Japan's ETFs seem to be cheaper in Europe than US (!?)

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Astones
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Joined: Mon Apr 12, 2021 12:48 pm

Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by Astones »

I currently live in US and soon I will have to move back to Italy and so I'll have to spend a certain number of hours to understand all the technical differences in the ETF market between here and there.

During this research my attention was captured by noting that Vanguard offers an ETF called VJPN with incredibly small expense ratio. Then I dug a little bit and HSBC also offers an ETF that's rather cheap as well. Is there an easy explanation for why ETFs that are domiciled in Europe appear to have lower fees than their US counterpart ?

Everything else so far looked cheaper in US, expecially value-factor ETFs, the only other exception being Europe market ETFs (duh?).
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typical.investor
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Re: Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by typical.investor »

Astones wrote: Tue Apr 20, 2021 10:28 pm I currently live in US and soon I will have to move back to Italy and so I'll have to spend a certain number of hours to understand all the technical differences in the ETF market between here and there.

During this research my attention was captured by noting that Vanguard offers an ETF called VJPN with incredibly small expense ratio.
VJPN has a 0.15% ER - correct?

US domiciled BBJP has a 0.19% ER.
US domiciled FLJP has a 0.09% ER.

All have Large and Mid sized Japanese equities.
Topic Author
Astones
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Re: Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by Astones »

typical.investor wrote: Wed Apr 21, 2021 12:20 am
Astones wrote: Tue Apr 20, 2021 10:28 pm I currently live in US and soon I will have to move back to Italy and so I'll have to spend a certain number of hours to understand all the technical differences in the ETF market between here and there.

During this research my attention was captured by noting that Vanguard offers an ETF called VJPN with incredibly small expense ratio.
VJPN has a 0.15% ER - correct?

US domiciled BBJP has a 0.19% ER.
US domiciled FLJP has a 0.09% ER.

All have Large and Mid sized Japanese equities.
Thank you. My mistake was to look at IShare and assume the other ETFs would have similar ER.
alex_686
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Re: Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by alex_686 »

A couple of points. Make sure you are comparing apples to apples.

Compare the exact index to the exact index.

The larger the fund the greater are the efficiencies. The larger the fund family the greater are the efficiencies.

The cost structures are different, accounting methods are different, the regulatory burdens are different. I did expense accounting for mutual funds on the US side. I don't know how it is done in Europe but it has to be different. There are some compliance costs at the client and advisor level that the fund picks up in the US. Trading costs are not counted in the US. A decent portion of the ER is to cover regulatory stuff. I can't imagine that the costs between the 2 systems will line up.

I would expect that the {fund, brokerage account, advisor} expenses are broken down differently. The actual fund expenses must be different. How those expense are reported must be different. Then factor in the different withholding taxes for each jurisdiction.

So you are going to have to juggle all of those balls in the air to get the true cost of difference.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Astones
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Re: Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by Astones »

alex_686 wrote: Wed Apr 21, 2021 8:46 am
So you are going to have to juggle all of those balls in the air to get the true cost of difference.
I see. Yes, I was indeed expecting the issue to be rather complex.
I don't exclude that the solution might end up being to just buy ETFs tracking broader indices like total market, S&P500 and emerging markets, which should reduce the chances of missing something.

Thanks
alex_686
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Re: Japan's ETFs seem to be cheaper in Europe than US (!?)

Post by alex_686 »

Astones wrote: Wed Apr 21, 2021 9:46 am I don't exclude that the solution might end up being to just buy ETFs tracking broader indices like total market, S&P500 and emerging markets, which should reduce the chances of missing something.
I wouldn't let the tail wag the dog. The "expensive" funds are still very cheap. Focusing on your AA and getting passive funds to fill that roll.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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