You might be sitting back and considering the Vanguard Ethically Conscious Global Aggregate Bond Index (Hedged) ETF (ASX: VEFI) and thinking that April could be as good of a time as any to take closer look. Here’s how we would start our research.
Find out what the ETF does
The Vanguard VEFI ETF provides investors with exposure to high-quality debt securities issued by governments, government-owned and government-guaranteed entities, and investment-grade corporate issuers from global markets. This ethical ETF excludes issuers with significant business activities in fossil fuels, alcohol, tobacco, gambling, weapons, nuclear power, and adult entertainment.
The VEFI ETF might be used by investors who want to take an ethical approach to investing in global credit markets. This ETF provides an opportunity to gain access to high-quality global issuers while avoiding issuers from certain ‘problematic’ industries. Global bond ETFs can be used to diversify equity holdings or Australian bond holdings.
VEFI’s FUM does not meet our minimum hurdle
The Vanguard VEFI ETF had $88.37 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as Vanguard, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
Pay attention to yearly costs & fees
Vanguard charges investors a yearly management fee of 0.26% for the VEFI ETF. This means that if you invested $2,000 in VEFI for a full year, you could expect to pay management fees of around $5.20.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.51% or around $10.20 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Our takeaway
If you’re thinking about investing in VEFI, bear in mind that this is just an introductory glance at the ETF. To explore further, check out our free Vanguard VEFI report. And for good measure, search our complete list of ASX ETFs for similar ETFs in the Fixed interest – International sector to do a good comparison.
