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Long-Term Savings From Benckmark Changes Anticipated For Some Vanguard Funds

Comments

  • Saw this earlier and was about to post, but Ted beat me to it. One interesting thing in the article is the case of South Korea: changing from MSCI to FTSE international indexes makes a pretty substantial difference because South Korea is "emerging" in the former and "developed" in the latter. With SK running at 16% in the Vanguard EM funds (VWO, VEIEX) now, the geographic weights in the EM index will change fairly significantly (and I s'pose slightly in the EAFE index too, which will now include SK).
  • I'm puzzled by the EAFE remark. MSCI EAFE is a developed market index. If Morgan Stanley were moving Korea to EAFE, then it would be reclassifying Korea as a developed market country. This in turn would remove it from MSCI EM market index, and keep that index similar to the FTSE index. (BTW, MSCI and FTSE both list the country as Korea, though the popular press seems a bit inaccurate in their reporting.)

    http://www.msci.com/products/indices/tools/index.html (MSCI EAFE, EM, etc.)
  • edited October 2012
    As I understood the article, it's not MSCI changing anything, it's the makeup of the Vanguard funds that will change.

    V. is shifting from the MSCI indexes, which classify S. Korea as emerging, to FTSE, which classifies it as developed, so the V. funds will be shifting SK from their EM funds to their developed funds (i.e., their funds that will now be based on the FTSE equivalent of the EAFE). Looks like I didn't state that last part in parens clearly ... good catch for clarification.
  • FYI:
    Regards,
    Ted
    M*s Slant On Benchmark Changes: http://news.morningstar.com/articlenet/article.aspx?id=569258
  • edited October 2012
    It's a pretty significant change: Comparing Vanguard MSCI Emerging Markets (VWO) to FTSE EMERGING MKTS (ENEI.L):

    http://finance.yahoo.com/q/bc?s=VWO&t=2y&l=on&z=l&q=l&c=ENEI.L

    I don't remember what happened in 1Q 2011 but AFAICT Korea and Russia have been a stabilizing influence on VWO. Well's it's EM, so I guess I'm asking for that volatility, but I think eventually it will cost me more than the .0-something percent in expense savings.
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