Comparing VWRA with IWDA+EMIM combination

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BeBH65
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Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Tue Aug 13, 2019 1:14 pm

Vanguard has started a an accumulating version VWRA of their Vanguard FTSE All-World UCITS ETF all world funds.
This opens perspectives for investor prefering accumulating fund.

Until now they turn to other fundproviders.
The combination of IWDA - iShares Core MSCI World ETF USD Acc and EMIM - iShares Core MSCI EM IMI ETF USD Acc is popular.

I would like to analyse if switching to VWRA would make sense.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Tue Aug 13, 2019 1:48 pm

VWRA is really new, but the distributing version already exists since 2012. Both have an ER of 0,25%. Fund started in 30/04/2012
Based on Morningstar, looking at the asset split between developped markets and emerging markets it looks like a combination of 87% IWDA and 13% EMIM would be very similar in regional splits as well as style box. The ER of these funds are 0,20 and 0,18% respectively.
The Total return grapsh also look roughly the same.

Would this be a correct comparison?

If I compare the total return of both using Morningstr Xray, I see that 10K Euro invested on 30/04/2012 would have following returns:
- Portfolio1: 22,831.58
- Vanguard FTSE All-World UCITS ETF: 21,917.12

Could one conclude from this that the difference in ER leads to a difference of 900 Euro over this period?
IS this significant?
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Sinsji
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Re: Comparing VWRA with IWDA+EMIM combination

Post by Sinsji » Tue Aug 13, 2019 3:30 pm

After gave advise on my personal plan, I found out about VWRA on this forum as well: (viewtopic.php?f=22&t=287965).

Currently I've got IWDA and EMIM.

The little link below compares iShares MSCI World ETF (88%) + iShares Core MSCI Emerging Markets ETF (12%) with 100% VT between Jan 2013 - Jul 2019. The difference is 16 dollar on a total of 17,693 for iShares vs 17,709 for VT. So the clear winner in this one is Vanguard. :happy
Couldn't find IWDA, EMIM and VWRD on portfolio visualizer.

https://www.portfoliovisualizer.com/ba ... 0&total3=0

silverex
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Re: Comparing VWRA with IWDA+EMIM combination

Post by silverex » Wed Aug 14, 2019 2:21 am

BeBH65 wrote:
Tue Aug 13, 2019 1:48 pm
VWRA is really new, but the distributing version already exists since 2012. Both have an ER of 0,25%. Fund started in 30/04/2012
Based on Morningstar, looking at the asset split between developped markets and emerging markets it looks like a combination of 87% IWDA and 13% EMIM would be very similar in regional splits as well as style box. The ER of these funds are 0,20 and 0,18% respectively.
The Total return grapsh also look roughly the same.

Would this be a correct comparison?

If I compare the total return of both using Morningstr Xray, I see that 10K Euro invested on 30/04/2012 would have following returns:
- Portfolio1: 22,831.58
- Vanguard FTSE All-World UCITS ETF: 21,917.12

Could one conclude from this that the difference in ER leads to a difference of 900 Euro over this period?
IS this significant?
Good topic, I'm also wondering whether to switch new money to VWRA. It would be good to see how Portfolio1 and Portfolio2 contents differ - maybe by country, but I don't have the tools for that. Of course, all differences would be small enough to make a big impact on returns. Also, I don't have the data how ER for all ETFs was changing since 2012 - wasn't IWDA and EMIM more expensive at the start?

Regarding ER, it's only a target ratio that funds strive to achieve, and the difference with target is called tracking error. All 3 ETFs use optimized sampling replication method, that means they don't buy all the securities anyway. iShares does have a better economy of scale at this point, however Vanguard has the knowledge and experience from US funds for optimized fund management regarding transactions, taxes, and share classes.

At this point, other considerations might be important. iShares at least once, instead of lowering TER of iShares MSCI World UCITS ETF, opened a cheaper iShares Core MSCI World UCITS ETF, leaving investors money tax-locked in expensive funds. It's always a possibility they'll do the same with current funds. To be fair to iShares, many other fund managers, incuding Lyxor, X-trackers, did similar things. Vanguard, on the other hand, does not do that.

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Aug 15, 2019 7:16 am

Sinsji wrote:
Tue Aug 13, 2019 3:30 pm
After gave advise on my personal plan, I found out about VWRA on this forum as well: (viewtopic.php?f=22&t=287965).

Currently I've got IWDA and EMIM.

