What Are UCITS Equivalents Of Popular Vanguard Funds? (2024)

This article is Part 7 of ourdefinitive guide to Equity Index Investing.

While Vanguard is a relatively small Asset Manager in Europe, you can still build a 100% Vanguard Index Fund Portfolio.

And there are lots of reasons to back Vanguard, including excellent reputation and unique ownership structure with low conflicts of interest.

As a European or UK Investor, you would have to slightly adjust the way to construct a typical two, three or four Fund Portfolio using UCITS ETFs.

Here are some questions, that European and UK Investors frequently ask.

Most individual investors in Europe do not have the option to open a direct account with Vanguard and need to invest in Vanguard ETFs through their brokers.

However, the following types of Investors have direct access to Vanguard:

• Investors in the UK,with a minimum initial investment of £500.
• Investors in Germany, with a minimum initial investment of €5,000.
• Non-Professional Europeans that may be treated as elective professionals, usually requiring a minimum of €500,000.

Most Individual Investors in Europe and the UK are bound by UCITS, a regulatory framework for investment funds in the European Union.

However, there are a couple of exceptions, when as an Investor you may directly invest in US ETFs:

• Investors from countries like Switzerland.
• Non-Professional Europeans that may be treated as elective professionals, usually requiring aminimum of €500,000.

If, like most Europeans, you are not part of the above list, you may need a UCITS equivalent of a US ETF. The good news is, there is plenty of choice. Let’s go through them one by one.

Vanguard Equity Funds

Vanguard Total World Stock Index Fund, as ETF (VT) or Mutual Fund (VTWAX), gives you access to all Global markets:

• Developed and Emerging Markets
• Large, Mid and Small Caps

It tracks the FTSE Global All Cap Index, as illustrated below.

The closest UK equivalent is a Mutual Index Fund – the Vanguard FTSE Global All Cap Index Fund, that also includes Small Caps. UK Investors can also invest through the same UCITS ETF as Europeans, without access to Small Caps.

So, you can also pick an iShares or SPDR equivalent instead of Vanguard.

I have done anextensive comparison of the below World ETFs that give you all the convenience of investing through a single Index Fund.

The Vanguard Total Stock Market Index Fund, as ETF (VTI) or Mutual Fund (VTSAX), gives access to the entire US Market – Large, Mid and Small Caps. The ETF Tracks the CRSP US Total Market Indexandincludes about 3,500 companies.It is a popular choice, given a larger coverage than the S&P 500, that only tracks Large Caps.

The closest UCITS equivalent to VTI ETF is Vanguard S&P 500 UCITS ETF, with accumulating share classes in GBP and EUR, and distributing share classes in GBP, EUR and CHF.

Vanguard S&P 500 Vanguard excludes Small and some Mid-Caps. However, since both indices are weighted by market size, the performance is very similar.As a European or UK Investor, you don’t necessarily need to control the allocation to US Large Caps Stocks.

A more efficient way may be to split your portfolio into Developed and Emerging Markets ETFs. You can learn more about how the ETF World is divided through my analysis of ETF Benchmarks from two leading providers – MSCI and FTSE.

Vanguard Total International Stock Index Fund, VXUS as ETF and VGTSX as Mutual Fund, are used by American Investors that want to control exposure to all International markets ex-US.

There is no European and UK Vanguard UCITS ETF Equivalent to VXUS ETF, given that European and UK Portfolios are not US Centric.

But if you do opt for it, you will need a few ETFs:

• A couple of ETFs to get access to Developed Markets ex-North America, as explained in this guideand illustrated below.
• An ETF with exposure to Emerging Markets, like illustrated in this guide.
• An ETF with exposure to Canadian Market.

Vanguard Bond Funds

The Vanguard Stock Bond Index Fund, BND as ETF or VBTLX as Index Fund, gives access to the US Bond Market.It is a one-stop solution to give you exposure to the entire Bond Market including Government Bonds, highly rated corporate Bonds and Mortgage Bonds.

The BND ETF Tracks the Bloomberg Barclays US Aggregate Index.Vanguard does not have a UCITS-equivalent tracker. However, BlackRock’s iShares and State Street SPDR have a direct equivalent.

• iShares US Aggregate Bond UCITS ETF, with accumulating share classes available in EUR,USD and CHF and distributing share classes in EUR,USD and GBP.
• SPDR Bloomberg US Aggregate Bond UCITS ETF, with distributing share classes in EUR and USD.

Vanguard designed diversified Developed Markets Bond Funds to meet needs of European and UK Investors.

The UCITS diverified Bond Fund is Vanguard Global Aggregate Bond UCITS ETF withaccumulating share classes in GBP and EUR, and distributing classes is GBP and EUR.

This ETF tracks the Bloomberg Barclays Global Aggregate Bond Index.

As a European or UK Investor, you want access to High Quality Bonds available in your currency.

Should you want to choose the efficient and simple way without splitting your portfolio into multiple ETFs, Vanguard Lifestrategy Funds are a great choice. It combines exposure to all global equity markets and bonds.

These products are structured as funds-of-fund.In a nutshell, it is a one ETF solution to gives you exposure to both Equities and Bonds.

The LifeStrategy Funds differ by the asset allocation and risk profile.

Cost comparison

For the most liquid asset classes (S&P 500) differences are minimal, while Bonds may have larger discrepancies (difference of 0.22%).

Even if you do have access to US Funds, Taxes are another consideration that, depending on your situation, may outweigh expense ratios. Here is why.

PART 6 - OVERWEIGHTING US AND DEVELOPED MARKETS TAX-EFFICIENTLY

PART 8 - BEST ETFS - FULL SELECTION