Vanguard to close its factor funds

[dave559]

Vanguard is planning to close its factor funds:

We are writing to let you know of our plans to close our Factor UCITS ETFs on 23 February 2021:

o Vanguard Global Value Factor UCITS ETF [VVAL]
o Vanguard Global Momentum Factor UCITS ETF [VMOM]
o Vanguard Global Liquidity Factor UCITS ETF [VLIQ]
o Vanguard Global Minimum Volatility UCITS ETF [VMVL]

Closing a fund is never an easy decision and we understand you may be disappointed by this news. However, we believe it is in our clients’ best interests to focus on products that are more likely to attract economies of scale. After a review, we found that the above ETFs no longer meet this criteria.

We are committed to providing value and it is through economies of scale that we have been able to reduce the cost of investing, and continue to deliver this value to our investors.

(quote from message to customers)

[ralt]

Thanks Dave

Good riddance I say
my £5000 investment in VVAL was sold for £3700 after 4 years
just a simple world tracker like VWRL would have done much better
sometimes simple is better

but there is a chap (who I have seen several people on here recommend)
doing videos on youtube who reckoned this was as good as Fundsmith Equity OEIC

[daveh]

Well they haven't told me. Guess I'll have to see if there is any info on my broker site next week.

[OLTB]

I also have to make a decision on my VVAL holding. I was going to buy another ‘value’ etf but I think as I still have many years to retirement, may just go with an all world tracker. I just don’t know...

Cheers, OLTB.

[hiriskpaul]

I am not too surprised by this as they have not been popular and are expensive to run. The value factor ETF made it to only $170M, the other 3 only $120M in total. I would not be surprised to see them close their actively managed funds either as they are miniscule in comparison to their index funds. Active U.K. Equity Fund £15M, FTSE U.K. All Share Index Unit Trust £10B.

[hiriskpaul]

I bought VVAL in my childrens Lifetime ISAs in 2018. By far the worse performer since with a return of -5%. But value investing has had a very rough time for a few years now and the valuation gap between value and growth companies has become very stretched. I have not given up on the value factor and these portfolios have a 30+ year investment horizon, so plenty of time for the value factor to bounce back. I have had a quick look for alternatives and the obvious one is iShares Edge MSCI World Value Factor (IWFV for accumulation class, IWVG for dividend paying class). TER of 0.30%, but they make aroung 0.03% from stock lending. It is a $2.7B fund, so I would not expect it to go the same was as VVAL. The only difficulty is that Youinvest don't appear to have it listed! They have every other EDGE factor ETF, but not value.

[daveh]

No mention of anything happening to VVAL on my broker site - no corporate action notice, no secure message. Vanguard site says it is to close on 23rd Feb 21. I can find an RNS now that I've been an looked, but its not one that was sent to me. It doesn't say a lot and says look at the info sent to shareholders - not very useful as I've not been sent it and my broker hasn't posted it on their site yet. Not sure how I was supposed to find out about this - so thanks to the OP for posting. A search of the Vanguard site fails to find any info on the wind-up and liquidation of the factor funds other than it is happening.

So should I sell now or wait for the liquidation. I guess sell now as that removes any worries about the price achieved.

[torata]

So should I sell now or wait for the liquidation. I guess sell now as that removes any worries about the price achieved.

I don't know the details, not having received any direct info like you, but I think the only reason to sell now would be if you felt the VVAL would reduce in value between now and the windup date because 'value' is on a losing streak anyway.

I've had another ETF close on me in the UK in the past and I didn't do anything, and the money was put into my account.
I doubt that, even with the relatively large size (though not big enough) of these four funds, selling them would move the market, as Vanguard may well make internal sales, and the turnover of these factor funds was extremely high in any case.

torata

[Hariseldon58]

It’s been an odd one, I was quite hopeful in early 2016 with a first purchase but ....

I just took a look at my purchases and sales and I have been rather more active than I thought or should have been.
I have tucked in and out of this one, numerous times, in numerous accounts, buying between £14.58 and £27.88 ( ouch !!!!) and selling between £16.90 and £26.20

It is enlightening to look back and see how much more active I have been in respect to timing than I ever imagined, it’s not generally a good idea!
Fortunately it was a small holding, I seem to have had a typical balance of £110,000 between 2016 and 2019 and returned £37,000 o/a over the three years, not disastrous.

Looking at the period when I owned a substantial holding, Feb 2016 to Aug 2019 the return over that period was very close to the developed world index, Value was doing far better until September 2018, reached parity around August 2019 but then fell off a cliff in mid February this year and has seriously lagged since.

[daveh]

So should I sell now or wait for the liquidation. I guess sell now as that removes any worries about the price achieved.

I don't know the details, not having received any direct info like you, but I think the only reason to sell now would be if you felt the VVAL would reduce in value between now and the windup date because 'value' is on a losing streak anyway.

I've had another ETF close on me in the UK in the past and I didn't do anything, and the money was put into my account.
I doubt that, even with the relatively large size (though not big enough) of these four funds, selling them would move the market, as Vanguard may well make internal sales, and the turnover of these factor funds was extremely high in any case.

torata

I couldn't find any info on the Vanguard site for personnel investors - its seems we are too stupid to understand complicated information like how they are going to close out shares we hold (under the MiFID regulations) so they aren't going to tell us. I found the letter fairly easily on the bit of the website aimed at advisors. It gives some useful info on timings of what will happen particularly if you still hold on the redemption date and also warns about possible poor tracking error if there are a lot of redemptions in advance of the closure date in February. I sold last week.

[torata]

I found the letter fairly easily on the bit of the website aimed at advisors. It gives some useful info on timings of what will happen particularly if you still hold on the redemption date and also warns about possible poor tracking error if there are a lot of redemptions in advance of the closure date in February. I sold last week.

I had a search out of interest on the advisor site, but couldn't find any info other than a small banner on their respective pages to say the ETFs would be closed.
Where did you find it?

torata

[daveh]

I found it on the funds page.
https://www.vanguard.co.uk/adviser/inve ... ctType=etf

There is a link to announcements in the message at the top which takes you to this page:
https://global.vanguard.com/portal/site ... ouncements
and the letter is there.
https://global.vanguard.com/documents/v ... v-2020.pdf

I know why they didn't send it to me - I'm not on the share register as I held it in my ISA. It would have been good if it had been easy to find though as it contains some useful info. As of last week there was no corporate action notice on my account (there won't be now as I've sold out), I wonder when I would have found out - or would it be in February when they disappeared from my account to be replaced by cash a couple of weeks later.

Thanks to the OP for posting, because otherwise I might never have noticed until the cash appeared (or a corporate action notice appeared on my account). I don't check the Vanguard site that often particularly for VVAL as it was accumulating so need to check for distributions. If I had the closure was prominent on the main VVAL page (though the letter with details was harder to find).