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VWRl (Distributing) vs VWRA (Accumulating)

General discussions about growth strategies which focus primarily on investing for capital growth
GeoffF100
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475393

Postby GeoffF100 » January 22nd, 2022, 6:04 pm

If you plot the distributing and accumulating versions of a Vanguard ETF on the same graph with Morningstar, the lines are coincident as far as one can see, but there are tiny differences if you look at the legend. Sometimes the distributing fund wins, sometimes the accumulating fund. It depends on the time period. Morninstar does not have all the accumulating versions though. As I have said, the biggest issue is the wider spread of the accumulating versions (because they have less liquidity).

monabri
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475394

Postby monabri » January 22nd, 2022, 6:09 pm

Arborbridge wrote:
GeoffF100 wrote:
Arborbridge wrote:VWRP appears to perform slightly better than VWRL. Not sure why.

AJ Bell quotes exactly the same return for VEVE and the accumulating version last year. Morningstar showed VEVE as slightly ahead, over a slightly different time period (it only has closing prices). The two ETFs are separate shares, and can go to a small discount or premium before the Authorised Participants can fix it. I expect that is what is happening. The accumulating versions have not been around for long, so we do not have much data. Vanguard seems to want to hide them away.


The chart lines for VWRP and VWRL are slowly but surely diverging since the launch of VWRP.

Arb.



Ahaa...HL plotting tools now working!

Plotting over a 3 year period as (1) PRICE and then as (2) TR.

PRICE
Image

Total Return
Image

Total Return 1 year
Image



TBH - The Total Return graphs suggest that there is only so much jam...there doesn't appear to be that much of a divergence.

GeoffF100
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475395

Postby GeoffF100 » January 22nd, 2022, 6:15 pm

Arborbridge wrote:The chart lines for VWRP and VWRL are slowly but surely diverging since the launch of VWRP.

Not so. Currently, over 3 months VWRP wins. Over 1 year, VWRL wins. Over Max, VWRP wins. Discount and premium are the likely culprits:

https://www.bloomberg.com/quote/VWRL:LN

Premium/Discount: 1.23%
Average 52-week Premium 0.11%

(That will be for close of business yesterday.) VWRL is pricing shares in markets that are not open. What is the NAV? What is the discount/premium? These are very detailed technical questions.

mc2fool
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475406

Postby mc2fool » January 22nd, 2022, 6:58 pm

GeoffF100 wrote:
mc2fool wrote:
GeoffF100 wrote:
swill453 wrote:
TopOfDaMornin wrote:Surely if a person is growing their pot then the accumulating version is more beneficial?

It depends. If your shares are in a tax-sheltered account (SIPP, ISA) then there's a good argument for that.

But if in a general investment account, you still need to keep track of the notional dividends that are received, for Income Tax purposes. This is harder than it would be if you held the non-accumulating version.

No, the tax is slightly easier for the accumulating version in a GIA. You need to declare the Excess Reportable Income for both versions. You also have to declare the dividends for the distributing version, but not for the accumulating version.

What makes you think that? Dividends are taxed the same whether they are distributed or accumulated.

Yes, but the dividends are not distributed. For foreign domiciled reporting funds, they have to be declared as part of the Excess Reportable Income.

That the dividends are not distributed is by definition for an accumulation fund! But HMRC doesn't care if they're distributed or not; they still get taxed.

Are you saying that for a foreign domiciled accumulation fund with reporting status, that the (rolled up) dividends do not appear on the consolidated tax certificate issued by the holding broker, but instead the fund includes the amount of the (rolled up) dividends in their excess reportable income figure?

If so, then they are indeed taxed just as if they'd been distributed, and you still have to keep track of them for base-cost for CGT purposes, and the only difference is that instead of conveniently getting the figure from your broker's CTC you have to go digging to find the ERI figure for each fund...

GeoffF100
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475413

Postby GeoffF100 » January 22nd, 2022, 7:17 pm

mc2fool wrote:Are you saying that for a foreign domiciled accumulation fund with reporting status, that the (rolled up) dividends do not appear on the consolidated tax certificate issued by the holding broker, but instead the fund includes the amount of the (rolled up) dividends in their excess reportable income figure?

Yes, that is right. A simple calculation shows that everything tallies. I recently posted a calculation. (There was a tiny discrepancy, which, again was probably due to discount/premium. The share prices for the two shares are not the same, and you need to allow for that.)

mc2fool wrote:If so, then they are indeed taxed just as if they'd been distributed, and you still have to keep track of them for base-cost for CGT purposes, and the only difference is that instead of conveniently getting the figure from your broker's CTC you have to go digging to find the ERI figure for each fund...

You have to do that for the distributing version too, because that will also have ERI (usually but not always, and clearly smaller than for the accumulating version, because it does not include the dividends.) You can add that to the base cost in both cases. The only difference is that you do not have to bother looking at the CTC with the accumulating version. That should show the dividends as zero, if it shows them at all.

