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Reply to @Charles: Most Vanguard ETFs are actually a share class of a Vanguard mutual fund and perform very similarly. Apparently, VDE is not a share class of VGENX. So, they behave differently. I guess, it is similar to PTTRX vs BOND.
I think the article overstates the case, in search of a catchy headline. BOND was explained and reported on as a pure version of the Gross strategy, not as an ETF clone of PTTRX in the same way most of the Vanguard ETFs are clones of the pre-existing OEFs. It was clear from the beginning, for example, that he couldn't own derivatives in it, so that it wouldn't work the same way as the OEF.
No question, though, that the ETF has outdone the OEF; but the return difference has narrowed more recently from what it was in the first few months after BOND came out.
Reply to @Investor: VDE is a share class of VENAX.
Vanguard ETFs are share classes of Vanguard index funds. So VDE wouldn't be a share class of the actively managed VGENX.
The only "exception" to this rule (that I know of) is VEA (MSCI EAFE). Obviously that ETF is an index fund. But Vanguard asserts that when you look at the same portfolio from the perspective of an open end fund, VTMGX (Tax-Managed International Fund), it is actively managed.
Two share classes of the same fund (whether ETF, Admiral, or Investor class) represent ownership in the same portfolio, not a clone, not a copy. So just as the NAV of Admiral and Investor class shares of the same fund should behave nearly identically (same except for expense ratio), so should the the NAV of an ETF share class (except for expense ratio).
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No question, though, that the ETF has outdone the OEF; but the return difference has narrowed more recently from what it was in the first few months after BOND came out.
Vanguard ETFs are share classes of Vanguard index funds. So VDE wouldn't be a share class of the actively managed VGENX.
The only "exception" to this rule (that I know of) is VEA (MSCI EAFE). Obviously that ETF is an index fund. But Vanguard asserts that when you look at the same portfolio from the perspective of an open end fund, VTMGX (Tax-Managed International Fund), it is actively managed.
Two share classes of the same fund (whether ETF, Admiral, or Investor class) represent ownership in the same portfolio, not a clone, not a copy. So just as the NAV of Admiral and Investor class shares of the same fund should behave nearly identically (same except for expense ratio), so should the the NAV of an ETF share class (except for expense ratio).
VDE had too much of a divergence in performance to be ETF shares of VGENX.