Low amount of volume for Bond ETFs(VAGU) on the LSE

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Badcatn
Posts: 9
Joined: Sun Jul 25, 2021 2:06 pm

Low amount of volume for Bond ETFs(VAGU) on the LSE

Post by Badcatn »

It seems like VAGU(Global Aggregate Bond UCITS ETF USD Hedged Accumulating) ETF traded on the London Stock exchange has a low trading volume.This ETF seems to have around $2.9B AUM and a TER of 0.10% however the trading volume appears to be quite low on some days with only around $200 or so traded and on some instances and only a few thousand dollars appear to be traded on other days!All of this according to the LSE Value-Daily section on the trade recap.I liked this ETF because it has exposure to Emerging markets bonds which I believe AGGU doesn’t have however I don’t know if I would choose VAGU because of its low trading volume.In addition it seems like the spread is somewhat higher for VAGU than it is for AGGU.
https://www.londonstockexchange.com/sto ... rade-recap

I was thinking about making a long term commitment to this VAGU ETF but it seems like it would be better perhaps to invest in AGGU(iShares Core Global Aggregate Bonds UCITS ETF USD hedged Accumulating) traded on the London Stock Exchange. This ETF has $5.5B AUM and a TER of 0.10% however it seems that in the Value-Daily section on the trade recap there appears to be a much higher trading volume with the lowest being $147k on the 13th of July.
https://www.londonstockexchange.com/sto ... rade-recap


Now it seems that both (VAGU and AGGU) Ireland domiciled ETFs have a low trading volume compared to US domiciled bond ETFs.In addition I also took a small sample (17Jun-20July) of the trading volume in US Dollars. If I was investing say $100k into either one would I have any problem with liquidity?I grabbed the data from the London Stock Exchange website.
Laurizas
Posts: 515
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: Low amount of volume for Bond ETFs(VAGU) on the LSE

Post by Laurizas »

Badcatn wrote: Fri Jul 30, 2021 1:42 pm It seems like VAGU(Global Aggregate Bond UCITS ETF USD Hedged Accumulating) ETF traded on the London Stock exchange has a low trading volume.This ETF seems to have around $2.9B AUM and a TER of 0.10% however the trading volume appears to be quite low on some days with only around $200 or so traded and on some instances and only a few thousand dollars appear to be traded on other days!
It is hard to believe that a fund with such AUM has so little trading volume, maybe it is not the full information? But to my mind it should not be a problem, check this article.
https://getmoneyrich.com/low-trading-volume-of-etfs/
It could be a problem when volatility occurs
viewtopic.php?t=317456
TedSwippet
Posts: 5166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Low amount of volume for Bond ETFs(VAGU) on the LSE

Post by TedSwippet »

Laurizas wrote: Wed Aug 04, 2021 3:38 am
Badcatn wrote: Fri Jul 30, 2021 1:42 pm It seems like VAGU(Global Aggregate Bond UCITS ETF USD Hedged Accumulating) ETF traded on the London Stock exchange has a low trading volume.This ETF seems to have around $2.9B AUM and a TER of 0.10% however the trading volume appears to be quite low on some days with only around $200 or so traded and on some instances and only a few thousand dollars appear to be traded on other days!
It is hard to believe that a fund with such AUM has so little trading volume, maybe it is not the full information?
My thoughts also. FT Funds shows historical data for these ETFs:

Vanguard Global Aggregate Bond UCITS ETF USD Hedged Accumulation, VAGU:LSE:USD historical prices - FT.com
iShares Core Global Aggregate Bond UCITS ETF USD Hedged (Acc), AGGU:LSE:USD historical prices - FT.com

There are some very low trade days for VAGU -- a few down in the hundreds -- but also plenty of healthy ones. AGGU volumes are noticeably higher, though its NAV is around 1/5 that of AGGU so you would expect this. Factor down by 5 still appears to show a higher average volume, though.

Overall, I don't think I would let the lower volume of VAGU dissuade me, but also there is also no cost saving over AGGU, and comparing performance, both are indistinguishable over one year (VAGU only launched in 2019, so five years comparison is not possible). Overall then, it doesn't appear to matter which you pick.
glorat
Posts: 1036
Joined: Thu Apr 18, 2019 2:17 am

Re: Low amount of volume for Bond ETFs(VAGU) on the LSE

Post by glorat »

Volume has been very low but that doesn't matter. What matters is liquidity as measured by the bid/ask spread. And that has been perfectly sensible any time I've looked. This is because "authorized participants" keep the market liquid by making the market - and if the spreads went too wide, it is an easy arbitrage opportunity. There is a Vanguard paper out there that explains volume doesn't matter for ETFs.

On the flip side, the iShares equivalent ETFs (e.g. AGGG and family) are even more liquid with tighter spreads so you would save maybe 0.05% by going that way. At that point, one is simply asking whether you prefer Vanguard or iShares
Post Reply