Hargreaves Lansdown HL Portfolio+ vs Vanguard lifestrategy

ColdIron

EdSwippet wrote: »

The annual charge (OCF) for the HL balanced portfolio is 1.44%. For Vanguard Lifestrategy it's 0.49% if held at HL -- 0.24% fund charge and 0.25% HL added charge (so potentially lower than 0.49% if held on a different platform).

The OCF for the HL Multi-Manager Balanced Managed Trust is 1.45% plus HL's platform fee of 0.45%. If they waive the platform fee for their MM funds it's news to me

The OCF for the VLS is 0.24% + platform fee of 0.45%

Therefore 1.9% and 0.69% respectively, that's a large difference

EdSwippet

ColdIron wrote: »

Therefore 1.9% and 0.69% respectively, that's a large difference.

Thanks for the correction.

DrSyn

jamesd
With respect to your post #7.

I thought that the OP (anddreou) would be interested because there was mentioned of :-

(a) Charges & fees, hence
http://www.7im.co.uk/media/455228/fifth_rule_of_investing.pdf


(b) HL Balanced growth portfolio (active investing)
Vanguard Lifestrategy 80% equity fund (passive investing).

I have notice for the last year at least HL have been pushing (in your words) there own managed funds. Hence as a balance
http://monevator.com/this-former-hedge-fund-manager-reveals-how-you-can-invest-for-life-in-five-quick-videos/


You are disparaging of passive investing but here are some facts

1. All academic studies show most fund managers after charges are applied to their fund, do not beat their relevant index.

2. Funds tracking major indexes are cheaper than their equivalent active funds.

3. In the USA since fiduciary duty responsibility has been placed on ISA's ,they are starting to recommend passive funds to their clients instead of active funds.

4. Warren buffet recommends passive investing for the average investor as they will be better off than trying to beat the market.

Questions
For this active fund which you sing the praises of, please tell me

1. Will continue to beat it's relevant index?

2. What is it's relevant index?

You failed to mention the relevant index that was beaten?

Looking the fund up on Morningstar, it's trailing the index since the start of 2015 at least. Shows you need to choose the index to compare it against with care.

dunstonh

1. All academic studies show most fund managers after charges are applied to their fund, do not beat their relevant index.

Although that has flaws as you would be eliminating a lot of funds in your filtering to make your pick from a much smaller range.

2. Funds tracking major indexes are cheaper than their equivalent active funds.

No-one would suggest picking an active fund with a equivalent objective to a tracker.

1. Will continue to beat it's relevant index?

That cannot be answered. So, no point asking the question. Nothing is guaranteed.

2. What is it's relevant index?

irreverent. You wouldnt want to pick a fund that is a closet tracker.

grey_gym_sock

DrSyn wrote: »

1. All academic studies show most fund managers after charges are applied to their fund, do not beat their relevant index.

dunstonh wrote: »

Although that has flaws as you would be eliminating a lot of funds in your filtering to make your pick from a much smaller range.

ok, so in a sense you're not buying an active fund, but buying into a filtering process for selecting an active fund.

and therefore data about the past performance of the average active fund isn't the most relevant thing. what you really want to look at is data about the past performance of the average filtering process for selecting an active fund.

does that data exist? i'm guessing it doesn't. if it does, who collates it? does everybody who has a process for filtering active funds report their selection, in real time, to some central location?

or do you only have data for the past performance of the filtering strategy you're using? that would be pretty useless, because it suffers from survivorship bias. because clearly if a filtering strategy does badly enough, after a while nobody will try pushing it any more. just like unsuccessful active funds are often closed down.

dunstonh

ok, so in a sense you're not buying an active fund, but buying into a filtering process for selecting an active fund.

There are some active funds that are little more than expensive trackers. So you eliminate those. You can usually eliminate bank and insurance company funds. If you want a value fund, spec sits, equity income, recovery etc type fund then you include those and eliminate the rest. You may prefer to have a lower volatility rated holding in a sector. In the remainder of the funds available you will have a much smaller pool of funds. You may find a tracker that fits the bill but you may find an investment objective that you prefer where there is no tracker or you feel the active fund offers better potential.

