Speaking of managing MERs on a portfolio of size, has anyone else considered redeeming their ETFs in specie?
What this means is that you surrender $x in the ETF in exchange for the direct underlying holdings. I reckon ETFs make a lot of sense during the accumulation, but the MER becomes non trivial eventually. For example, the redemption unit on VAS is about $1.5M. That means, if you have $1.5M of VAS, you can redeem it for the underlying $1.5M of securities (and a one off fee of approx $1250 - refer the PDS).
If I had 1.5M sitting there at a MER of 0.15%, I'm paying someone $2250 a year to "manage" the shares. As its a market cap ETF, this really only means trading when shares are created or destroyed - and not just because of price changes. I figure once a portfolio gets to that sort of size, the effort of dealing with dividend details from 300 individual stocks would start to be paid for by the cost savings.
Anyone else looked at this path before? I'm still to figure out the CGT treatment of an in-specie redemption too. There would be some bonus opportunities available from tax loss harvesting too.
I guess what I'm trying to say is that is there a point at which it makes sense to run your own index fund, rather than have someone else running it for you?