I have several investment trusts which provide a decent level of income. Some have reasonably low charges such as City of London with OCF of ~0.45%. Others have higher charges and in particular I have been looking at my 3 income trusts focussed on the Asian markets - Aberdeen Asian Income, Henderson Far East and Schroder Oriental. Ongoing charges for these trusts are 1.25%, 1.21% and 1.34% respectively - an average of 1.26%.
They all provide a reasonable income yield, but at the back of my mind, I am wondering whether the higher yield comes at the expense of overall performance.
I believe the Vanguard Developed Asia Pacific ETF (VAPX) will give me exposure to roughly the same markets as the investment trusts however the ongoing charges are much less - just 0.22% which will save me over 1.0% in charges every year - that’s just over £100 for every £10,000 invested.
The fund was launched in May 2013 and tracks the FTSE Developed Asia Pacific (ex Japan) index. The principal areas of investment focus are Australasia (45%), S. Korea (25%), Hong Kong (22%) and Singapore (8%).
The cumulative return for the index over the past 10 yrs is 156% - annualised cagr 9.86%.
The current yield is around 3.25% and paid quarterly. As with the Vanguard All World ETF which I purchased last year, the dividend distribution amount is a little unpredictable which is something I am having to adjust to - I am not sure how much I will receive at the end of each quarter - but a minor inconvenience compared to the saving in charges.
The other saving is on platform charges - with my broker AJ Bell Youinvest there are no charges for holding ETFs (or ITs to be fair) compared to the 0.20% charge for holding funds - for example, I could have selected Vanguard's Pacific (ex Japan) Stock Index fund which would work out at 0.43% total charges.
I have had a good run with my investment trusts over the years but the time has come to wave bye-bye to the higher charges. The 3 ITs were sold earlier this week and replaced with the Vanguard fund at a purchase price of £15.80. I will incorporate these changes when I next update my investment trust income portfolio.
What do you think? Is this a sensible exchange? Anyone else hold the Vanguard ETF?