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  • FIRST POST
    • Asghar
    • By Asghar 13th Sep 17, 7:42 PM
    • 109Posts
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    Asghar
    Query about Multi-Asset Fund Charges?
    • #1
    • 13th Sep 17, 7:42 PM
    Query about Multi-Asset Fund Charges? 13th Sep 17 at 7:42 PM
    Do you get charged twice for investing in Multi-Asset funds or fund of funds? Not sure what to call them.

    A popular one like the Vanguard LifeStrategy 100% Equity Fund charges 0.22% and holds other vanguard funds which have their own charges.

    Some of the funds it contains are:
    Vanguard US Equity Index - which charges 0.10%
    Vanguard FTSE Developed World ex-UK Equity - which charges 0.15%
    Vanguard FTSE UK All Share Index - which charges 0.08%
    Vanguard Emerging Markets Stock Index - which charges 0.27%

    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?
Page 1
    • BLB53
    • By BLB53 13th Sep 17, 8:07 PM
    • 1,151 Posts
    • 930 Thanks
    BLB53
    • #2
    • 13th Sep 17, 8:07 PM
    • #2
    • 13th Sep 17, 8:07 PM
    Or is the 0.22% the only charge of all the funds combined?
    Yes this covers all the charges of the underlying funds which averages ~ 0.15% and adds a bit more to cover admin and rebalancing.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Alexland
    • By Alexland 13th Sep 17, 10:34 PM
    • 647 Posts
    • 406 Thanks
    Alexland
    • #3
    • 13th Sep 17, 10:34 PM
    • #3
    • 13th Sep 17, 10:34 PM
    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!
    • chiang mai
    • By chiang mai 14th Sep 17, 2:19 AM
    • 88 Posts
    • 17 Thanks
    chiang mai
    • #4
    • 14th Sep 17, 2:19 AM
    • #4
    • 14th Sep 17, 2:19 AM
    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. nevertheless, from a risk perspective, it appears very low since the geographic spread is so wide.
    • msallen
    • By msallen 14th Sep 17, 6:53 AM
    • 553 Posts
    • 488 Thanks
    msallen
    • #5
    • 14th Sep 17, 6:53 AM
    • #5
    • 14th Sep 17, 6:53 AM
    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
    Originally posted by chiang mai
    By definition LS100 is 100% equities. LS80 is 80%, LS60 is 60% etc.
    • redpete
    • By redpete 14th Sep 17, 7:15 AM
    • 4,129 Posts
    • 3,639 Thanks
    redpete
    • #6
    • 14th Sep 17, 7:15 AM
    • #6
    • 14th Sep 17, 7:15 AM
    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. nevertheless, from a risk perspective, it appears very low since the geographic spread is so wide.
    Originally posted by chiang mai
    It is exposed to risks that affect global equity prices, events that have happened in recent history so not 'very low'. FE Risk Score of the fund is 97 - a volatility very similar to the baseline of 100 leading UK shares.
    Last edited by redpete; 14-09-2017 at 7:19 AM.
    loose does not rhyme with choose but lose does and is the word you meant to write.
    • chiang mai
    • By chiang mai 14th Sep 17, 7:59 AM
    • 88 Posts
    • 17 Thanks
    chiang mai
    • #7
    • 14th Sep 17, 7:59 AM
    • #7
    • 14th Sep 17, 7:59 AM
    Sorry, I was merely pointing out to the OP that the fund is a single asset (equities) fund and not mixed assets, as he suggested. Agreed however the fund is not very low risk but it is certainly below average, geographic risk seems to be something people outside the UK are more easily willing to accept than those inside hence my perception of it being lower than it really is.
    • Audaxer
    • By Audaxer 14th Sep 17, 9:23 AM
    • 559 Posts
    • 244 Thanks
    Audaxer
    • #8
    • 14th Sep 17, 9:23 AM
    • #8
    • 14th Sep 17, 9:23 AM
    Sorry, I was merely pointing out to the OP that the fund is a single asset (equities) fund and not mixed assets, as he suggested. Agreed however the fund is not very low risk but it is certainly below average, geographic risk seems to be something people outside the UK are more easily willing to accept than those inside hence my perception of it being lower than it really is.
    Originally posted by chiang mai
    Any fund that is 100% equities would be not be classed as below average risk.
    • Malthusian
    • By Malthusian 14th Sep 17, 9:38 AM
    • 3,280 Posts
    • 4,980 Thanks
    Malthusian
    • #9
    • 14th Sep 17, 9:38 AM
    • #9
    • 14th Sep 17, 9:38 AM
    Any fund that is 100% equities would be not be classed as below average risk.
    Originally posted by Audaxer
    To be fair it would be below average risk for an 100% equity fund, given that most 100% equity funds invest in single geographic markets. There is not really any such thing as "average risk".

