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?

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