The little link below compares iShares MSCI World ETF (88%) + iShares Core MSCI Emerging Markets ETF (12%) with 100% VT between Jan 2013 - Jul 2019. The difference is 16 dollar on a total of 17,693 for iShares vs 17,709 for VT. So the clear winner in this one is Vanguard. :happy
Couldn't find IWDA, EMIM and VWRD on portfolio visualizer.

https://www.portfoliovisualizer.com/ba ... 0&total3=0
Thank you for your feedback.

I like portfoliovizualiser a lot. It is unfortunate that it does not cover the non-US UCITS ETFs.
Good suggestion to add some extra data points. I will make a table below comparing the returns of several alternatives. I will make the comparison in Euro
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Aug 15, 2019 7:20 am

silverex wrote:
Wed Aug 14, 2019 2:21 am
Good topic, I'm also wondering whether to switch new money to VWRA. It would be good to see how Portfolio1 and Portfolio2 contents differ - maybe by country, but I don't have the tools for that. Of course, all differences would be small enough to make a big impact on returns. Also, I don't have the data how ER for all ETFs was changing since 2012 - wasn't IWDA and EMIM more expensive at the start?

Regarding ER, it's only a target ratio that funds strive to achieve, and the difference with target is called tracking error. All 3 ETFs use optimized sampling replication method, that means they don't buy all the securities anyway. iShares does have a better economy of scale at this point, however Vanguard has the knowledge and experience from US funds for optimized fund management regarding transactions, taxes, and share classes.

At this point, other considerations might be important. iShares at least once, instead of lowering TER of iShares MSCI World UCITS ETF, opened a cheaper iShares Core MSCI World UCITS ETF, leaving investors money tax-locked in expensive funds. It's always a possibility they'll do the same with current funds. To be fair to iShares, many other fund managers, incuding Lyxor, X-trackers, did similar things. Vanguard, on the other hand, does not do that.
I use Morningstar, more particularly morningstar XRay on a self defined portfolio to look at composition and performance.
I think I succeeded in getting a good match>

It is true that the ER is only the published cost, next to it there are some extra internal costs, and some income (e.g. securities lending).
This is one of the reasons why I want to do this exercise to look at the real return.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

DJN
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Re: Comparing VWRA with IWDA+EMIM combination

Post by DJN » Thu Aug 15, 2019 7:31 am

Hi,
thanks for pointing this one out. I have added VWRA (+ VWRP and VWCE) to Wiki page on suggested options for accumulating Boglehead portfolios for non-US investors: https://www.bogleheads.org/wiki/Buildin ... _investors
DJN
Yah shure

Schlabba
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Re: Comparing VWRA with IWDA+EMIM combination

Post by Schlabba » Thu Aug 15, 2019 8:31 am

DJN wrote:
Thu Aug 15, 2019 7:31 am
Hi,
thanks for pointing this one out. I have added VWRA (+ VWRP and VWCE) to Wiki page on suggested options for accumulating Boglehead portfolios for non-US investors: https://www.bogleheads.org/wiki/Buildin ... _investors
DJN
I appreciate your updates to the wiki, but I think its getting out of hand.

The title of the section says ‘sample portfolio’ and the table says ‘Suggested Portfolio 1 - accumulating’ but it is not a suggested portfolio you should follow, it is now a list of 9 etf’s which meet the right criteria for being part of a portfolio.

Can you mention the list of etf’s separately from 2 (acc and distr) sample portfolio’s?
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

DJN
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Re: Comparing VWRA with IWDA+EMIM combination

Post by DJN » Thu Aug 15, 2019 8:52 am

Hi,
thanks for the helpful suggestion. The next step would be to carve out some suggested portfolios where the etfs are grouped.
Maybe I will get some time later this week.
thanks again for your input.
DJN
Yah shure

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Aug 15, 2019 8:55 am

Goal of the comparison: determine if it would make sense to replace to replace the often advised IWDA+EMIM combo by the new VWRA.
Assumption: 'costs matter" VWRA has a ER of 0,25% the ishares combo 0,20% hence oe would expact the ishares fund to have a slightly higher total return.
Methodology: Use Morningstar to create different portfolios and compare the results via XRAY.
notes:
XRAY has results until the end of July. So without the decline of this month.
We have performance results of the funds going back until 31/12/2012. Hence we do not have any info on behaviour during a crash.
It is assumed that neither of this matters in the comparison.

