Vanguard’s new global ETFs: how do they stack up?

The launch of three new exchange-traded funds (ETFs) from Vanguard has added to the list of options available to investors looking for diversified exposure to global markets.

The trio encompasses Vanguard FTSE Global All-Cap UCITS ETF, Vanguard FTSE Global Small-Cap UCITS ETF and Vanguard FTSE All-World ex-US UCITS ETF.

But how do these new products compare to existing ETFs of a similar type and do they offer anything new?

Vanguard FTSE Global All-Cap

Although there are already lots of global trackers available, the Vanguard Global All-Cap ETF differs from quite a few of them because it includes smaller companies alongside large and medium-sized ones.

Vanguard’s own FTSE All-World ETF, for example, only focuses on large- and mid-cap names. In practical terms, the difference is likely to be minimal because the FTSE Global All-Cap index, which the product tracks, is weighted by market valuation like the FTSE All-World index. Or in other words, the largest companies have the biggest bearing on movements in the index.

As the chart shows, the performance of the two indices has been almost identical.

A difference with some existing global ETFs is that the new Vanguard FTSE Global All-Cap ETF includes stocks from emerging markets rather than just developed markets. The MSCI World, for example, which a lot of global trackers follow, has an exclusive focus on developed market shares. As the same chart indicates, this index has slightly more variance in performance compared with the FTSE Global All-Cap.

On cost, Vanguard FTSE Global All-Cap ETF compares favourably with most of the current alternatives available to investors.

Vanguard FTSE Global Small-Cap and Vanguard FTSE All-World ex-US

The new small-cap-focused global ETF from Vanguard is entering a more limited universe of existing products. Smaller companies are often seen as having more capacity for growth but also come with higher risks attached.

The fees on this product are lower than most of the alternative options, many of which track the MSCI World Small Cap index, which unlike the FTSE Global Small Cap index does not include emerging markets.

Emerging markets are usually seen as riskier than developed markets, so this adds another layer of risk for investors to consider compared with most existing products.

The Vanguard FTSE All-World ex-US ETF taps into a growing trend of investors looking to invest in global stocks while excluding the US market. Many investors may already have US exposure elsewhere in their portfolio or for whatever reason want to avoid US shares.