Official Shiny Things thread—Part III

[aYu82]

Hi BBC and ST,

What do you guys think of ETF Fund that seeks to track the performance of an index composed of developed markets ESG (environmental, social and governance) screened companies?

 

[RuiQi_91]

I read here that the IWDA and VWRA perform the same https://forums.hardwarezone.com.sg/127624475-post2057.html and that both the VWRA/IWDA are accumulating funds that automatically reinvests the dividend whereas the VWRD is a distributing fund that hands out the dividends to us https://forums.hardwarezone.com.sg/127634124-post2064.html.

Since they are similar, when would a distributing fund be preferable or better over an accumulating one? Would there be a reason to go for the VWRD if my intent is to reinvest the dividends?

 

[moolala]

I read here that the IWDA and VWRA perform the same https://forums.hardwarezone.com.sg/127624475-post2057.html and that both the VWRA/IWDA are accumulating funds that automatically reinvests the dividend whereas the VWRD is a distributing fund that hands out the dividends to us https://forums.hardwarezone.com.sg/127634124-post2064.html.

Since they are similar, when would a distributing fund be preferable or better over an accumulating one? Would there be a reason to go for the VWRD if my intent is to reinvest the dividends?

iwda

 

[yellownova]

An accumulating ETF reinvests that income back into the fund, so if you're already intending to reinvest it, the accumulating ETF does it for you automatically.

I read here that the IWDA and VWRA perform the same https://forums.hardwarezone.com.sg/127624475-post2057.html and that both the VWRA/IWDA are accumulating funds that automatically reinvests the dividend whereas the VWRD is a distributing fund that hands out the dividends to us https://forums.hardwarezone.com.sg/127634124-post2064.html.

Since they are similar, when would a distributing fund be preferable or better over an accumulating one? Would there be a reason to go for the VWRD if my intent is to reinvest the dividends?

Sent from Samsung SM-G975F using GAGT

 

[hwckhs]

Since they are similar, when would a distributing fund be preferable or better over an accumulating one? Would there be a reason to go for the VWRD if my intent is to reinvest the dividends?

A distributing fund is desirable for someone who is income-focused. It gives you the options/freedom to either reinvest, use the income, or a mixture of both. Depending on whether you are in early/mid/late/no career, you can decide how to use that dividend. Btw, MBH and ES3/G3B are distributing. For me, I use VWRD.

 

[RuiQi_91]

I was hoping someone could tell me why bond index funds (ABF) are more volatile then stock index funds/ETFs like the STI.

I have been searching for an answer through google but the articles I find only mention how bonds are less risky to investors since you are guaranteed the principal at maturity.

I would like to know what makes a bond less volatile.

 

[Wishdom]

I was hoping someone could tell me why bond index funds (ABF) are more volatile then stock index funds/ETFs like the STI.

I have been searching for an answer through google but the articles I find only mention how bonds are less risky to investors since you are guaranteed the principal at maturity.

I would like to know what makes a bond less volatile.

Coupons are guaranteed but stock returns are not.

Bond holders get repaid before stock holders when a company go bust. This is because bond holders are debtors while stock holders are owners.

Sent from Ilovennp using GAGT

 

[BBCWatcher]

A distributing fund is desirable for someone who is income-focused. It gives you the options/freedom to either reinvest, use the income, or a mixture of both.

So do accumulating funds. There’s no difference in these respects in a hypothetical world with zero costs.

Unfortunately we don’t live in a zero cost world. There are often brokerage costs involved in buying more shares, and of course there’s a cost in terms of your wasted time (and time out of the market) to reinvest dividends. Some brokers even charge a dividend distribution fee. Thus most people during accumulation years should choose accumulating funds, not distributing funds. They’re just easier and more cost efficient. Later, close to retirement, you’ll be gradually rebalancing from stocks into bonds, and that can also be from accumulating stock funds to distributing bond funds if you wish. But even that’s optional since selling a portion of holdings every quarter, for example, is not difficult.

 

[omnipage]

What is the opinions of this video ?

 

[BBCWatcher]

What is the opinions of this video ?

It doesn't make sense. As Vanguard points out, the vast bulk of trading volume has nothing to do with index funds. Consequently there's tons of price discovery going on.

 

[hwckhs]

It doesn't make sense. As Vanguard points out, the vast bulk of trading volume has nothing to do with index funds. Consequently there's tons of price discovery going on.

Very nice article!

First time reading such an article, so lots of new information there for me. I am surprised that indexing holds 50% of asset (figure 6), but consoled to know indexing accounts for only 5% of trading activity (figure 8).

 

[hwckhs]

Something I have been trying to figure out is, do ETFs (the actual shareholders of the underlying companies) participate in corporate voting? Do they (always) abstain from voting?

Since they might be major shareholders of companies, it will be scary if they misuse that capacity, for example, to vote in a way to favour them financially or to drive political/ESG/other causes. I would hate for ETFs to make decisions on our behalf because there is no way for us to express ourselves. They should ideally stay neutral.

 

[BBCWatcher]

Something I have been trying to figure out is, do ETFs (the actual shareholders of the underlying companies) participate in corporate voting?

The fund managers are shareholders, so of course they can vote.