VWRA is really new. It is the accumulating version of VRWL/VWRD. Follows the FTSE All-World index
Morningstar Style box is
28 29 27
05 05 03
00 00 00
Regional split key numbers
Europe 22,1
USA 53,8
Emerging Asie (4 tigers) 4,4 and (ex 4 tigers) 6,0

ER is 0,25%


Combination of 87,5% IWDA and 12,5% EMIM Follows the MSCI indexes - EMIM tracks the IMI index
Similar style box as VWRA, similar regional split with higher USA (55,5 vs 53,8)
Combined ER is 0,20% (0,20% and 0,18%)

Combination of 87,5% IWDA and 12,5% IEMA
IEMA is the non-core version of EMIM. It tracks MSCI EM. ER is 0,68%
Added to this comparison to validate the impact of higher ER.
Similar style box as VWRA, similar regional split with higher USA (55,3 vs 53,8)
Combined ER is 0,26% (0,20% and 0,68%)

100% VT Vanguard Total World Stock Index Fund ETF Shares follozing qn index "inspired" on FTSE
US domiciled fund -- might not be available for European investor. Is a distributing fund.
slightly lower % in EM, USA is 54,4%, Europe is 21,3%
Stylebox includes 5% small caps
ER = 0,09%

As this is a US domiciled fund dividend taxation will be different then for the Ireland based funds.
Level 1 taxation is controlled by the tax treaties between the US and the countries of the assets; compared with the Irish tax treaties for Irish funds. The impact of this is included in the published results.
Level 2 taxation: Ireland does not have any level 2 taxation. For US funds this is 30% or

87,5% URTH and 12,5% IEMG MSCI indexes
US domiciled funds -- might not be available for European investor. Is a distributing fund.
slightly lower % in EM, USA is 55%, Europe is 21,3%
ER = 0,23%

Comparison

Code: Select all

 ER  | 3yr | 5yr |oct | Fund
     |     |     | 2012| 
0.25 |10.49|10.54|21451| VWRD
0.20 |10.6 |10.58|22097| IWDA+EMIM
0.26 |10.6 |10.58|21377| IWDA+IEMA
0.23 |10.48|08.9 |21445| URTH + IEMG
0.09 |10.20|10,58|21573| VT
ER: published expense ratio
3yr: 3 year total return as reported by Morningstar Xray
5yr: 5 year total return as reported by Morningstar Xray
Oct2012: total return growth of 10000 Euro since 31/10/2012 until 31/07/2019


My conclusions: The difference is small. The ER seems to be a good predictor of the performance.
US funds underperform - not sure why? maybe the result of differences in the L1 taxation
Last edited by BeBH65 on Thu Aug 15, 2019 11:12 am, edited 1 time in total.
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glorat
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Re: Comparing VWRA with IWDA+EMIM combination

Post by glorat » Thu Aug 15, 2019 10:23 am

There's a key difference that's not been mentioned. VWRD/VWRA don't have small caps, whereas all the other ones do.

Since we're talking about global market cap weighted, missing out small caps doesn't have a significant effect on returns but missing them will cause noise in returns in the similar range as the expense ratio. In other words, trying to compare past returns of all these combos is fairly meaningless for predicting future relative returns - sometimes those small caps will add +0.25% (or more), sometimes they will cause -0.25% (or more)

Instead, you'll just have to by looking at the portfolio. Accept that small caps are missing from VWRA. Accept that ER is slightly higher. Accept the benefits of having only a single fund to manage (both time and transaction cost). Factor in the intangible Vanguard corporate structure benefit. That's all I'd consider.

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Aug 15, 2019 11:11 am

Well according to Morningstar the only combination that had a real amount of small caps is VT, as mentioned. All the other combinations show 0% small caps in the Morningstar xray. Presumably the small amount of small caps that the EMIM is dwarfed by all the other assets.

Note that M* defines small cap as the lower 10% of the market.
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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Wed Aug 21, 2019 8:16 am

Vanguard seems to have completed their offering on the Accumulating All-world UCITS ETF with Euro en GBP version.

Naam Ticker Valuta
Vanguard FTSE All-World ETF USD Acc LSE:VWRA USD
Vanguard FTSE All-World ETF USD Acc EUR XTER:VWCE EUR
Vanguard FTSE All-World ETF USD Acc EUR FRA:VWCE EUR
Vanguard FTSE All-World ETF USD Acc GBP LSE:VWRP GBP
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Re: Comparing VWRA with IWDA+EMIM combination

Post by vstariradev » Thu Aug 29, 2019 10:39 am

I want to thank BeBH65 for going through the numbers for us to compare the two options.

I want to add 3 other factors we should consider. Tracking errors, commission fees when buying 2 ETFs and differences in indexes tracked.

