Vanguard has an extensive selection of international index exchange-traded funds (ETFs). The firm has added ETF share classes to a number of its long standing international funds (Europe, Pacific, Emerging Markets, Developed Markets, and Total International). It has also introduced new funds with both investor and ETF shares.
Vanguard exchange-traded funds are unique in that the ETFs are structured as a share class of a mutual fund and not as a standalone entity. This structure allows us to view asset flows and asset growth by means of the ratio of ETF share assets to total fund assets.
The trend of growing ETF investment in the funds is predominate in most funds. The FTSE all World ex US fund runs counter to this trend as investment in low cost admiral and institutional shares has outpaced investment in ETF shares since the introduction of these share classes to the fund.
Regional international stocks
Vanguard offers three regional international index funds. ETF shares were introduced in 2005. All three funds have exhibited significant investor interest in ETF shares. ETF shares are now the dominant share class holding in each fund.
Table. International Regional Funds
FTSE international stocks
The FTSE international stock indexes include the FTSE all World ex US and FTSE all World ex US small cap funds, both of which offered an ETF share class when the funds were inaugurated. The FTSE all World ex US fund also possesses investor, admiral, and institutional shares. The FTSE small cap fund possesses investor and institutional shares, but does not issue admiral shares. As is common with funds lacking low-cost admiral shares, investor interest in the ETF shares remains high.
The FTSE Developed market fund added ETF shares to the fund in 2007 when it was a standalone tax managed fund. When the exclusively mutual fund share Developed Market Index was merged into it in 2014, the ETF share of the combined portfolio naturally dropped. ETF shares purchases have continued to outpace mutual fund share purchases since the merger.
Table. FTSE International Funds
|Year||FTSE All ex-US||FTSE Developed||FTSE All ex-US Small|
Vanguard offers two global stock index funds: The Total World fund and a Global ex US Real Estate Fund. The Total World fund does not offer low-cost admiral shares, and the Global ex US Real Estate fund imposes purchase and redemption fees on mutual fund purchases. The level of ETF share in the fund asset base is likely due to investor preference for lower costs.
Table. Global Funds
|Year||Total World||Global ex-US RE|
Total international stocks
The Vanguard Total International fund was introduced well before the advent of exhange-traded funds and thus possesses a legacy of a large mutual fund share clientele. In addition the fund is used as an allocation in target retirement and lifestrategy funds and receives infusions of investor cash into its investor class mutual fund shares as a result of investor investment in these fund-of-fund portfolios.
Vanguard added ETF shares to the fund in 2011. While remaining a small part of the huge fund’s asset base, the ETF share growth has outpaced all other share classes over its life span.
Table. Total International Fund