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Vanguard FTSE Developed Markets ETF: Broader Allocations, Lower Returns

  ETFs under the Vanguard Group have been popular and respected by investors, and these funds have high liquidity, low expense ratios and transaction costs, which are especially beneficial for long-term portfolios.
  Vanguard FTSE Developed Markets ETF was established on July 20, 2007, and listed on the New York Stock Exchange High Growth Market on July 26, 2007 six days later, with the trading symbol VEA.P, and is a stock fund. With $91.4 billion under management as of June 17, 2022, the Vanguard FTSE Developed Markets ETF is the fourth-largest ETF under the Vanguard Group and the seventh-largest ETF in the United States, according to Wind Financial Terminal.
  For international investors looking to invest in developed markets outside the United States, the Vanguard FTSE Developed Markets ETF provides exposure to a broad range of companies, primarily in Europe, the Pacific, and Canada. Its investment objective is “based on the performance of a benchmark index, which is designed to measure the return on investment of companies issued in major markets in Europe and the Pacific”, and the investment strategy is basically to replicate the index, excluding the North American index, which covers Europe, There are approximately 1385 common stocks issued by developed countries in Australia, Asia and the Far East, so all or substantially all of the assets of the Vanguard FTSE Developed Markets ETF are invested in the constituent stocks of the index, and each constituent stock is weighted in the fund equal to The same in the index.
  In comparison, the Vanguard FTSE Developed Markets ETF has underperformed its predecessors, and while still able to outperform its peers, the margin is effective. According to Wind Financial Terminal, the 2022 annual yield, 6-month yield, 1-year yield, 2-year yield and 3-year yield for the Vanguard FTSE Developed Markets ETF as of June 21 are – 18.93%, -17.03%, -18.33%, 11.46% and 7.34%, while the yields of similar funds are -20.48%, -19.29%, -23.42%, 7.93% and 1.61% respectively, the former is overweight relative to the latter The yields were only 1.55, 2.26, 5.09, 3.53 and 5.3 percentage points respectively. The investment performance of the Vanguard FTSE Developed Markets ETF has also not been satisfactory for the last four full years. In 2018-2021, Vanguard FTSE Developed Markets ETFs yielded -15.16%, 22.07%, 10.26%, and 11.49%, respectively, compared with -16.56%, 22.25%, 14.07%, and 8.70% for similar funds, the former relative to the latter The excess rate of return was 1.4%, -0.18%, -3.81% and 2.79%, and even underperformed similar funds for two consecutive years.
  The reason for the above may be related to the regional allocation, industry allocation and heavy holdings of the Vanguard FTSE Developed Markets ETF, especially the regional allocation. According to Wind Financial Terminal, as of the end of the first half of 2022, Vanguard FTSE Developed Markets ETFs are allocated to as many as 30 countries, ranging from 0.01% (Mexico) to 20.50% (Japan), with the exception of Japan, Vanguard FTSE Developed Markets ETFs Countries with more allocations also include the United Kingdom (12.5%), Canada (10.44%), Switzerland (8.50%), France (7.78%), Australia (6.89%) and Germany (6.27%); it is worth mentioning that Vanguard The allocation countries of the FTSE Developed Markets ETF also include China. Although the proportion is only 0.28%, it is the only fund in the top ten ETFs in the United States that allocates China. From the above configuration, it can be seen that the coverage of the Vanguard FTSE Developed Markets ETF is too broad. In addition, the fund simply replicates the tracked index and cannot actively adjust the investment direction of the fund. Its relatively low yield is not difficult to explain. .
  As for the sectors allocated, the top five sectors of the Vanguard FTSE Developed Markets ETF are Financials, Industrials, Healthcare, Consumer Discretionary, and Information Technology, accounting for 18.43%, 15.31%, 11.45%, and 10.20% of the fund’s net assets, respectively. and 9.53%; over the same period, the top five holdings of the Vanguard FTSE Developed Markets ETF are Nestlé (Daily Consumption, 5.22%), Roche (Healthcare, 3.55%), AstraZeneca (Healthcare, 3.55%), Shell (Energy , 3.25%) and Novartis (Healthcare, 2.97%). According to Wind Financial Terminal, the above-mentioned five heavyweight stocks will increase by -9.62%, -18.19%, 13.56%, 7.79% and 0.44% respectively in 2022 as of August 11, with a rise and fall of half and half.
  In addition, it should be noted that whether it is the Vanguard Value ETF that tracks the CRSP U.S. Large Cap Value Index, or the Vanguard FTSE Developed Markets ETF that tracks the FTSE Developed Markets Index, the ETFs under Vanguard are distinctive and completely different from tracking The peers of commonly used indexes such as the S&P 500, this may also be the magic weapon for Pioneer to lead the “one-stop” in the field of ETFs.

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