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  • FIRST POST
    • edinburgher
    • By edinburgher 16th May 17, 8:21 AM
    • 10,618Posts
    • 55,111Thanks
    edinburgher
    Vanguard direct to customer offering confirmed
    • #1
    • 16th May 17, 8:21 AM
    Vanguard direct to customer offering confirmed 16th May 17 at 8:21 AM
    Looks like Vanguard are taking the wraps off their new direct to customer offering - wonderful

    https://www.ft.com/content/6821ce50-3976-11e7-821a-6027b8a20f23

    I know that this has been on the cards for some time, but it's nice to see some specifics confirmed (0.15% admin costs for £500+)

    Another article:

    https://www.theguardian.com/business/2017/may/16/vanguard-funds-investment-isa-uk-fees-hargreaves-lansdown-fidelity
    Last edited by edinburgher; 16-05-2017 at 8:24 AM.
Page 7
    • bostonerimus
    • By bostonerimus 18th May 17, 12:11 PM
    • 352 Posts
    • 191 Thanks
    bostonerimus
    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.
    Originally posted by BananaRepublic
    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.
    • hennerz
    • By hennerz 18th May 17, 12:28 PM
    • 171 Posts
    • 32 Thanks
    hennerz
    Hennerz perhaps you should realise there is a difference between the USA and the U.K.
    Originally posted by fun4everyone
    Heh, maybe you should spend more time reading my posts instead of Thanking anyone who disagrees with them.

    As I already posted: http://www.evidenceinvestor.co.uk/2016-uk-fund-managers-annus-horribilis/
    • fairleads
    • By fairleads 18th May 17, 12:35 PM
    • 580 Posts
    • 148 Thanks
    fairleads
    The operative word is most, which implies that a significant minority still choose active management.
    In the case of the example quoted the significant minority investing in European active funds is just over 36% of the 2016 total.
    Interesting is that WB constantly encourages investors to not time the market, yet his strategy is opposite.
    • edinburgher
    • By edinburgher 18th May 17, 12:44 PM
    • 10,618 Posts
    • 55,111 Thanks
    edinburgher
    So the take home message here is that Warren Buffet advocates a different strategy for the 99.99999999% of the global population who aren't Warren Buffet? That seems fair enough
    • Crashy Time
    • By Crashy Time 18th May 17, 12:48 PM
    • 4,247 Posts
    • 1,988 Thanks
    Crashy Time
    Very interesting, thanks for posting.
    • dunstonh
    • By dunstonh 18th May 17, 12:51 PM
    • 88,168 Posts
    • 53,390 Thanks
    dunstonh
    Heh, maybe you should spend more time reading my posts instead of Thanking anyone who disagrees with them.

    As I already posted: http://www.evidenceinvestor.co.uk/2016-uk-fund-managers-annus-horribilis/
    Originally posted by hennerz
    1 year periods, as that article has can be misleading. According to research by S&P Dow Jones Indices, the majority of active UK equity fund managers returned more than their passive benchmark in the year to 30 June [2016], with 82% outperforming the S&P UK BMI index.

    UK large and medium-sized company funds returned the most, with 92% of actively managed funds beating the S&P UK Large/Mid Cap index over the year to the end of June. However, S&P says that this stands in stark contrast to UK smaller company funds, with the majority of funds underperforming their benchmarks over one, three, five and 10-year periods.
    --

    So, in June, 1 year had most active being better. Yet by the end of December, 1 year had passive as being better. Main differences in the periods was the June to June had a stockmarket crash in the middle. Whereas 2016 calendar year did not and was mostly growth. Typically, you find passive is better in growth periods rather than volatile.

    For me, I tend to avoid general UK growth funds on the managed side. I think passive is better if you want to invest in that style for that sector. However, if you want focused UK equity funds such as defensive, income, spec sits/recovery, value etc then that is where the managed comes into play.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • BananaRepublic
    • By BananaRepublic 18th May 17, 1:09 PM
    • 816 Posts
    • 570 Thanks
    BananaRepublic
    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.
    Originally posted by bostonerimus
    My experiences are not anecdotal, they are factual, and they do not involve just one fund, but a group of funds, over a long period (20 years or so), making it unlikely - but not impossible - that luck was on my side.

    However, you say "People owning passive funds will on average beat those owning active funds". That assumes random fund selection. And indeed if you are daft enough to choose funds in that manner, then yes I agree with your remarks. However, one of the posters - Dunstunh - is an IFA, and has been so for quite a few years. That means that he has long term experience of choosing funds, and he states that he too can select active funds that outperform passive ones. Bear in mind that he will have helped goodness knows how many people select funds, and so you would expect his experiences to be more representative.

    So in short, you have misinterpreted the results of research to draw conclusions that are not valid. As I had stated, it would be fairly easy to see if using historical performance data was a reliable way to pick funds. My experience suggests it is. Proper research would provide a more informative answer.

