Index Fund Available in the UK with Low Tracking Error

by Nov 2, 2020Personal Finance0 comments

The fund tracking error is an hidden cost of an investment which is often overlooked. Choosing the right index with lowest tracking error can save you money in the long run. Tracking error basically denotes how well the fund is performing in relation to its benchmark index. Fund with low tracking error are one that do not largely deviate from performance of benchmark index fund.

Below are the list of funds available for UK investor which has lowest tracking error. Some of the funds tracking are not really low but it is the lowest among other funds in the same category. Some category do not have any alternative funds

The list of available funds with low tracking error are categorised as below.

  • UK Larger Cap Equity
  • UK Mid Cap Equity
  • Global Emerging Markets Equity
  • US Large-Cap Blend Equity
  • Global All Cap Equity
  • Europe ex-UK Equity
  • Global Large-Cap Equity
  • Global Small-Cap Equity

UK Larger Cap Equity

Index: FTSE 100 TR GBP

Lowest – Vanguard

  • Fund: Vanguard FTSE 100 Index Unit Trust GBP Acc
  • Fund Code: VAUAA
  • Tracker Error (%): 2.1 (Based on 3 years data)

Next Lowest – HSBC

  • Fund: HSBC FTSE 100 Index Fund Accumulation C
  • Fund Code: HCOIA
  • Tracker Error (%): 2.86 (Based on 3 years data)

Index: FTSE All-Share

Lowest – Vanguard

  • Fund: Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc
  • Fund Code: VAASA
  • Tracker Error (%): 0.73 (Based on 5 years data)

Next Lowest – Fidelity

  • Fund: Fidelity Index UK Fund P Accumulation
  • Fund Code: PIUKA
  • Tracker Error (%): 2.8 (Based on 5 years data)

Index: FTSE UK Equity Income TR GBP

Lowest – Vanguard

  • Fund: Vanguard FTSE U.K. Equity Income Index Fund GBP Acc
  • Fund Code: VAFIA
  • Tracker Error (%): 3.0 (Based on 5 years data)

UK Mid Cap Equity

Index: FTSE 250 TR GBP

Lowest – HSBC

  • Fund: HSBC FTSE 250 Index Accumulation C
  • Fund Code: HCTIA
  • Tracker Error (%): 3.13 (Based on 5 years data)

Index: FTSE Custom 250 Net Midday

Lowest – iShares

  • Fund: iShares Mid Cap UK Equity Index Fund (UK) D Acc
  • Fund Code: MCMCA
  • Tracker Error (%): 2.93 (Based on 5 years data)

US Large-Cap Blend Equity

Index: S&P Total Market TR GBP

Lowest – Vanguard

  • Fund: Vanguard U.S. Equity Index Fund GBP Acc
  • Fund Code: VAUIA
  • Tracker Error (%): 0.74 (Based on 5 years data)

Next Lowest – L&G

  • Fund: Legal & General US Index Trust I Class Accumulation
  • Fund Code: LGSTA
  • Tracker Error (%): 4.5 (Based on 5 years data)

Index: S&P 500 NR GBP

Lowest – USB

  • Fund: UBS S&P 500 Index Fund C Accumulation
  • Fund Code: MCMCA
  • Tracker Error (%): 0.87 (Based on 5 years data)

Next Lowest – Fidelity

  • Fund: Fidelity Index US Fund P Accumulation
  • Fund Code: PIUSA
  • Tracker Error (%): 4.8 (Based on 5 years data)

Index: S&P 500 TR GBP

Lowest – HSBC

  • Fund: HSBC American Index Fund Income C
  • Fund Code: HCAII
  • Tracker Error (%): 5.16 (Based on 5 years data)

Europe ex-UK Equity

Index: FTSE Developed Europe ex UK NR GBP

Lowest – Vanguard

  • Fund: Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Inc
  • Fund Code: VAFED
  • Tracker Error (%): 0.62 (Based on 5 years data)

Index: FTSE Developed Europe NR EUR

Lowest – Vanguard

  • Fund: Vanguard SRI European Stock Fund GBP Acc
  • Fund Code: VAESA
  • Tracker Error (%): 0.88 (Based on 5 years data)

Index: MSCI Europe Ex UK NR GBP

Lowest – Fidelity

  • Fund: Fidelity Index Europe ex UK P Accumulation
  • Fund Code: PIEFA
  • Tracker Error (%): 2.88 (Based on 5 years data)

Index: FTSE Wld Europe Ex-UK MD (12:00UK)TR USD

Lowest – Vanguard

  • Fund: Legal & General European Index Trust I Class Accumulation
  • Fund Code: LGEXA
  • Tracker Error (%): 2.92 (Based on 5 years data)

Global Emerging Markets Equity

Index: MSCI EM NR USD

Lowest – Vanguard

  • Fund: Vanguard Emerging Markets Stock Index Fund GBP Acc
  • Fund Code: VNEMA
  • Tracker Error (%): 0.88 (Based on 5 years data)

Next Lowest – Fidelity

  • Fund: Fidelity Index Emerging Markets P Accumulation
  • Fund Code: PIEMA
  • Tracker Error (%): 3.32 (Based on 5 years data)

Index: FTSE All Emerging NR USD

Lowest – L&G

  • Fund: Legal & General Global Emerging Markets Index Fund I Class Accumulation
  • Fund Code: LGGMA
  • Tracker Error (%): 3.08 (Based on 5 years data)

Global All Cap Equity

Index: FTSE Global All Cap TR GBP

Lowest – Vanguard

  • Fund: Vanguard FTSE Global All Cap Index Fund GBP Acc
  • Fund Code: VAFTA
  • Tracker Error (%): 0.92 (Based on 3 years data)

Global Large-Cap Equity

Index: FTSE Developed Ex UK TR GBP

Lowest – Vanguard

  • Fund: Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc
  • Fund Code: VADEA
  • Fund Tracking Error (%): 1.24 (Based on 3 years data)

Global Small-Cap Equity

Index: MSCI World Small Cap NR USD

Lowest – Vanguard

  • Fund: Vanguard Global Small-Cap Index Fund GBP Acc
  • Fund Code: VNGSA
  • Tracking Error (%): 1.15 (Based on 3 years data)

Final Thoughts

It is wise to choose the fund with lowest tracking error to avoid the hidden cost. However, there are other factors to analyse to choose right index fund to invest. Some of the other factors are on-going (OCF) and transaction cost, fund size and tracking difference.

If you comes across any better index tracker funds with lowest tracking error I’d love to hear about them in the comments below.

About Me

My name is Naresh Jayakumar. I am mastering personal finance to effectively manage, save and grow money. I’m on my happy jounery to financial indenpendence.

I blog to share the tricks and hacks of making, managing and saving money to help others achieve Financial Independence in their lives too.

 

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