    On the standard risk scale it would be called something like "high medium risk".
    • chiang mai
    • By chiang mai 14th Sep 17, 9:49 AM
    • 88 Posts
    • 17 Thanks
    chiang mai
    Any fund that is 100% equities would be not be classed as below average risk.
    Originally posted by Audaxer
    I disagree very strongly, it's all about context. The fund in question is below average risk when compared to other equity funds. Of course, if you compare it against savings bonds then it's ultra high super duper high risk! I think that understanding that risk (in context) is essential when selecting equity funds in order to help match your risk profile. And....average risk refers to an average of a group of similar fund types, again it's the context that's important. If you look at the risk rating of a particular fund for example on the FT site, that shows relative risk by comparison to other funds in the same class and demonstrates above and below average very well. https://markets.ft.com/data/funds/tearsheet/risk?s=IE00B3NS4D25:GBP
    Last edited by chiang mai; 14-09-2017 at 9:52 AM.
    • bowlhead99
    • By bowlhead99 14th Sep 17, 10:37 AM
    • 6,873 Posts
    • 12,378 Thanks
    bowlhead99
    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.
    Originally posted by chiang mai
    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.

    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!
    Originally posted by Alexland
    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.
    Do you get charged twice for investing in Multi-Asset funds or fund of funds? Not sure what to call them.
    Originally posted by Asghar
    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.
    • Audaxer
    • By Audaxer 14th Sep 17, 8:21 PM
    • 559 Posts
    • 244 Thanks
    Audaxer
    I disagree very strongly, it's all about context. The fund in question is below average risk when compared to other equity funds. Of course, if you compare it against savings bonds then it's ultra high super duper high risk! I think that understanding that risk (in context) is essential when selecting equity funds in order to help match your risk profile. And....average risk refers to an average of a group of similar fund types, again it's the context that's important. If you look at the risk rating of a particular fund for example on the FT site, that shows relative risk by comparison to other funds in the same class and demonstrates above and below average very well. https://markets.ft.com/data/funds/tearsheet/risk?s=IE00B3NS4D25:GBP
    Originally posted by chiang mai
    The VLS100 might be average risk when compared to other 100% equity funds. However when people are looking to invest in a VLS fund they will be deciding which VLS fund to invest in based on their risk tolerance. If they looking for a medium risk VLS fund they might go for or be advised to go for the VLS60 (i.e. 60% equities) and if they are looking for high risk in the context of VLS funds they would probably go for the VLS100.
    • chiang mai
    • By chiang mai 15th Sep 17, 12:29 AM
    • 88 Posts
    • 17 Thanks
    chiang mai
    The VLS100 might be average risk when compared to other 100% equity funds. However when people are looking to invest in a VLS fund they will be deciding which VLS fund to invest in based on their risk tolerance. If they looking for a medium risk VLS fund they might go for or be advised to go for the VLS60 (i.e. 60% equities) and if they are looking for high risk in the context of VLS funds they would probably go for the VLS100.
    Originally posted by Audaxer
    What you write suggests that investors have allegiance to particular brands because that same risk adjustment can be made by balancing asset types within a multi-fund portfolio. To just restrict choice to Vanguard alone is in itself a risk I would suggest.
    • bigadaj
    • By bigadaj 16th Sep 17, 8:11 AM
    • 10,671 Posts
    • 6,970 Thanks
    bigadaj
    What you write suggests that investors have allegiance to particular brands because that same risk adjustment can be made by balancing asset types within a multi-fund portfolio. To just restrict choice to Vanguard alone is in itself a risk I would suggest.
    Originally posted by chiang mai
    I think you're reading more into that than was intended, vanguard are popular because they are cheap and straightforward, but many other fund houses and providers are similar. Choice often comes down to nuances on how the funds are put together, minor differences in inclusions and exclusions, what their benchmark is etc

    There's a theoretical risk in having large sums with vanguard alone as the fscs limit is only £50k, but were vanguard to go bust the underlying equities would still be held by the investors, soemthing very unusual such as systemic fraud would have to exist for people to suffer significantly.
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