The Lemon Fool

I looked at the tracking error for the Vanguard Global Bond Index Fund:

https://www.vanguardinvestor.co.uk/inve ... _fund_link

The relevant numbers are:

5 year NAV growth 12.30%

5 year index growth 12.79%

112.30% / 112.79% = 0.9956556

0.9956556 ^ (1/5) = 0.9991296

The annualised tracking error was about 0.1%. This is less than I expected. The OCF is currently 0.15%, and may have been higher in the past. The transaction costs are shown as 0.08%:

https://www.vanguardinvestor.co.uk/cont ... s-2018.pdf

There may also have been some defaults.

Similar results for other Vanguard funds, e.g. the global small cap fund:

https://www.vanguardinvestor.co.uk/inve ... _fund_link

The annualised tracking error here is about 0.2%, which is, again much less than the OCF plus the transaction costs. I had dismissed that fund as being too expensive, but perhaps it is good choice.