I asked Vanguard - Which AUM is important for a fund's closure risk?

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OnTheVerge
Posts: 8
Joined: Sat Mar 20, 2021 5:49 am

I asked Vanguard - Which AUM is important for a fund's closure risk?

Post by OnTheVerge »

Hi,

Many non-US investors wants to buy the cheap accumulating VHVE (FTSE Developed World UCITS ETF, expense ratio: 0.12%) but afraid that the fund is too small and Vanguard might choose to close it in the future.

Share class assets: $105.2 M
Total assets: $1.1 B

I emaild Vanguard Denmark and asked which AUM is the one important for Vanguard when considering if a fund should be closed - the Share class assets or the Total assets. Vanguard representative responded that the Total Assets is the AUM metric to watch.
That means (IMO only) that you probably shouldn't worry about buying VHVE since its Total Assets AUM is quite high.

Me:

Hi,

Which AUM is important for Vanguard when choosing if a fund is too small and should be closed - the share class assets or the total assets?

For example, FTSE Developed World UCITS ETF:
https://www.vanguardinvestments.dk/port ... /?overview

Share class assets: $105.2 M
Total assets: $1.1 B

Thanks.

Vanguard's representative:


Hi **********,


Thank you for your message. We normally look at the total AUM for each product. So not only at the assets per share class.


Kind regards,

Wouter


Me again:
Hi, just to make sure that I understood correctly.

If the total assets are big enough, Vanguard has no reason to close only the accumulating version of a product (VHVE), even if it has a relatively low share class assets.

Right?

Vanguard's representative:
Yes that correct! But of course there is no guarantee. But normally we don’t close it.


Kind regards,

Wouter



Full diclosure: I hold VHVE, VFEA and VWRA.
Disclaimer: This is not a professional or financial advice and you alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information.
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David Jay
Posts: 14569
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: I asked Vanguard - Which AUM is important for a fund's closure risk?

Post by David Jay »

Sounds reasonable. It comes down to economies of scale and all of the various share classes contribute to the scale.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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