Vanguard International ETFs: a growth story

GlobaletfsponsorshareVanguard 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

Year Europe Pacific Emerging Markets
2016 68.29% 55.73% 71.35%
2015 72.27% 52.81% 70.06%
2014 67.09% 50.27% 73.07%
2013 69.90% 48.15% 74.68%
2012 57.01% 41.86% 79.02%
2011 36.07% 37.84% 78.27%
2010 37.84% 34.88% 74.75%
2009 21.01% 22.03% 59.33%
2008 10.14% 13.56% 35.98%
2007 8.27% 8.82% 24.33%
2006 5.16% 6.07% 14.60%
2005 1.26% 2.23% 6.48%

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
2016 56.40% 59.75% 79.24%
2015 55.47% 54.65% 79.78%
2014 55.61% 53.44% 81.59%
2013 55.56% 87.96% 80.95%
2012 54.49% 86.13% 86.67%
2011 50.86% 80.00% 81.44%
2010 52.34% 76.06% 76.33%
2009 63.16% 73.33% 78.30%
2008 69.57% 62.16%
2007 74.26% 20.83%

Global stocks

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
2016 69.39% 85.83%
2015 64.23% 84.42%
2014 63.70% 80.59%
2013 65.96% 81.25%
2012 71.43% 68.45%
2011 73.33% 62.98%
2010 69.23%

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

Year Total International
2016 2.84%
2015 2.64%
2014 2.53%
2013 2.03%
2012 1.51%
2011 0.82%

Google spreadsheet link


Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog

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Posted in international stocks, Vanguard
March 2017
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