Will the expense ratio of VWRD ever drop? (NRA)

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pikaren3
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Will the expense ratio of VWRD ever drop? (NRA)

Post by pikaren3 » Sat Jan 27, 2018 12:44 am

Current expense ratios:

VWRD 0.25%
IWDA 0.20% (VWRD's main competitor on LSE, by iShares)
VT 0.11% (father of VWRD)

I understand VWRD is much smaller than IWDA in net assets, but the 0.25% expense ratio still bothers me, because Vanguard is supposed to be the front-runner in lowering expense ratios and 0.25% a year is quite a lot when you put half of your net worth into it. :oops:

I also wonder if should've just bought VT. After tax the yearly expense is probably slightly in favor of VWRD, but VT also provides a more complete exposure, smaller tracking error, superior liquidity, and etc.

Will Vanguard adjust the expense ratio in the future when VWRD grows larger? :annoyed

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asset_chaos
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by asset_chaos » Sat Jan 27, 2018 7:10 pm

Vanguard runs funds at cost. It doesn't lower expense ratios as a marketing tool, but, as assets rise, the economies of asset management scale are given to the fund's investors. M*.uk says vwrd has about US$1.7 billion and the investor share class of the mutual fund vtwsx has about US$1.6 billion. Headline expenses for vtwsx are 21 bp. Is it about 4 bp per year more costly to run a fund in the UK? I don't know. On the other hand, vtwsx started out 9 years ago costing 50-something bp. It's dropped 30-some bp in cost as it's put on 1.5 billion in assets. I don't know what the expense ratio path for vwrd as been, but it wouldn't surprise me if it had been similar.

Also, check the annual reports for vwrd. For vtwsx the latest annual report in the footnotes said the actual expense ratio for the previous year was 19 bp. It comes down regularly. Possibly vwrd follows a similar path.

I once made a graph of expense ratio vs assets for vtwsx and the investor share class of total stock market, but I don't know where that is now. Total stock started out with much lower cost, but total world reduced faster with asset growth, from memory.

Hang in there. The expense ratio will likely come down, and in the mean time you know you're just being charged whatever it costs to run the fund.
Regards, | | Guy

Geologist
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by Geologist » Sat Jan 27, 2018 7:19 pm

I'm not sure what you mean when you say "0.25% is quite a lot". What you should be worried about is the difference, since you can't get your investment for free (by the way, I don't know what the tickers mean; it is customary on this board to explain what funds these are).

The difference is 0.05% for the iShares competitor. The difference in dollars and cents is 50 cents per $1000 per year (or $50 per $100,000 per year). I don't know your currency, but this is really not a large amount.

stan1
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by stan1 » Sat Jan 27, 2018 7:34 pm

In the U.S. Vanguard has a history of passing economies of scale on to customers that results in declining expense ratios. iShares less so.

Consider Emerging Markets ETFs:
EEM: 0.69% with $45B in assets
VWO: 0.14% with $92B in assets

And even worse instead of lowering the expense ratio of EEM to compete with Vanguard iShares created a different ETF locking in the people who own EEM in a taxable account with a high expense ratio forever:
IEMG: 0.14% with $50B in assets

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asset_chaos
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by asset_chaos » Sat Jan 27, 2018 11:53 pm

I found the graph I mentioned above plotting expense ratio (in basis points) versus asset size (in billions of $) for the investor classes of total stock market index fund and total world index fund. Note the logarithmic x-axis. Data is derived from fund annual reports, and the expense ratio is the actual expenses reported in footnotes, not the headline er. Possibly also relevant---in what way I don't know---is that for total world the investor class mutual fund has only about 10% of total assets in the fund; the ETF share class holds about 70% of the total fund assets.

Image

Total stock started with a much larger asset base and a much smaller expense ratio, but the expense ratio didn't change much with asset growth. Total world started with much smaller asset base and a much higher expense ratio, but it fell rapidly. Expenses for both were about the same 20 bp after crossing the $1 billion mark.

Implications for the future; I don't know. As an investor in total world, I hope technology advances let Vanguard introduce lower cost admiral shares at a lower asset base for total world than that for total stock nearly 20 years ago.
Regards, | | Guy

Pinkllama
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by Pinkllama » Sun Jan 28, 2018 4:05 am

You are not comparing like for like.
IWRD is a developed world ETF.
VWRD is an all world (inc emerging markets) ETF.
Vanguard’s developed world ETF is VEVE.
It has a cost of 0.18%

Neus
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by Neus » Fri Mar 02, 2018 12:32 pm

I wonder about this too, how far does 0.15%-0.2% TER difference affecting portolio, it felt quite expensive compared to US domiciled counterpart especially with VTI only 0.04% TER, VXUS at 0.11% TER, and BND at 0.05% TER

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BeBH65
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by BeBH65 » Fri Mar 02, 2018 1:19 pm

Our wiki has a comparison after tax between VWRL/VWRD and its us-domiciled equivalent.

Please note that Vanguard Europe is not owned by its funds.

For Europeans it has become difficult to buy the us-domiciled funds due to European MIFID and PRIIPS regulations.
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

Neus
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by Neus » Sat Mar 03, 2018 9:17 am

BeBH65 wrote:
Fri Mar 02, 2018 1:19 pm
Our wiki has a comparison after tax between VWRL/VWRD and its us-domiciled equivalent.

Please note that Vanguard Europe is not owned by its funds.

For Europeans it has become difficult to buy the us-domiciled funds due to European MIFID and PRIIPS regulations.
Thanks

I want to try change the number with current real yield of VT, VWRD, VOO, VUSD.. Where is the most accurate source of yield rate of these ETF?

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BeBH65
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Re: Will the expense ratio of VWRD ever drop? (NRA)

Post by BeBH65 » Sat Mar 03, 2018 1:21 pm

I would start from the global.vanguard.com website to find the info on Vanguard funds.
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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