Posted inHead To Head, News, Research

HEAD-TO-HEAD: iShares vs Vanguard

FSA compares two Japan index products from the industry’s two giants: the iShares Japan Equity Index Fund and the Vanguard Japan Stock Index Fund.
by Fund Selector Asia
Performance

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“Both funds have done a very good job of tracking their indices,” Lamont said.

However, European investors might notice a difference between the daily returns of the fund NAVs and the daily closing values of the underlying indices.

The NAV of the funds is priced daily at midday UK time – eight hours behind Japan. It reflects market events that have transpired since the close of the Japanese stock market.

Since the benchmarks of the two funds make no such adjustments, it is a source of both tracking difference and tracking error. (The tracking difference is the daily difference of returns between a fund and its benchmark, while the tracking error is the volatility of tracking differences).

“In this case with Japan, because of the time difference of the underlying market, it is difficult for an analyst to directly compare the tracking performance,” Lamont said. “Therefore, we are not able to make cohesive judgement on that.”

The tracking error of the iShares fund is 2.11, compared to 2.86 of the Vanguard fund.

Share class D of the iShares product has returned 14.06% over the past three years, Lamont said, adding it performed “admirably when compared with its surviving category peers”.

Vanguard has generated a return of 13.77% over the same period.

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