I’m not buying an actively managed global equity fund – most of you guys can’t beat the benchmark and I like low fees

I

But I’ve heard the Value message and think it makes sense, so I’m going to buy an ETF benchmarked to the MSCI World Global Value Index

Oh, so you like Real Estate?

What?

No, I’m very worried about Commercial Real Estate, I think it’s the next “shoe to drop”

We agree, but then you should know the MSCI World Value index has 4% exposure to that sector

when some active managers like us have zero

mmm

Well, it’s only 4%

Yes, but if the “shoe drops” by 50%, you’ve lost 2%, how much is that fee differential again?

mmm

Well, the US has been the winning region and I like betting on winners

Past winners or future winners?

Duh, future winners obviously!

Well Berkshire Hathaway must think Japanese equities are “future winners” if WB was happy to leave his Omaha steakhouse and travel to Japan for
sushi

Well, this ETF also has Japan at 6%

Yes, but Toyota is roughly 25% of that with a 1.4% holding

Do you like car companies?

Not particularly

Pity because you get Honda too

Anyway, some active managers have far higher weightings to Japan than 6% (without autos)

And do you like tobacco companies?

Are you crazy – I don’t like companies that “harm” their customers (to put it kindly)

Us neither, but then you better “look under the hood”

And I’m not referring to the “hood” of one of the many car companies you hold

Because you’ve got:
British American Tobacco at 1.4%
Altria at 0.58%
Japan Tobacco with a 0.35%
Imperial Brands at 0.33%

Roughly 2.7% in tobacco companies in the MSCI World Value ETF from what I can tell,

You wouldn’t want that lot “going up in smoke” would you?

Could cost another few years of fee differential..

Well, I see from the fact sheet that some of the largest holdings are United Health and Procter & Gamble and they’re nice solid companies

Ah yes on 23x and 27x earnings…

What?

But that’s not Value!

No, we don’t think so either, that’s why we don’t hold them

Well, how did they get in here?

Good question – ask them

if there’s anyone to ask…

But at least you’ve started “looking under the hood”

Unfortunately, many Passive investors don’t, and simply stop at the

“lower fees, can’t beat the benchmark”… argument (yawn)

You could say…

they’ve been “hoodwinked”…