secret sauce." I believe that them being "good" at factor investing is validated by the overall performance of a fund like QSPIX since inception, while I'm more skeptical that their "secret sauce" could be that much better.

In VFMF's favor, the fund is about 50 bp cheaper than my QSMLX/QSMNX combination. That's not a whole lot in the context of my portfolio; it adds about $100 in cost per year. I would probably keep some QSMLX/QMSNX at Fidelity for rebalancing and move a portion of my IRA to Vanguard for free ETF trades.

I think I prefer Vanguard's factor loads. Looking at both Fama-French and AQR factors on Portfolio Visualizer:
size: QSMLX higher by about 0.4 load
value: VFMF higher by about 0.2-0.3 load
momentum: VFMF higher by about 0.1-0.2 load
quality: QMLX higher by about 0.1-0.2 load

I have the most confidence in value and momentum, and they have historically been the largest.

Has anyone considered a change like this?

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by Theoretical » Tue Sep 25, 2018 9:44 am

jhfenton wrote:
Tue Sep 25, 2018 7:11 am
vineviz wrote:
Mon Sep 24, 2018 10:46 pm
fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
Almost certainly. I'd be nervous, though, buying 15,000 shares of VFMF or 10,000 shares of VFVA with market orders. It would probably be fine, but I'd probably use a marketable limit order.

At this point, I'm adding to my positions incrementally, and if I'm buying 5 or 6 shares at a time, I just use market orders and hope for price improvement. I often--but not always--get mid-spread execution on small market orders.
I think at that quantity, working with a market maker and or a broker-assisted trade could be well worth the cost to minimize the slippage.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by fennewaldaj » Tue Sep 25, 2018 1:31 pm

jhfenton wrote:
Tue Sep 25, 2018 7:11 am
vineviz wrote:
Mon Sep 24, 2018 10:46 pm
fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
Almost certainly. I'd be nervous, though, buying 15,000 shares of VFMF or 10,000 shares of VFVA with market orders. It would probably be fine, but I'd probably use a marketable limit order.

At this point, I'm adding to my positions incrementally, and if I'm buying 5 or 6 shares at a time, I just use market orders and hope for price improvement. I often--but not always--get mid-spread execution on small market orders.
For me its just $15k and $10k. So like 200 and 150 shares. I wish my account was big enough to buy 15000 shares and 10000 shares :).

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Tue Sep 25, 2018 2:36 pm

fennewaldaj wrote:
Tue Sep 25, 2018 1:31 pm
jhfenton wrote:
Tue Sep 25, 2018 7:11 am
vineviz wrote:
Mon Sep 24, 2018 10:46 pm
fennewaldaj wrote:
Mon Sep 24, 2018 9:37 pm
I am guessing limit orders are still advisable for these funds? I just transferred assets from an adviser and will be buying ~15k vfmf and ~10k vfva later this week.
I doubt you’d need it. You can expect instantaneous execution at the prevailing ask price regardless of quantity.
Almost certainly. I'd be nervous, though, buying 15,000 shares of VFMF or 10,000 shares of VFVA with market orders. It would probably be fine, but I'd probably use a marketable limit order.

At this point, I'm adding to my positions incrementally, and if I'm buying 5 or 6 shares at a time, I just use market orders and hope for price improvement. I often--but not always--get mid-spread execution on small market orders.
For me its just $15k and $10k. So like 200 and 150 shares. I wish my account was big enough to buy 15000 shares and 10000 shares :).
Ah. That's too bad. :mrgreen: I was looking forward to the visible uptick in assets in the funds. :beer A new creation unit is 25,000 shares.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Tue Sep 25, 2018 2:43 pm

Ketawa wrote:
Tue Sep 25, 2018 9:20 am
Is it time for me to swap out QSMLX for VFMF?
I don't own QSMLX, but I really like the way that VFMFX/VFMF are put together. It's hard to judge factor loads over short period, but the methodology that Vanguard is using looks very much like what a factor purist would design.

VFMFX/VFMF do take an explicitly all-cap (roughly 1/3 each small, mid, and large) approach to fund construction, compared to QSMLX's small cap mandate.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by gtwhitegold » Wed Sep 26, 2018 6:25 am

Ketawa wrote:
Tue Sep 25, 2018 9:20 am
Is it time for me to swap out QSMLX for VFMF?

I haven't been following these funds. My portfolio is essentially "tilt as much as possible, within reason, have about 1 fund for each asset class per account." The particular funds have changed since I implemented that in August 2012 as offerings became available without any consideration for past performance and I've been with QSMLX since March 2015.