Everything is different for Vanguard's UK domiciled open ended funds, and different again for Vanguard's Ireland domiciled open ended funds. Vanguard and HMRC like to make it interesting.

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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475420

Postby kempiejon » January 22nd, 2022, 7:42 pm

mc2fool wrote:Are you saying that for a foreign domiciled accumulation fund with reporting status, that the (rolled up) dividends do not appear on the consolidated tax certificate issued by the holding broker, but instead the fund includes the amount of the (rolled up) dividends in their excess reportable income figure?


That's exactly the way I have come to understand it - though only recently. My vanguard holdings are now all sheltered, I only learnt about the excess reportable income a couple of years back and only held distributing version anyway. I thought only the accumulating versions would have any excess reportable income so held distributing version in my unsheltered avvounts. I hold both of the global funds now VWRL and VWRP both sheltered, and have chosen to go accumulating in a new ISA to trim fractions off my reinvestment fees - for a couple of years I had other vanguard funds unsheltered and didn't know I was neglecting to report income.

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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475423

Postby richfool » January 22nd, 2022, 8:21 pm

A question, - noting that the spread is greater on the accumulation fund than the distribution fund, would that make any significant difference if one made a single purchase and then didn't add or top up at all therafter? Or to put that another way, does the accumulation fund actually physically purchase more units (whereby the spread would be relevant), or just increase the value of the accumulation units?

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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475436

Postby GeoffF100 » January 22nd, 2022, 9:15 pm

richfool wrote:A question, - noting that the spread is greater on the accumulation fund than the distribution fund, would that make any significant difference if one made a single purchase and then didn't add or top up at all therafter? Or to put that another way, does the accumulation fund actually physically purchase more units (whereby the spread would be relevant), or just increase the value of the accumulation units?

The accumulation versions do not purchase more units, they just increase the value of the units. That is what makes reconciling the ERIs for the two share classes tricky. Buying in drips and drabs has the advantage that the discount/premium is likely to average out.

I am coming to the view that the accumulation versions are not such a great idea. They are less liquid (i.e. there is less trade in them). That makes the spread wider, and may also make the discount / premium wider. Vanguard is clearly hiding them away. Vanguard wound up its UK based factor funds and returned the money. That would not have been good if you had held them outside a tax shelter. You could lose more on poor prices than you gain from not paying FX commission. It is probably best to stick to the mainstream funds that Vanguard has on its own platform.

If you have big distributing ETF holdings, AJ Bell has a lot to recommend it. 0.5% FX commission on converting dividends. The other fees are reasonable for ETFs, and their customer service is good.

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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475439

Postby richfool » January 22nd, 2022, 9:38 pm

GeoffF100 wrote:
richfool wrote:A question, - noting that the spread is greater on the accumulation fund than the distribution fund, would that make any significant difference if one made a single purchase and then didn't add or top up at all therafter? Or to put that another way, does the accumulation fund actually physically purchase more units (whereby the spread would be relevant), or just increase the value of the accumulation units?

The accumulation versions do not purchase more units, they just increase the value of the units. That is what makes reconciling the ERIs for the two share classes tricky. Buying in drips and drabs has the advantage that the discount/premium is likely to average out.

I am coming to the view that the accumulation versions are not such a great idea. They are less liquid (i.e. there is less trade in them). That makes the spread wider, and may also make the discount / premium wider. Vanguard is clearly hiding them away. Vanguard wound up its UK based factor funds and returned the money. That would not have been good if you had held them outside a tax shelter. You could lose more on poor prices than you gain from not paying FX commission. It is probably best to stick to the mainstream funds that Vanguard has on its own platform.

If you have big distributing ETF holdings, AJ Bell has a lot to recommend it. 0.5% FX commission on converting dividends. The other fees are reasonable for ETFs, and their customer service is good.

Thanks for the clarification, Geoff.

I had been thinking of a holding of VEVE, but came across this thread which brought up the idea of VHVG. I would be holding it/them in my ISA, alongside my IT's. The idea would be to see how it compares with my IT's and as a benchmark to compare my overall portfolio against. I use X-O which involves no platform fees, just trading fees.

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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475446

Postby richfool » January 22nd, 2022, 10:06 pm

Incidentally, if Vanguard is an issue, LGGG is an alternative option with a lower OCR of 0.11 and a spread of 0.15%

GeoffF100
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Re: VWRl (Distributing) vs VWRA (Accumulating)

#475479

Postby GeoffF100 » January 23rd, 2022, 6:57 am

richfool wrote:Incidentally, if Vanguard is an issue, LGGG is an alternative option with a lower OCR of 0.11 and a spread of 0.15%

Vanguard has a much better reputation than any of the other fund managers, with the possible exception of BlackRock. Trackers from the others often have negative tracking errors that cannot be explained by their stated costs. HL currently quotes spreads of 0.07% for VWRL and 0.37% for VWRP. With AJ Bell, the hit on a year's dividend payments is about 0.007%.


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