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When VWRL is VWRP

Index tracking funds and ETFs
Newroad
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When VWRL is VWRP

#466483

Postby Newroad » December 16th, 2021, 7:41 pm

Hi All.

This is not directly related to Shonky's "When is VWRL not VWRL" post, but it seemed a good title to piggy-back on :)

For largely administrative reasons, today, I sold all VWRL (the distributing version of the ETF) in my wife and my SIPP's and repurchased VWRP (the accumulating version). I sold VWRL at c£92.26 (closing price £91.62) and bought VWRP at c£88.15 (closing price £87.71). The trades were "free" (in that the commission was covered by credits from my II subscription). The buying versus selling price ratio was approximately 95.55% and the matching closing price ratio was approximately 95.73%, so, if anything, I may have marginally profited from the trade thus far, though this was an accidental nominal gain if so.

My main reason for doing this was to avoid the USD distributions (dividends) from VWRL - even if for only not having to remember to convert them to GBP once a quarter for reinvestment (yes, there is a transaction cost as well, but this is a percentage of a percentage, so doesn't bother me that much). Like I said above - administrative reasons.

I haven't done it yet, and may not, for the same holdings in the ISA's and JISA's - they are not allowed to hold USD, so II automatically converts the distributions into GBP from USD.

I thought this may be of interest to some - indeed, it wasn't that long ago that I discovered VWRP existed.

Regards, Newroad

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Re: When VWRL is VWRP

#466490

Postby swill453 » December 16th, 2021, 7:55 pm

Newroad wrote:For largely administrative reasons, today, I sold all VWRL (the distributing version of the ETF) in my wife and my SIPP's and repurchased VWRP (the accumulating version). I sold VWRL at c£92.26 (closing price £91.62) and bought VWRP at c£88.15 (closing price £87.71). The trades were "free" (in that the commission was covered by credits from my II subscription). The buying versus selling price ratio was approximately 95.55% and the matching closing price ratio was approximately 95.73%, so, if anything, I may have marginally profited from the trade thus far, though this was an accidental nominal gain if so.

I'm not really sure what you're getting at here. There's no real relationship between the VWRL price and the VWRP price. The latter will tend to increase over time more than the former, because of the accumulated dividends. But the different between the share price of each is meaningless.

Scott.

Newroad
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Re: When VWRL is VWRP

#466525

Postby Newroad » December 16th, 2021, 8:41 pm

Hi Scott.

As I hope was obvious, I wasn't trying to arbitrage (or by any other means) secure a nominal profit - quite the opposite - I was more worried about losing money on the transaction. Even ETF's have spreads.

However, on the side matter which I brought up and you are focussing on, the quarterly distribution of VWRL vs non-distribution of VWRP over a given day will have around either a 1/90th or so effect (if it's based on all days) or a 1/65th or so effect (if it's based on working days). I haven't bothered doing the precise numbers to see if this factor might account for the nominal 0.18% "relative improvement" by days end - as I don't really care. However, instinctively I would say it's not big enough to explain it away - and I may just have been marginally lucky to trade at the prices I did.

My main points were and remain

    (1) Some people may not know VWRP exists, and if they don't
    (2) They may find is useful, like me, to avoid the admin/costs of receiving USD distributions

Regards, Newroad

PS I think there is a relationship between the VWRL and VWRP prices - subject to the accumulation towards the distribution in VWRL we both observe.

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Re: When VWRL is VWRP

#466531

Postby GeoffF100 » December 16th, 2021, 9:10 pm

On the LSE website at the moment, the spread of VWRL works out at 0.065%, whereas the spread of VWRP works out at 0.137%. VWRL usually has a spread about half that of VWRP. Spread is mostly determined by liquidity and volatility. Clearly, the volatility for the two funds will be the same, so the difference in the spreads is due to the difference in liquidity. VWRL has the larger market cap and larger liquidity. Higher liquidity might also reduce the likely discount / premium to NAV, but I have not investigated that. The Vanguard platform supports the income versions of the Vanguard ETFs, but not the accumulating versions.

I have read that the II website is almost the same as the old TD Direct website, which offered the choice of multi-currency accounts and automatic conversion to GBP, if I remember correctly

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Re: When VWRL is VWRP

#466533

Postby Newroad » December 16th, 2021, 9:21 pm

Indeed, Geoff.