75% equities
15% fixed income
10% alternatives

It ends up being:

Equities
market cap weighted overall across entire portfolio for region splits
IRA: 50/50 domestic/intl, consisting of QSMLX, QICLX, QEELX, will shift to market cap split within IRA once I Fund incorporates emerging markets
TSP: S Fund and I Fund in weights to reach market cap region splits overall

Fixed Income
100% G Fund in TSP with a few 5% prepaid cards/accounts in taxable

Alternatives
100% QSPIX in IRA

VFMF and QSMLX both target the same factors, with VFMF adding a volatility screen. I don't have much of an opinion on volatility screening.

In QSMLX's favor, AQR is supposedly "good" at factor investing and might have a better "secret sauce." I believe that them being "good" at factor investing is validated by the overall performance of a fund like QSPIX since inception, while I'm more skeptical that their "secret sauce" could be that much better.

In VFMF's favor, the fund is about 50 bp cheaper than my QSMLX/QSMNX combination. That's not a whole lot in the context of my portfolio; it adds about $100 in cost per year. I would probably keep some QSMLX/QMSNX at Fidelity for rebalancing and move a portion of my IRA to Vanguard for free ETF trades.

I think I prefer Vanguard's factor loads. Looking at both Fama-French and AQR factors on Portfolio Visualizer:
size: QSMLX higher by about 0.4 load
value: VFMF higher by about 0.2-0.3 load
momentum: VFMF higher by about 0.1-0.2 load
quality: QMLX higher by about 0.1-0.2 load

I have the most confidence in value and momentum, and they have historically been the largest.

Has anyone considered a change like this?
I personally am looking to use VFMF and Vanguard Strategic Small-Cap Equity Fund (VSTCX) as my US factor based funds. Costs vs factor exposure are closer to a sweet spot for me. I'm staying with QSPNX and QMHNX for my alternative funds at least until I can justify paying an advisor for use of other liquid alternatives. I'm probably switching to a mix of FEMS and DGS for EMSC and ISCF for IDSC.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sat Dec 08, 2018 4:28 pm

I was curious to see what had happened with the assets in the factor funds during all the market turbulence in November and December.

The multifactor is the clear winner. It will probably pass $100 MM before its anniversary date in mid-February. It's not a blowout success, but it's definitely not going anywhere.

And all of the funds except Liquidity saw a block or two of shares created.

VFMF - $80.68 MM (+225,000 shares) (plus $34.9 MM in VFMFX as of 10/31/18)
VFVA - $37.51 MM (+25,000 shares)
VFMO - $33.12 MM (+50,000 shares)
VFMV - $22.62 MM (+25,000 shares)
VFQY - $17.87 MM (+50,000 shares)
VFLQ - $15.76 MM (-0-)
jhfenton wrote:
Mon Sep 24, 2018 6:14 pm
We've seen continued slow growth for Vanguard's factor funds. They all had new shares created in the last 5 weeks.

I'm curious to see if there's a noticeable jump in assets in February when the funds hit their anniversary date.

VFMF - $68.78 MM (+75,000 shares) (plus $38.0 MM in VFMFX as of 8/31/18)
VFVA - $38.99 MM (+25,000 shares)
VFMO - $32.28 MM (+75,000 shares)
VFMV - $21.40 MM (+50,000 shares)
VFLQ - $16.96 MM (+25,000 shares)
VFQY - $15.14 MM (+25,000 shares)

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by fennewaldaj » Sun Dec 09, 2018 2:21 am

I wonder what kind of success they would want for these before they considered adding international funds set up in the same way. One would almost think that would be more economical as the same people could likely run all of them.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sun Dec 09, 2018 8:32 am

fennewaldaj wrote:
Sun Dec 09, 2018 2:21 am
I wonder what kind of success they would want for these before they considered adding international funds set up in the same way. One would almost think that would be more economical as the same people could likely run all of them.
It is a good question. I'm curious to see how the domestic factor funds attract assets once we get past a year. Unfortunately, it has been a poor year for value, so they're not going to be attractive to performance chasers. Only the Min Vol factor fund has outperformed the broader market. I'm perfectly happy to buy a fund from a company I trust based strictly on a methodology that I believe in, but that's not

I would love to see developed and emerging markets multifactor funds with similar construction to VFMF, but I figure we're at least a few years away from any ex-US factor offerings.

I am curious how the Quantitative Equity Group would design an ex-US factor offering. Would they limit country or sector concentration? Or if value or value+momentum+quality tell you to invest 35% of the fund in South Korea do you just roll with it.

I do own EMGF/iShares EM MF ETF in my HSA at Fidelity, and I am going to start buying it in my wife's Roth for 2019 alongside VEMAX (Vanguard EM). But iShares's multifactor ETFs are not as pure an expression of the factor methodology as Vanguard's US factor funds. iShares puts a lot of constraints on them to reduce tracking error compared to broader benchmarks.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by gtwhitegold » Sun Dec 09, 2018 9:06 am

Considering how the only international (long only) fund offered by the QEG, is the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX), I would look at the weighting restrictions of that fund and use it as a baseline.

