Vanguard, the company behind the worldâs biggest emerging markets ETF, âVWO,â is broadening the scope of its Total World Stock Index Fund (NYSEArca:VT) by adopting a different FTSE benchmark that adds small-cap companies and deepens the securityâs penetration to global equity markets.
VT will now replicate the FTSE Global All Cap Index, a float-adjusted market-capitalization-weighted benchmark that tracks the performance of large-, mid- and small-cap stocks globally, capturing some 98 percent of the worldâs investable universe.
The ETF, which has about $963 million in assets, previously tracked the FTSE All-World Index, which provided exposure to about 97 percent of the worldâs investable equities universe. The index switch shouldnât result in any capital gains distributions, Vanguard said in a press release.
The index change means even broader exposure to a fund that already holds some 2,900-plus names around the globe. By comparison, VTâs closest competitor, the $1.95 billion iShares MSCI ACWI Index Fund (NYSEArca:ACWI), is a more optimized strategy and includes fewer than 1,100 securities.
VT, which has a total of $1.4 billion including assets wrapped in different open-end mutual funds, should also remain the cheaper of the two, costing ETF investors 0.25 percent in fees despite the index changeâACWI costs 0.34 percent. VTâs fees were slashed as recently as February from 0.30 percent to reflect greater efficiencies and economies of scale.
âThe fund now offers even broader exposure to the worldâs equity markets in a single, low-cost vehicle,â Vanguardâs Chief Investment Officer Gus Sauter said in the press release.
The Valley Forge, Pa.-based company offers a total of four ETFs that serve up âtotal marketâ exposure to both equities and fixed income.
Other than VT, Vanguard also offers the Total Stock Market Index Fund (NYSEArca:VTI) and the Total International Stock Index Fund (NYSEArca:VXUS), each essentially a subset of VT, one focused on the U.S. and the other on international equities.
The Vanguard Total Bond Market Index Fund (NYSEArca:BND) is a broad fixed-income portfolio.
Apple Inc., Exxon Mobil, IBM Corp. and Microsoft Corp. top VTâs holdings list, with the U.S. representing just over 40 percent of the portfolioâs country allocation.
Like all Vanguard ETFs, VT is a separate class of the same mutual fund. The other classes of VT are actual mutual funds and include so-called Investor Shares (VYWSX) and Institutional Shares (VTWIX). The mutual funds cost 0.45 percent and 0.23 percent, respectively, the company said.
While those fees remain the same, Vanguard said it is now eliminating a 0.25 percent purchase fee thatâs paid directly to the fund to cover stock purchasing costs, effective immediately.
âGiven the level of fund assets and transaction activity, new share purchases can be offset with shareholder redemptions,â the company said in a press release. âThis reduces net purchasing activity and results in lower transaction costs, thereby eliminating the need for the purchase fee.â
Vanguard is the U.S.â third-largest ETF provider, with $165 billion in assets under management, according to data compiled by IndexUniverse.
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