    Incidentally, my comments apply to funds outside of the US. The US is known to be a market where active funds do particularly poorly, and passive funds are perhaps the best choice.
    • Linton
    • By Linton 18th May 17, 2:11 PM
    • 7,913 Posts
    • 7,712 Thanks
    Linton
    1 year periods, as that article has can be misleading. According to research by S&P Dow Jones Indices, the majority of active UK equity fund managers returned more than their passive benchmark in the year to 30 June [2016], with 82% outperforming the S&P UK BMI index.

    UK large and medium-sized company funds returned the most, with 92% of actively managed funds beating the S&P UK Large/Mid Cap index over the year to the end of June. However, S&P says that this stands in stark contrast to UK smaller company funds, with the majority of funds underperforming their benchmarks over one, three, five and 10-year periods.
    --

    So, in June, 1 year had most active being better. Yet by the end of December, 1 year had passive as being better. Main differences in the periods was the June to June had a stockmarket crash in the middle. Whereas 2016 calendar year did not and was mostly growth. Typically, you find passive is better in growth periods rather than volatile.

    ........
    Originally posted by dunstonh
    Surely the most significant factor was the BREXIT vote leading to the large drop in the £. Large companies mainly increased in value in £ terms because their price is underpinned by their involvement in the global market whereas small companies which attract less foreign investment interest generally fell in £ terms as they are far more susceptible to local economic disruption.

    Which raises a thought in my mind - do the comparisons that are made between mainly US based indices and UK based fund performance take account of currency fluctuations?
    • dunstonh
    • By dunstonh 18th May 17, 2:40 PM
    • 88,168 Posts
    • 53,390 Thanks
    dunstonh
    Another thing to note is that passive is still an investment strategy.

    Vanguard Lifestrategy 60 (a strategy that only uses passives) was top quartile in 2016 and 2014. It was second quartile in 2015. It was third quartile in 2012 and bottom quartile in 2013 and year to date in 2017.

    Which raises a thought in my mind - do the comparisons that are made between mainly US based indices and UK based fund performance take account of currency fluctuations?
    I did wonder too. I looked at FE analytics which reams of benchmarks on it and the S&P ones were not present.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Sally57
    • By Sally57 18th May 17, 2:59 PM
    • 66 Posts
    • 15 Thanks
    Sally57
    Another thing to note is that passive is still an investment strategy.

    Vanguard Lifestrategy 60 (a strategy that only uses passives) was top quartile in 2016 and 2014. It was second quartile in 2015. It was third quartile in 2012 and bottom quartile in 2013 and year to date in 2017.


    I did wonder too. I looked at FE analytics which reams of benchmarks on it and the S&P ones were not present.
    Originally posted by dunstonh
    So that's respectable but not great results for VLS60 but I suppose it is quite a low risk fund but I,m sure there will be equivalent active funds that have done better over this period overall?

    Also how does that compare with other similar multi asset funds over the same time period and risk strategy - HSBC Global Strategy, Blackrock Consensus and L&G?
    • thetimewill
    • By thetimewill 18th May 17, 5:04 PM
    • 40 Posts
    • 6 Thanks
    thetimewill
    Hello again all,
    It is becoming difficult to follow this thread as it seems to be about types of investments against the opening posts information re Vanguard new offering. Or is it me?
    Regards
    Billy
    • racey
    • By racey 18th May 17, 5:16 PM
    • 124 Posts
    • 43 Thanks
    racey
    Another thing to note is that passive is still an investment strategy.

    Vanguard Lifestrategy 60 (a strategy that only uses passives) was top quartile in 2016 and 2014. It was second quartile in 2015. It was third quartile in 2012 and bottom quartile in 2013 and year to date in 2017.
    Originally posted by dunstonh
    The top quartile of what? All funds?
    Sorry, I'm not sure what eve above means.
    • badger09
    • By badger09 18th May 17, 6:07 PM
    • 4,980 Posts
    • 4,178 Thanks
    badger09
    Hello again all,
    It is becoming difficult to follow this thread as it seems to be about types of investments against the opening posts information re Vanguard new offering. Or is it me?
    Regards
    Billy
    Originally posted by thetimewill
    That's what tends to happen on an internet forum.

    By all means bring it back 'on track' if you have a specific question, or comment
    • badger09
    • By badger09 18th May 17, 6:08 PM
    • 4,980 Posts
    • 4,178 Thanks
    badger09
    The top quartile of what? All funds?
    Sorry, I'm not sure what eve above means.
    Originally posted by racey
    The top/second/third/fourth quartile of comparable funds.