The key thing is not to be biased to active or passive but to retain an open mind.

or do you only have data for the past performance of the filtering strategy you're using? that would be pretty useless, because it suffers from survivorship bias.

Often with managed funds you are looking for consistency. So, no-one can deny past performance is an element of it. However, there is no point caring about survivorship as you are looking at the better end and not the duff end.

grey_gym_sock

dunstonh wrote: »

there is no point caring about survivorship as you are looking at the better end and not the duff end.

basically, you're saying you have no data.

the data on active funds generally is allegedly irrelevant, because you eliminate some of them. so where is your data (generated in real time, i.e. without hindsight) on performance of active funds excluding "the duff end"?

without data, it's just hand waving.

i agree with your point about starting from investment objective. though i would add that, if there is a cheap passive fund which fits a given investment objective, that's almost certainly what you should go for.

in some cases, the investment objective may lead you to an active fund. "value" would be a fair example.

though i think some of your example objectives are a bit "interesting":

a "recovery" fund - what is the purpose of that? are you trying to time the market/economic cycle?

"special situations" - why? that's effectively saying you want an active fund in advance. what effect is it supposed to benefit from, other than the theory that you (or your proxy) can identify in advance an active manager who can outperform the market by more than their charges? (which is rather begging the question.)

dunstonh

basically, you're saying you have no data.

Of course you do. You have data as you run your filtering. There is no point doing your research and worrying about a hypothetical fund that may have existed 10 years ago but doesnt now.

a "recovery" fund - what is the purpose of that? are you trying to time the market/economic cycle?

Certain investment objectives do work well in one part of the economic cycle but poorly in others. So, its not trying to time the market but adjust your objectives depending on where we are.

"special situations" - why? that's effectively saying you want an active fund in advance. what effect is it supposed to benefit from, other than the theory that you (or your proxy) can identify in advance an active manager who can outperform the market by more than their charges? (which is rather begging the question.)

And sometimes you have to accept there will not be a tracker with an investment style you are after.

grey_gym_sock

dunstonh wrote: »

Of course you do. You have data as you run your filtering. There is no point doing your research and worrying about a hypothetical fund that may have existed 10 years ago but doesnt now.

i'm suggesting your performance data is invalid because of survivorship bias. so you have data. but not convincing data.

Certain investment objectives do work well in one part of the economic cycle but poorly in others. So, its not trying to time the market but adjust your objectives depending on where we are.

i wonder if objectives are worth pursuing at all if they're not worth pursuing for a whole cycle.

presumably this is just at the margins of the portfolio, i.e. most of the portfolio doesn't pursue "transient" objectives. in which case, it won't do that much harm.

And sometimes you have to accept there will not be a tracker with an investment style you are after.

my problem with "special situations" as a category is: what effect is it supposed to capture, other than "some managers being clever"?

Linton

grey_gym_sock wrote: »

....

my problem with "special situations" as a category is: what effect is it supposed to capture, other than "some managers being clever"?

I would look on "special situations" as a superset of "recovery". The latter aims to invest in those companies perhaps where the old management have run the company into the ground and have been replaced, or perhaps where a well run company is moving into a new area after its old markets have disappeared . This investment would be undertaken on detailed knowledge of the companies involved. Under such circumstances the upside opportunity could well be very lucrative.

Such funds were very successful in the past but are much less relevent now. Perhaps because the large badly managed companies have gone and the larger good ones are multinational, there is less UK-specific opportunity - there simply arent enough larger UK companies around. The recovery/special situation arpproach now tend to be more a speciality of the small company funds which have the time and motivation to understand the companies they invest in, as in the small company sector there is sufficient variability to make the exercise worthwhile.

To make a broader point, advocates of passive investing state that to be successful and "beat the market" (whatever that is) active investors need to predict the future. This is not the case. In the same way as a balanced bond/equity fund gains from rebalancing without any need to predict which type of asset will give the best returns, one can aim to have a portfolio with a fixed allocation across industry sectors, company sizes, geographies, defensive/growth and anything else one can get data on. As various types of investment rise and fall annual rebalancing ensures that a general policy of buying low and selling high is in place. You can set up your portfolio so that the allocations are such as to provide the risk/return to meet your objectives.

Passive funds with their simple market cap allocation make this level of detailed management almost impossible to achieve.