That was my prior understanding too (although I would say VWRP was quite liquid, so wouldn't expect the difference to be great).

Rebasing my VWRP purchase into VWRL sale terms (multiply by c1.0466) the VWRP closing price was the equivalent of c£91.80 (versus VWRL's closing price of £91.62).

I recall at the time I purchased VWRP that the price I paid was closer to the bid rather than offer quote (I could be remembering this wrong, but the bid offer spread that II was quoting at the time might have been £88.14 to £88.20 and I paid a little over £88.15. Like I said, I was probably just fortunate. It might also simply reflect an anomaly in the closing price auction.

However, I am fairly sure I haven't lost out badly, if at all, from making the switch - which was the main hope.

Regards, Newroad

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Re: When VWRL is VWRP

#466662

Postby Newroad » December 17th, 2021, 8:51 am

Hi All.

As a purely academic exercise, just redoing the rebasing with latest prices.

    VWRP = £91.04 (86.99 * 1.0466)
    VWRL = £91.13

To be honest, that feels about right to me (losing very slightly on either the transactions and/or the daily accumulation towards a distribution for VWRP). It's about what I would have hoped for when doing the transactions - a c0.1% charge.

So, the nominal gain last night was probably just a closing auction anomaly or similar.

Regards, Newroad

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Re: When VWRL is VWRP

#466782

Postby Rajput1962 » December 17th, 2021, 2:10 pm

I posted a query some months ago about whether there was any disadvantage to being paid the VWRL divi in $ and then converting to £ before being able to reinvest in more VWRL in a non-ISA account with ii. I concluded that any 'extra conversion loss' was relatively small but at the same time thought that maybe ii's 'free trade' from the monthly credits provided some 'compensation'. I haven't worked out yet whether i am truly benefitting from the move to ii from Equinity or not. Probably not ie it will end up costing more.

However, i do have some VWRL in my ii ISA - but i don't know if there's a 'cost' to holding VWRL as opposed to VWRP because of ii's 'free trade' credit thingy. :?

The other reasion for any inaction is that i like the 'flexibility' of being able to sell VWRL and know the exact price at point of transaction rather than waiting until the next day because VWRP is a fund. Maybe this is just sentiment?

I agree with the OP that holding VWRP lessens admin so i expect i'll change at some point. It's not so much for me as it might be for any beneficiaries because my belief is that VWRP remains fully invested unlike VWRL which would leave dividends in cash until any estate is settled, which i'd like to think is still a long way off!

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Re: When VWRL is VWRP

#466787

Postby GeoffF100 » December 17th, 2021, 2:19 pm

Rajput1962 wrote:The other reasion for any inaction is that i like the 'flexibility' of being able to sell VWRL and know the exact price at point of transaction rather than waiting until the next day because VWRP is a fund.

VWRP is an ETF. You know the exact price when you trade.

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Re: When VWRL is VWRP

#466790

Postby Newroad » December 17th, 2021, 2:23 pm

Hi Rajput1962.

To confirm what Geoff wrote - VWRP, like VWRL, is an ETF (not a fund) - the only difference is that VWRP is an accumulating one, VWRL a distributing one.

When I did my switch, it took a couple of minutes (maybe five minutes if you count me checking the current quotes before the sell and then the buy).

Regards, Newroad

PS The VWRL in your ISA will auto-convert the distribution from USD to GBP (as you can't hold the former in an ISA). I'm guessing it's done at the same rate as if it were done manually, but I don't know that for sure.

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Re: When VWRL is VWRP

#467301

Postby Rajput1962 » December 19th, 2021, 3:27 pm

GeoffF100 wrote:
Rajput1962 wrote:The other reasion for any inaction is that i like the 'flexibility' of being able to sell VWRL and know the exact price at point of transaction rather than waiting until the next day because VWRP is a fund.

VWRP is an ETF. You know the exact price when you trade.


Ah, sorry yes, my 'bad'. I momentarily confused VWRP with FTSE Global All Cap, which is a fund. :oops:

I swapped VWRL for FTSE Global All Cap in my Vanguard ISA because Vanguard doesn't offer VWRP on its platform and i didn't want the admin of VWRL dividends, but ii does offer VWRP, which as you correctly point out is an ETF.


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