Query about Multi-Asset Fund Charges?

chiang_mai wrote: »

I was looking for something similar to that so thanks to the OP for posting. It appears to be a global equities fund but is not a mixed asset fund since it doesn't appear to contain bonds of any type.

The Vanguard Lifestrategy series is a mixed asset range of funds, though as you noticed, the particular "100" version mentioned is 100% equities (rather than 80% equities for the Lifestrategy 80 and 60% equities for the Lifestrategy 60).

So the only 'mix' they are offering in that particular version of the Lifestrategy range is by geographic region (25%UK, 75% non-UK) and they take that exposure by investing the fund's money into other Vanguard regional-specialist equity index funds, using major market-capitalisation weighted index trackers for their exposure to each region. In the versions that are less than 100% equities (e.g. the Lifestrategy 80, Lifestrategy 60, 40, 20) they have a lower proportion of the value allocated to equity tracking funds and more in bond index tracking funds.

nevertheless, from a risk perspective, it appears very low since the geographic spread is so wide.

It is still 100% equities though which is generally accepted to be the riskiest of the mainstream asset classes (e.g. compared to bonds or commercial property). And having the money spread all around the world is sensible but does not 'save you' from a global equities crash when all that money is in equities and most major markets are pretty correlated with each other.

For example, the FTSE All-World index has 4000+ companies from across all major developed and emerging markets, yet within the last decade the largest peak-to-trough drawdown for that index (before management fees, operating costs and platform fees) was 58% - between 2007-2009 for a US dollar investor. So as you say, 100% equity funds are super-duper risky compared to a bond fund.

Alexland wrote: »

It's a very good question and although I have seen the standard answer I have never really been sure. I don't think I would be satisfied unless the multi fund manager allowed me to inspect their internal fee deduction transactions!

They allow you to inspect their accounts in their longform annual reports which they publish. You can look at those and see what ratio of expenses to assets they have.

Asghar wrote: »

Do you get charged twice for investing in Multi-Asset funds or fund of funds? Not sure what to call them.

Are the individual funds taking their own charges and then you are charged another 0.22% for investing in them through the Vanguard LifeStrategy 100% Equity Fund? So basically paying for vanguard to manage the asset allocation.
Or is the 0.22% the only charge of all the funds combined?

Regarding terminology: a 'multi-asset fund' does not always invest in other funds at all - it can simply be directly holding investments from different asset classes, e.g. different tpes of shares, bonds, properties, commodities etc. In this case you are talking about a 'fund of funds' where the fund you buy invests in other funds ; and you are concerned about whether the total expense ratio of the underlying investee funds is already incorporated when coming up with the total expense ratio of the top holding fund that you buy.

The answer is yes , it should be, based on the industry guidance given for a situation where an open-ended fund invests into another open-ended fund. The expense ratio info from the lower-tier fund should get bundled into the top fund's numbers. In this particular case of Vanguard it's pretty easy for them to do that because they are all one fund house and don't have any problem getting the data from the underlying positions.

In some other cases, a fund-of-funds type product might hold some opaque investment trusts or other investment companies with difficult-to-meaningfully-track expenses figures ; in such cases you don't get a full lookthrough and will just need to bear in mind the nature of the underlying holdings to guess the overall expenses to which you might be exposed.

At the end of the day though, any charges that are expensed by the fund... or by its investees... or are capitalised into the cost of its investment portfolio (or its investees' investment portfolios)... will all come out in the wash when you look at the published performance ; i.e., what is the fund worth per unit now compared to what was it worth five years ago on a total returnn basis.