Vanguard direct to customer offering confirmed
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Interesting. This survivorship-bias study from Vanguard covers five years and includes 'dead' funds. Of those measured, active funds underperform overall, but active UK equity funds come closest to active/passive parity, with around 53% or so of them underperforming trackers. So if you're going to pick funds with darts and a dartboard, this is the sector in which to do it (and the US is definitely not the sector for that).Another flaw with the Telegraph data is that it does not account for funds that discontinued during the period. These will tend to be the underperformers.
Also, bear in mind that some active funds are not really active. Aggregating enough of those could at least partly explain why UK funds show a close degree of active/passive parity.
These two probably underpin a chunk of of why this debate in the UK just runs, and runs, and runs, and runs, and...0 -
Can someone clarify if I have paid into a CSD ISA this year and I transfer out all my holdings to Vanguard and close my CSD account completely I can contribute to the Vanguard ISA this year or would I have to continue with CSD and transfer in April 2018?0
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They've just announced some pretty impressive performance stats !
In its latest trading statement released today, HL reported net new business of £3.3bn during the four-month period under review, and year to date this rose to £5.6bn.
AUA increased by 10% from £70bn to £77bn in the four months to 30 April, while total net revenue was £131m. The group said this was a result of net new business, higher market levels and strong share dealing volumes.
This makes year to date net revenue £316m, 17% higher than the same time in 2016 ...
New tax year ISA and SIPP contributions:cool:0 -
Can someone clarify if I have paid into a CSD ISA this year and I transfer out all my holdings to Vanguard and close my CSD account completely I can contribute to the Vanguard ISA this year or would I have to continue with CSD and transfer in April 2018?
Yes.
You must arrange for Vanguard to transfer all your current year ISA subscriptions from CSD. Once that's done, you can contribute new money to the Vanguard ISA.
If you have previous year ISA subscriptions with CSD, you can include those within the transfer, leave them with CSD, or transfer elsewhere.0 -
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I'm coming to the view that the core issue on passives vs actives is whether you believe you (or your adviser) can pick, in advance, the active funds that will outperform. Clearly some will outperform passives, though what proportion will do so is still debatable. Clearly, most people who pick a range of actives will end up with some that outperform, which may convince them that picking the winners is easy. Whether they are taking a balanced view of their overall success is something only they can judge.
At the moment I only hold active funds though I have held a few passives in the past. As far as my investing is concerned the key issue isnt outperformance or trying to predict winners. The concept of outperformance only makes sense if you are comparing funds that invest in the same things with the same objectives. If funds invest in different things or have different objectives they will behave differently - obviously, so what?.
One key issue for me is asset allocation for diversification. In general passive funds constrain you to investing in companies in proportion to their market capitalisation which to me makes as much as sense as investing according to the position in an alphabetical list. (To be fair, I have a vague memory of some statistically significant data from many years ago showing that companies high in an alphabetic list tended to perform better than those near the bottom!). A completely passive portfolio is dominated by global companies which operate in a single global market and so will tend to be highly correlated within any sector - you lose much of the possible benefit of geographic diversification.
Another factor is that some areas of investing clearly require human intervention. Income funds are an obvious example where a purely passive approach cant distinguish between a high yield because a company is successfully generating high dividends and one where the share price has recently dropped significantly. They also can suffer by over=focussing on particular sectors. Look up what happened to IUKD in the 2008 crash. Aside from the income area, small companies and industry specific niche funds can benefit from expert knowledge of the companies concerned.0 -
Seems to be a misconception that active managers as a whole cannot beat the market. But that only applies when active managers hold all the market. If 90% of the market is held in passive funds its theoretically possible for active managers to hold only the best performing 10%“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
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How successful have you been in picking passive funds that consistently beat their market index, without using funds with active strategies like stock lending on top of their passive core? If you ever managed it, were you unhappy with the tracking error or did you regard it as desirable?
In the active world it's relatively easy and you start in the same way as you might start in the passive world: by eliminating the consistent under-performers. In the passive world that means eliminating expensive funds like those from Vanguard or the even more expensive one percent chargers. Eliminating the ones that exploit tied in buyers or inertia - many pension funds - also helps. Then avoid biasing the study by ignoring the things that are normally done by those paying attention to active funds, like leaving when the human manager changes or by pretending that lots of money was in the junk funds that were closed after people left them or never bothered with in the first place because they were dogs just like a two percent charging FTSE tracker would be.
