H-L charging structure

jimjames

Forever wrote: »

As for HL's wealth 150, I've never taken too much notice of it. After all, it lists new funds in it which they could never verify so it is obviously just a 'sales' listing. Well to me anyway.

Interesting to see the latest copy of the HL Wealth 150 this weekend which shows on glaring omission and perhaps clearly highlights the list's purpose.

According to BestInvest the US market makes up 55% of the capitalisation of the world index. How many US funds do HL include on the 150? The answer is a very round number, absolutely none. Maybe there are no funds that consistently beat the index which might be fair enough reason to promote a tracker as a 150 fund for the USA. I wonder if it will change once the platform review is fully implemented. In comparison there are 6 Japan funds in the Wealth 150, hmm?

Totton

Investors Chronicle are having a laugh ridiculing HL tips, some of those in IC have hardly been good for your wealth but I do enjoy reading it.

grey_gym_sock

there is 1 north american smaller companies fund in the 150, but no bigger companies fund. place your bets now for when they'll add a US tracker fund (i'll take 6 april 2016 ).

jamesd

Why would they have a US (or other) tracker in that list? A cap-weighted tracker is effectively guaranteed to under-perform the index and they are trying to list funds that have a record of and future possibility of out-performing.

Guaranteed under-performers need not apply. They don't belong there.

Something that is not cap-weighted might be interesting when available, though, given at least one study showing out-performance from trackers that aren't cap-weighted.

grey_gym_sock

which would you rather have, guaranteed under-performance by a small fraction of a %, or greater uncertainty and a big chance of more serious under-performance?

(or (what HL are effectively suggesting now) completely ignoring the biggest stocks in the world's largest stock market?)

"under-perforance" is an emotionally loaded term. it makes it sound like failure. it's isn't - not if you've invested within your risk level, and achieved good returns.

the market return is an arbitrary benchmark. for many markets, there happens to be a way of achieving performance just below the market. there's also the option of trying to do better than that, and perhaps doing worse as a result. it may be sometimes worth trying, but it surely sometimes isn't.

non-cap-weighted indices might be interesting. though clearly at least part of their advantage comes from the small/value premium. whether there is any other advantage they can capture, i'm not so sure.

jamesd

They aren't suggesting ignoring it, just that they don't have a fund they want to recommend with the expectation of consistently out-performing funds for the area. This may not surprise quite a few people here given that US large cap is where the efficient markets hypothesis is least likely to be untrue.

I agree that under-performance isn't necessarily negative.

When it comes to trackers not using cap-weighted indexes there was a piece in the Saturday FT a few weekends ago about them being shown to do better than cap-weighted. Picking by value metrics was one of the ones that succeeded in doing better.

Porcupine

Interesting. Was it this one? (pick the ft.com search result to avoid the paywall). Worth reading the comments as well.

It appears there's a thing called the 'RAFI weighting', which is another metric instead of market cap. There are a few RAFI ETFs around (but note the dateline on that article)

Edit 16-05-2013: FT have paywalled their article, but it's on MoneyWeek instead.

Rollinghome

grey_gym_sock wrote: »

which would you rather have, guaranteed under-performance by a small fraction of a %, or greater uncertainty and a big chance of more serious under-performance.

Reminds me of the comment "our analyst" Nigel Dampier had against various index trackers: "Once fees are taken into consideration our research suggests passively-managed tracker funds are likely to underperform the index they aim to track over the long term". Attempting to draw the assumption from punters that the more profitable managed funds weren't also extremely likely to underperform as a result of the charges.

Looks as if he's now done further "research" and removed the comments.

Investors need to decide for themselves whether they're able to find the managed funds that might do better than a tracker. Views will differ but they shouldn't be influenced by deliberately misleading marketing.

lentrix92

I was just about to open a Vang Lifestyle isa - only investing a small amount p/mth.

Given the possible new charging structure (any idea when?)Am I better off now with another provider ???

Borrowedtune

Totton wrote: »

Investors Chronicle are having a laugh ridiculing HL tips, some of those in IC have hardly been good for your wealth but I do enjoy reading it.

Presumably Psigma Income is one of the poor-performers they have highlighted ?