AFAIK tracking errors can introduce differences in the funds returns so it’s possible any advantage in TER to be eliminated them. See tracking differences section in these two links
https://www.trackinsight.com/fund/IE00B ... _perf,flow

https://www.trackinsight.com/fund/IE00B ... _perf,flow
I know the number of companies they cover is different but I’m trying to make a point that tracking errors matter.


I remember a discussion on the forum some time ago comparing the differences in the way FTSE and MSCI track countries. Essentially we must treat them as funds tracking two different indices.

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Aug 29, 2019 1:14 pm

Indeed tracking difference and tracking error matter.
Here is some info: https://www.etf.com/etf-education-cente ... error.html
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Re: Comparing VWRA with IWDA+EMIM combination

Post by thibaulthib » Thu Sep 19, 2019 9:19 pm

BeBH65 wrote:
Thu Aug 15, 2019 8:55 am
Goal of the comparison: determine if it would make sense to replace to replace the often advised IWDA+EMIM combo by the new VWRA.
Assumption: 'costs matter" VWRA has a ER of 0,25% the ishares combo 0,20% hence oe would expact the ishares fund to have a slightly higher total return.
Methodology: Use Morningstar to create different portfolios and compare the results via XRAY.
notes:
XRAY has results until the end of July. So without the decline of this month.
We have performance results of the funds going back until 31/12/2012. Hence we do not have any info on behaviour during a crash.
It is assumed that neither of this matters in the comparison.
BeBH65 could you please provide the right Morningstar Xray website that you are using to do so?

I've only found the 2 following, but it doesn't seem to match:
https://www.morningstar.com/instant-x-ray
https://www.morningstar.com/InvGlossary ... x-ray.aspx

Thank you!

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Sep 19, 2019 9:57 pm

There are differences in the regional Morningstar sites. In addition some sites (i.e. us one) seem to be undergoing an update.

Here is how it works on the .be site:
- on the home page there is a tab portfolio.
- when you sign in you can make up to 5 portfolio's. A portfolio has a benchmark.
- on the portfolio section there is a tab xray. This will generate a report in the composition of your portfolio at the end of precious month including: sectorsplit, styleboxes, overlap between the positions. There is also a graph that visualizes the performance of the portfolio.

Using this allows you to analyse the IWDA+EM portfolios and then compare with the one fund portfolios.

Our wiki has a very short info that might help you: https://www.bogleheads.org/wiki/Tools_a ... olio_tools
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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Re: Comparing VWRA with IWDA+EMIM combination

Post by thibaulthib » Fri Sep 20, 2019 9:54 am

BeBH65 wrote:
Thu Sep 19, 2019 9:57 pm
There are differences in the regional Morningstar sites. In addition some sites (i.e. us one) seem to be undergoing an update.

Here is how it works on the .be site:
- on the home page there is a tab portfolio.
- when you sign in you can make up to 5 portfolio's. A portfolio has a benchmark.
- on the portfolio section there is a tab xray. This will generate a report in the composition of your portfolio at the end of precious month including: sectorsplit, styleboxes, overlap between the positions. There is also a graph that visualizes the performance of the portfolio.

Using this allows you to analyse the IWDA+EM portfolios and then compare with the one fund portfolios.

Our wiki has a very short info that might help you: https://www.bogleheads.org/wiki/Tools_a ... olio_tools
Thanks ! Awesome, indeed Xray is only proposing the LSE ETFs on the .be website, but not on the .com one!

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Re: Comparing VWRA with IWDA+EMIM combination

Post by buf » Thu Oct 10, 2019 7:18 am

Now that the dust has settled a bit, what were your final decisions regarding above two choices and what was the reasoning that finally persuaded you to choose one over the other?

For those who are only starting to build up a portfolio, which option did you chose?

For those who already had considerable amounts of IWDA+EMIM, did you move the assets over to VWRA? Did you decide to stay with IWDA+EMIM? If you had the option to move from IWDA+EMIM to VWRA without incurring any taxes, fees and etc. would you do it? Why?

For those who are simply passing by and have no interest in any of above ETFs, which option attracts you more and why?

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Re: Comparing VWRA with IWDA+EMIM combination

Post by BeBH65 » Thu Oct 10, 2019 7:50 am

Personally I am currently staying with IWDA+EMIM.
I see no compelling reason to switch, the difference in ER confirms to me that my choice is good.
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thibaulthib
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Re: Comparing VWRA with IWDA+EMIM combination

Post by thibaulthib » Thu Oct 10, 2019 8:25 pm

Same here : IWDA + EIMI. It's only 2 ETF, very easy to manage :-)

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