The SPIVA scorecard you quoted from is useless as a comparison tool because of its built in bias, which comes from ignoring the things that matter in active fund selection and only keeping the things which matter to passive selection. Nobody should be surprised that a firm which makes its money by selling the right for trackers to use its indexes would produce a measuring tool with built in bias. You might try looking for a SPIVP scorecard though. S&P probably don't provide one but to get you started just put 100 in the percentage of passive funds underperforming their benchmark boxes.
Also interesting that HL's platform is cheaper than Vanguard's, for unwrapped ETFs, with a 0% platform charge.
I've just checked four of my funds, all active European funds, and over the last 5 and 10 years all four have outperformed the European index funds I looked at. I wasn't able to check all European index funds, just a handful. Over five years the outperformance was at least 2%. Over ten years it was higher, in one case by 6%. My best fund has rocketed upwards over almost 20 years. It looks as if the index funds took a larger hit in the crash. In any case, these funds have done very well even taking charges into account. My worst funds are passive, such as a UK index fund, although they have done very well compared to cash in a savings account.
I am sure it is not hard to work out the likelihood of an active fund in a given sector performing well for a further 5 years given good performance over the previous 5 years. Historical data would suffice.0 -
How successful have you been in picking passive funds that consistently beat their market index, without using funds with active strategies like stock lending on top of their passive core? If you ever managed it, were you unhappy with the tracking error or did you regard it as desirable?
In the active world it's relatively easy and you start in the same way as you might start in the passive world: by eliminating the consistent under-performers. In the passive world that means eliminating expensive funds like those from Vanguard or the even more expensive one percent chargers. Eliminating the ones that exploit tied in buyers or inertia - many pension funds - also helps. Then avoid biasing the study by ignoring the things that are normally done by those paying attention to active funds, like leaving when the human manager changes or by pretending that lots of money was in the junk funds that were closed after people left them or never bothered with in the first place because they were dogs just like a two percent charging FTSE tracker would be.
The SPIVA scorecard you quoted from is useless as a comparison tool because of its built in bias, which comes from ignoring the things that matter in active fund selection and only keeping the things which matter to passive selection. Nobody should be surprised that a firm which makes its money by selling the right for trackers to use its indexes would produce a measuring tool with built in bias. You might try looking for a SPIVP scorecard though. S&P probably don't provide one but to get you started just put 100 in the percentage of passive funds underperforming their benchmark boxes.
Not going to spend too much time replying to everything, you're a smart guy and will do your own research but in short...
One does not buy a tracker for outperformance. Buying a tracker will, as the name suggests, track the market, less the fee. The fee is ~0.22% for an automatically balancing diversified world portfolio.
Buying a tracker is saying "why take the risk of trying to pick a 1 in 10 fund manager that can beat the market? When anyone can pick a vast array of vanilla low cost trackers that will provide returns in line with the market.
Calling the VGLS funds expensive is somewhat misleading as the funds suggested don't match any VGLS portfolio, nor do they auto-balance to the set asset allocation, doing this yourself costs time/money and can quickly eat away at any fee saving, your post didn't mention this.
Why is Warren Buffet willing to bet against hedge fund managers while advocating tracker funds? Why does he wish his wife to invest in a tracker stating: "long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers" Why is there net inflows into European passive funds in 2016 – both index funds and ETFs – totalled $83 billion and outpaced the $48 billion netted by their active peers?0 -
Hennerz perhaps you should realise there is a difference between the USA and the U.K.0
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BananaRepublic wrote: »I've just checked four of my funds, all active European funds, and over the last 5 and 10 years all four have outperformed the European index funds I looked at. I wasn't able to check all European index funds, just a handful. Over five years the outperformance was at least 2%. Over ten years it was higher, in one case by 6%. My best fund has rocketed upwards over almost 20 years. It looks as if the index funds took a larger hit in the crash. In any case, these funds have done very well even taking charges into account. My worst funds are passive, such as a UK index fund, although they have done very well compared to cash in a savings account.
I am sure it is not hard to work out the likelihood of an active fund in a given sector performing well for a further 5 years given good performance over the previous 5 years. Historical data would suffice.
Some active funds will beat the market and some won't. It's great that you are on the plus side, but there is a selection bias in these anecdotal stories as those that lose money seldom step forward to advertise their failure. People owning passive funds will on average beat those owning active funds and so to maximize the probability of "success" you should use a passive approach.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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