Hold the Fund vs the ETF of the fund in SIPP

[MJohnson]

What's the difference/benefits between holding the fund vs the ETF in your SIPP, it seems it costs more fees in a SIPP for funds and its takes a day or 2 to get your price depending when you place the orde vs an ETF being an immediate fill (assuming its with LSE hours)

It also seems to me in SIPPs with likes of HL and Interactive Investors etc they have much lower and and capped models for holding ETF (shares) vs Funds, assuming you are predominantly buy & hold and not actively trading, hence maybe just 1 trade a month.

So if you had for simplicity £1m with in 5 Vanguard funds vs in 5 Vanguard ETF, it looks like the funds will cost you £1000 p/a but ETFs just £200 p/a (as capped) with HL.

Am i missing something ? Tks in advance

[Tye Green]

Typically, ETFs are domiciled abroad and don’t have UK reporting status which results in slightly more complex taxation calculations but apart from that much cheaper for the fund charge and as you point out, also for some platforms’ fees

[trevalvole]

Not sure that the "fund" charges for ETFs are cheaper - I don't know if you can beat the 0.13% for HSBC's tracking of the FTSE All World Index.

[MJohnson]

My understanding is the that underlying fund charges are the same regardless of the vehicle (Fund or ETF) - if anything looking at Vanguard its cheaper in an ETF than the fund, again assuming the investment amount is big enough and you don't actively trade the position.

Edited by MJohnson on Monday 16th February 10:44

[Panamax]

MJohnson said:

What's the difference
Am i missing something ?

The difference is that one's a fund and the other's a fund in an ETF. There aren't "the same". In the ETF you have two levels of risk, both the fund price itself and then the popularity or otherwise of that particular ETF.

I'm not convinced that fund prices move about sufficiently from hour to hour for the specific time of a deal to make any material difference.

[MJohnson]

Yes - I appreciate the ETF intra day is the most efficiently correlated to the underlying holding vs the fund whose NAV is is fixed at EOD but essentially the closing price of the ETF will be very close to the NAV (depending on location of underlying funds holding) constituents, again assuming you are holding for for a long period of time the short term dislocations are irrelevant in the big picture i believe.

On HL it looks like £1m in funds will cost you £1,668 p/a vs £1m in ETF will be £200 p/a...call me cynical but you could possibly assume that pension providers and platforms find it more profitable to promote/encourage people to stay invested directly into their underlying funds vs ETF.

Edited by MJohnson on Monday 16th February 11:11

[Mazinbrum]

Panamax said:

The difference is that one's a fund and the other's a fund in an ETF. There aren't "the same". In the ETF you have two levels of risk, both the fund price itself and then the popularity or otherwise of that particular ETF.

I'm not convinced that fund prices move about sufficiently from hour to hour for the specific time of a deal to make any material difference.

I prefer being able to set a stop loss on an ETF and I know what price I'll get. Makes quite a difference on a sizeable fund. If you're long term investing through thick and thin in a no etf then not an issue, I have some non ETFs that I'll just leave forever.

[Scootersp]

from what I can read up on these things it seems like the only potentially harsher downsides are at times of high market stress, scenarios that are rare but not rare enough that they aren't detailed in the funds prospectus/terms.

https://fund-docs.vanguard.com/p968.pdf PDF pages 36/37.

[C69]

One other thing to bear in mind is dealing costs.

For example, the Fidelity SIPP charges £7.50 per one-off shares / ETFs trades, but £0 for funds trades. Similarly, HL SIPP funds trades are free, but those for shares / ETFs can cost as much as £11.95.

Whether or not this could be a factor depends on how many trades you're likely to do, the average size of those trades, how often you want to rebalance your portfolio, and the overall amount of your SIPP holdings.

[MJohnson]

Mazinbrum said:

I prefer being able to set a stop loss on an ETF and I know what price I'll get. Makes quite a difference on a sizeable fund. If you're long term investing through thick and thin in a no etf then not an issue, I have some non ETFs that I'll just leave forever.

Agreed - I like to know my price immediately (rather than hope no news comes out overnight) and also any dealing cost is small as the positions are not regularly traded and each one is of a size that the dealing cost is mostly irrelevant.

And as it seems.... its cheaper too...!

Edited by MJohnson on Monday 16th February 15:51

[VR99]

I invest in ETF's only in my SIPP to take advantage of the capped platform charges. I use funds (OEIC's) in other accounts and don't have a preference for either.

If anything I slightly prefer funds as (IMO) there is a much larger range of multi asset funds (Vs ETF's) but hopefully that changes over the next few years.

Edited by VR99 on Monday 16th February 18:24