Since they might be major shareholders of companies, it will be scary if they misuse that capacity, for example, to vote in a way to favour them financially or to drive political/ESG/other causes.

And why is that “scary”? When Carl Icahn or Berkshire Hathaway votes a particular way, that’s not scary?

I would hate for ETFs to make decisions on our behalf because there is no way for us to express ourselves. They should ideally stay neutral.

Vanguard is a mutual company, owned by its investors. Vanguard’s management periodically sounds out its owners and tries to act as they would. How’s that a problem?

 

[livingcharsiew]

And why is that “scary”? When Carl Icahn or Berkshire Hathaway votes a particular way, that’s not scary?

like this?

https://www.straitstimes.com/busine...er-targets-six-sti-firms-over-all-male-boards

One of the world's largest asset managers, State Street Global Advisors (SSGA), has decided to take voting action against six companies out of the 30 listed on the Straits Times Index (STI), if they do not add any women directors to their all-male boards.

It said yesterday that it will vote against the chair of the nomination committee or the director most responsible for the nomination process, this year and for the next two years.

If the company still does not respond, SSGA will then vote against the full nomination committee in the following year, said SSGA global co-head of asset stewardship Benjamin Colton in a conference call with reporters.

 

[BBCWatcher]

like this?
https://www.straitstimes.com/busine...er-targets-six-sti-firms-over-all-male-boards

What’s wrong with that? Leaving aside ethical and legal concerns (which also have business impact), there’s a strong argument that boards incapable of finding even one qualified woman to serve as a director are simply bad boards that are doing a terrible job recruiting and retaining the best talent. Failure to find the best talent means the business will be less successful, harming shareholders.

However, there’s an easy solution if you’re uncomfortable with what certainly seems to be an entirely reasonable voting position: don’t invest in SSGA’s funds! There’s freedom of choice here. SSGA is announcing their intentions, and fund holders who favor discrimination against female directors can switch to Nikko AM Shenton’s fund if they wish. Except that it wouldn’t be surprising if Nikko AM Shenton takes the same point of view because who wouldn’t? This is simple good corporate governance.

 

[BBCWatcher]

I’ll just draw out this paragraph:

Mr Colton said that SSGA wants to work with the firms it identifies to change the mentality about having women on boards, and to encourage them to develop a pipeline of female leaders, as research has shown that companies with board diversity outperform over time.

This is all about business performance, making sure that boards are looking out for the long-term interests of shareholders. SSGA isn’t a charity, and it’s certainly not acting like a charity here. It wants businesses to perform better because that helps shareholders. And if you’re a major corporation in 2020 that doesn’t have even one female director, you suck in business terms.

 

[livingcharsiew]

Then we should fight for firms to have underweight, overweight, short, homosexual, bisexual, asexual, transgendered people on the board of directors too instead of majority of them being tall and straight.

SSGA's own gender diversified ETF under performs the SPY

The SSGA Gender Diversity Index is designed to measure the performance of U.S. large capitalization companies that are "gender diverse," which are defined as companies that exhibit gender diversity in their senior leadership positions.

 

[moolala]

Then we should fight for firms to have underweight, overweight, short, homosexual, bisexual, asexual, transgendered people on the board of directors too instead of majority of them being tall and straight.

SSGA's own gender diversified ETF under performs the SPY

charsiew has been making alot of money, thats why bother about these management thing

 

[hwckhs]

The fund managers are shareholders, so of course they can vote.

I googled around and found that indeed fund managers exercise their voting rights.

And why is that “scary”? When Carl Icahn or Berkshire Hathaway votes a particular way, that’s not scary?

Vanguard is a mutual company, owned by its investors. Vanguard’s management periodically sounds out its owners and tries to act as they would. How’s that a problem?

The example cited by @livingcharsiew is one. There could be other controversial votes. I am unsure how Vanguard "sounds out its owners", but unless they allow voting by proxy, it is unlikely for their vote to be representative of the investors'. There will always be people who disagree with how the fund manager votes.

The Vanguard article you posted shows that the US market has a high percentage of assets held by index funds (~50% US vs 10% globally). The number looks set to grow further, so this voting issue will only become more glaring in future (and to US markets first). There is a proposal to restrict index funds from voting (in US). I don't think it makes sense to block major shareholders from voting. Vote by proxy would be more logical, but may be costly and complex to implement. Anyway, I believe we eventually need a reform in this regard.

 

[FrostWurm]

SSGA is announcing their intentions, and fund holders who favor discrimination against female directors can switch to Nikko AM Shenton’s fund if they wish. Except that it wouldn’t be surprising if Nikko AM Shenton takes the same point of view because who wouldn’t? This is simple good corporate governance.

This argument intentionally misleads and makes broad unsubstantiated generalizations.

Just because a Board does not have female directors does not mean it is discriminating against females becoming directors.

Just because a school has more female teachers does not mean that it is discriminating against males becoming teachers.

Good corporate governance does not mean reserving a seat for a woman on the Board; it means giving equal consideration to any person, regardless of gender, evaluated solely based on their merits and potential contribution to the company.

A tokenistic approach to putting a woman on the Board (who could, for example, be the sister of one of the directors) does nothing for corporate governance, though it may help the share price of the company as evidence of "inclusivity".