    Top is obviously best
    • Linton
    • By Linton 18th May 17, 6:13 PM
    • 7,913 Posts
    • 7,712 Thanks
    Linton
    The top quartile of what? All funds?
    Sorry, I'm not sure what eve above means.
    Originally posted by racey
    Funds are categorised into sectors. It is common to talk about a fund's performance within its sector as being 1st quartile ie in the top 25%, 2nd quartile ie in the 26-50% band etc. VLS60 is in the "mixed Investment 20-60%" sector.
    • bowlhead99
    • By bowlhead99 18th May 17, 6:34 PM
    • 6,416 Posts
    • 11,360 Thanks
    bowlhead99
    Funds are categorised into sectors. It is common to talk about a fund's performance within its sector as being 1st quartile ie in the top 25%, 2nd quartile ie in the 26-50% band etc. VLS60 is in the "mixed Investment 20-60%" sector.
    Originally posted by Linton
    I think the VLS60 was mixed investment 40-85% equity last time I looked, which is quite a broad bucket in terms of risk profile of funds that fit in it. It was the VLS80 fund that was rammed up against the top of that range at a permanent 80%. They put VLS60 in the same category, rather than have it be absolutely the highest risk thing in the 20-60% equity group.

    Though VLS60 will be in the top half of riskiness of funds in that sector: never dropping below 60% equities, always having 75% of its equities overseas, and taking its UK exposure from tracker only therefore high reliance on the multinationals with large proportions of their revenues in dollars or euros or other currencies than pounds, and not having any non-equity diversifiers other than a relatively fixed mix of bonds.

    So, it did well when GBP currency tanked against other currencies and global equity markets did extremely well at the same time as bonds were showing continuing strength. A lot of other mixed assets funds are more cautiously positioned.
    Last edited by bowlhead99; 18-05-2017 at 7:43 PM. Reason: Autocorrect typos
    • thetimewill
    • By thetimewill 18th May 17, 6:40 PM
    • 40 Posts
    • 6 Thanks
    thetimewill
    badger09,
    Thank you for the reply. I was considering adding another post to follow on from my earlier information. I thought some members may have been interested in my contact with Vanguard (email and telephone) since I transferred some funds. However, if it is the norm to ignore original topics, I shall refrain.
    Regards,
    Billy
    • Glen Clark
    • By Glen Clark 18th May 17, 7:09 PM
    • 3,715 Posts
    • 2,707 Thanks
    Glen Clark
    Being Vanguard I thought the fees would be less, as they are in America.
    But I suppose they can't undercut other platforms too much or the other platforms wouldn't sell Vanguard funds?
    For society to function well, people generally need to feel that they have a fair chance of success through their ability and efforts. The more entrenched hereditary elites we have, the less likely people are to feel that way
    • bostonerimus
    • By bostonerimus 18th May 17, 7:20 PM
    • 352 Posts
    • 191 Thanks
    bostonerimus
    My experiences are not anecdotal, they are factual, and they do not involve just one fund, but a group of funds, over a long period (20 years or so), making it unlikely - but not impossible - that luck was on my side.
    Originally posted by BananaRepublic
    I did not mean to say that you did not actually end up on the plus side of the market, just that forums and not places for absolute rigor.

    However, you say "People owning passive funds will on average beat those owning active funds". That assumes random fund selection. And indeed if you are daft enough to choose funds in that manner, then yes I agree with your remarks. However, one of the posters - Dunstunh - is an IFA, and has been so for quite a few years. That means that he has long term experience of choosing funds, and he states that he too can select active funds that outperform passive ones. Bear in mind that he will have helped goodness knows how many people select funds, and so you would expect his experiences to be more representative.
    The average person will not have the knowledge (I'd still ascribe a lot of luck) to consistently choose the right funds and make the right trades. Undoubtedly there are people who have long track records of success and there are also those with long track records of failure, but some in the middle and the difficulty comes in backing the right horse at the right time and for the average investor it's simply not worth it.


    So in short, you have misinterpreted the results of research to draw conclusions that are not valid. As I had stated, it would be fairly easy to see if using historical performance data was a reliable way to pick funds. My experience suggests it is. Proper research would provide a more informative answer.

    Incidentally, my comments apply to funds outside of the US. The US is known to be a market where active funds do particularly poorly, and passive funds are perhaps the best choice.
    Given the historical lack of low cost index funds in the UK you last sentence has a ring of truth about it. There hasn't been much time or data to compare active vs passive in the UK, but with low cost tracker options now readily available I expect to see studies and that the results will mirror those of the US.
    • badger09
    • By badger09 18th May 17, 8:43 PM
    • 4,980 Posts
    • 4,178 Thanks
    badger09
    badger09,
    Thank you for the reply. I was considering adding another post to follow on from my earlier information. I thought some members may have been interested in my contact with Vanguard (email and telephone) since I transferred some funds. However, if it is the norm to ignore original topics, I shall refrain.
    Regards,
    Billy
    Originally posted by thetimewill
    Please do add your further comments. I'm sure they will be useful & or interesting to other users considering this new offering from Vanguard.

    The point I was trying to make, is that it is impossible to stop posters wandering off topic. And sometimes, though not always, their wanderings can be as useful & or interesting as those which are strictly relevant to the opening post.

    That is the very nature of these fora.
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