The annual and semi-annual reports mention restrictions on company weight, but doesn't give any details. I can't really look at it from here, but I I would compare the FTSE all world index country weights and the same for the VMVFX fund over time to see how much variation there was between the two.

https://personal.vanguard.com/us/faces/ ... ducts=true
jhfenton wrote:
Sun Dec 09, 2018 8:32 am
fennewaldaj wrote:
Sun Dec 09, 2018 2:21 am
I wonder what kind of success they would want for these before they considered adding international funds set up in the same way. One would almost think that would be more economical as the same people could likely run all of them.
It is a good question. I'm curious to see how the domestic factor funds attract assets once we get past a year. Unfortunately, it has been a poor year for value, so they're not going to be attractive to performance chasers. Only the Min Vol factor fund has outperformed the broader market. I'm perfectly happy to buy a fund from a company I trust based strictly on a methodology that I believe in, but that's not

I would love to see developed and emerging markets multifactor funds with similar construction to VFMF, but I figure we're at least a few years away from any ex-US factor offerings.

I am curious how the Quantitative Equity Group would design an ex-US factor offering. Would they limit country or sector concentration? Or if value or value+momentum+quality tell you to invest 35% of the fund in South Korea do you just roll with it.

I do own EMGF/iShares EM MF ETF in my HSA at Fidelity, and I am going to start buying it in my wife's Roth for 2019 alongside VEMAX (Vanguard EM). But iShares's multifactor ETFs are not as pure an expression of the factor methodology as Vanguard's US factor funds. iShares puts a lot of constraints on them to reduce tracking error compared to broader benchmarks.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sun Dec 09, 2018 12:53 pm

gtwhitegold wrote:
Sun Dec 09, 2018 9:06 am
Considering how the only international (long only) fund offered by the QEG, is the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX), I would look at the weighting restrictions of that fund and use it as a baseline.

The annual and semi-annual reports mention restrictions on company weight, but doesn't give any details. I can't really look at it from here, but I I would compare the FTSE all world index country weights and the same for the VMVFX fund over time to see how much variation there was between the two.

https://personal.vanguard.com/us/faces/ ... ducts=true
It looks like they constrain tightly on country weighting by market cap. Comparing VMVFX to VT (Vanguard Total World) on M*, shows country weightings that match very closely.

They do not constrain on sector weights. Those vary widely compared to Total World. Global Min Vol is much higher in real estate, moderately higher in utilities and consumer defensive, and much lower in technology.

Global Min Vol has a much lower median market cap, with a much higher weighting in mid caps and far fewer giant caps. Global Min Vol's portfolio is higher quality and a bit more expensive than Total World's.

Global Min Vol has also crushed Total World in performance in Global Min Vol's 5 years in existence.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by gtwhitegold » Sun Dec 09, 2018 4:51 pm

Regarding VMVFX, I think that the sector biases are relatively baked in since technology is historically one of the most volatile sectors and real estate is one of the least. VFMFX also has significant significant sector biases however, so I believe that a similar international fund would have similar sector biases.
jhfenton wrote:
Sun Dec 09, 2018 12:53 pm
gtwhitegold wrote:
Sun Dec 09, 2018 9:06 am
Considering how the only international (long only) fund offered by the QEG, is the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX), I would look at the weighting restrictions of that fund and use it as a baseline.

The annual and semi-annual reports mention restrictions on company weight, but doesn't give any details. I can't really look at it from here, but I I would compare the FTSE all world index country weights and the same for the VMVFX fund over time to see how much variation there was between the two.

https://personal.vanguard.com/us/faces/ ... ducts=true
It looks like they constrain tightly on country weighting by market cap. Comparing VMVFX to VT (Vanguard Total World) on M*, shows country weightings that match very closely.

They do not constrain on sector weights. Those vary widely compared to Total World. Global Min Vol is much higher in real estate, moderately higher in utilities and consumer defensive, and much lower in technology.

Global Min Vol has a much lower median market cap, with a much higher weighting in mid caps and far fewer giant caps. Global Min Vol's portfolio is higher quality and a bit more expensive than Total World's.

Global Min Vol has also crushed Total World in performance in Global Min Vol's 5 years in existence.

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Re: Vanguard New Factor Funds Portfolio Statistics

Post by jhfenton » Sun Dec 09, 2018 7:42 pm

gtwhitegold wrote:
Sun Dec 09, 2018 4:51 pm
Regarding VMVFX, I think that the sector biases are relatively baked in since technology is historically one of the most volatile sectors and real estate is one of the least. VFMFX also has significant significant sector biases however, so I believe that a similar international fund would have similar sector biases.
I agree. It's a reasonable guess than an ex-US multifactor fund would have some country restraints, but maybe not much else.

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