Global Tracker Funds

dunstonh

MPN wrote: »

After doing some research I've noticed there are some good more specialist global trackers such as the L&G Global Health & Pharmaceutical Index & the L&G Global Technology Index or if you prefer a fund the Fidelity Global Technology Fund. Higher risk scores but some great returns if you prefer the higher exposure to these individual markets. Morningstar give them all a 5 star rating.

Ignore the ratings. Doesnt mean anything of value. Those funds are just about as high risk as you can get with unit trust/OECIS.

jdw2000

bowlhead99 wrote: »

An 'accumulating fund' is a special class or type of investment fund that does not pay out any dividends to you at all and the money received from its underlying investee companies is automatically reinvested within the fund without ever being paid over to your ISA account or investment account or pension account on your platform, so you don't get the opportunity to pay it out to your bank account.

Whereas if you invest directly into an individual company or into the 'income' version of the fund, the dividends arising would generally be paid into your account that holds the investment (isa account / investment account /pension account). Your platform may or may not offer the facility to automatically invest the received dividends back into buying more units of the investments. If it didn't, you would have to do it manually.

As JohnRo says, some platforms support automatically paying the dividends out to your bank every so often (whether a fixed amount by standing order or just the total amount that's been received in the period, from quarter to quarter).

You can decide fund by fund whether you would like to hold an accumulation version or an income version. But the platforms don't typically allow you to pick which particular fund's dividends you want to sweep to your bank account, it's either all the income you receive into the investment account or nothing (unless you're doing it as a fixed amount by standing order, which could be set at less than the total of the dividends you expect to receive).

As a general rule, accumulation funds which don't physically pay out dividends - and simply reinvest them internally - are quite useful for ISAs, because unless you're actually retired and living off the income being generated, you probably don't want the money. If you've topped up your ISA account to the maximum annual allowance, it's unlikely you are going to want to pull the dividends out of it again and reduce the value of your ISA when you are already stuck with money or investments that don't fit inside the ISA.

By contrast, if your holdings are unwrapped and in a general investment account outside an ISA or pension, then when you receive dividends it could be quite useful to have the fund be an 'income' version that sends the income it receives out to your investment account. You may or may not want to take it away and spend it, but at least you can see how much it is and track how much of it is being reinvested. You need that information for tax purposes anyway - i.e. even if you don't owe tax on the amounts because of fitting inside your allowances and exemptions, you need to keep records of much income you made and how much your investments really 'cost' for tax purposes.

While a great many 'funds' structured as unit trusts or OEICs are available in either accumulation or income flavours, the funds structured as ETFs are mostly just simple income payers. Sometimes you do find accumulating versions of ETFs but not for all of them. Similarly investment trusts will be income payers rather than accumulation.

Thanks very much for that. Yes, totally understand not wanting to be paid from the ISA. Keep whatever is in there locked in. Will have to check and see what TDDI do with VWRL and VLS80.

Cheers!

jdw2000

MPN wrote: »

After doing some research I've noticed there are some good more specialist global trackers such as the L&G Global Health & Pharmaceutical Index & the L&G Global Technology Index or if you prefer a fund the Fidelity Global Technology Fund. Higher risk scores but some great returns if you prefer the higher exposure to these individual markets. Morningstar give them all a 5 star rating.

That seems to fly in the face of the advice given by many quarters that you should diversify (sectors, as well as geography).

MPN

Yes, I totally agree but I wasn't suggesting putting a lots of money into these investments however I do feel it could be worth a small amount of money even if it is more high risk bearing in mind the returns of these funds? Diversify for sure on both sectors and geography but I was suggesting a very small amount of a portfolio.

jimjames

MPN wrote: »

After doing some research I've noticed there are some good more specialist global trackers

Out of interest, how do you rate these as good? Purely based on the Morningstar ranking?

bowlhead99

MPN wrote: »

After doing some research I've noticed there are some good more specialist global trackers such as the L&G Global Health & Pharmaceutical Index & the L&G Global Technology Index or if you prefer a fund the Fidelity Global Technology Fund. Higher risk scores but some great returns if you prefer the higher exposure to these individual markets. Morningstar give them all a 5 star rating.

The Fidelity Global Technology Fund lost 75% (yes, three quarters of its value), between September 2000 and October 2002.

Then in the five years from October 2002 to October 2007, it gained 95%. That sounds OK until you realise that losing three quarters of its value first, means it would have actually needed to gain 300%, to regain its September 2000 position. So it was nowhere near recovered after half a decade.

Did it continue to recover? No, we then had the global financial crisis, so over a period of just over a year between October 2007 to November 2008, it lost 35% again.

How about The L&G Global Technology index, launched on 1 November 2000. In under two years from that point, it too had lost 75%. It gradually recovered. If you could have waited almost 16 years, to 23 June this year, your total profit if you had invested £1000 on launch day, was £50. An average annual compound return of 0.3%.

Then on 24 June we had the Brexit referendum result, and with the GBP devaluing making these foreign companies more valuable, combined with a market rally in the US, it has grown 30% from that point, in just five months.

A complete rollercoaster. If you are going to buy a specialist industry-specific fund for all the other industry sectors, and rebalance between them on an ongoing basis, and you actually know what you are doing, it might be OK. But do you really want a fund that can drop 75-80% and then take 16 years to recover? Why does that deserve 'five gold stars at Morningstar'?

The answer is simply that the particular sector it's operating in has done relatively well in the last few years, and Morningstar do not go back many years when compiling their risk and volatility scores. History tells us that things that have 'done well in the last few years' do not always go on to do well in the next few.

In your original post on this thread you said:

I am particularly looking for a diverse Global Equity Fund maybe with a little exposure to the Emerging Markets as well. Any suggestions please?

My suggestion would be not to think that a super specialist single industry fund such as technology or healthcare is at all appropriate when you are looking for the risk and returns of “a diverse Global Equity Fund”. They are not diverse funds. They are hyper-specialist funds that can lose four fifths of their value if the market mood sours towards that industry at the same time as sterling appreciates in value.

however I do feel it could be worth a small amount of money even if it is more high risk bearing in mind the returns of these funds?

A very small amount of money would be the only amount of money you would want to invest in such a fund which can lose four fifths of its value over a year or two while sometimes spiking up 30% in five months.

The way to take advantage of all the ups and downs is to hold it alongside another ten specialist funds which can also drop 80% or grow 100% in a year , and keep rebalancing between them. Not to hold it alongside a good generalist fund which is delivering reasonable returns anyway.

It is tempting to dive into exciting-looking or trendy companies. For a newbie investor, excitement is something you should try to avoid. Because once you have found something that can go up 30% in five months and it no longer excites you, you'll be looking for something that can go up 30% in five weeks and then five days and then five minutes to get your fix.

Diversify for sure on both sectors and geography but I was suggesting a very small amount of a portfolio

OK, let's say you invest into a regular general multi-asset fund with £9700 of your investment and put £300 into the super specialist fund. Then you have a very small part of your portfolio (3%) in a sexy sector.

If the 'normal' fund delivers 5% return and you had put all £10k into it, you'd have £10500. But you only put £9700 into that normal fund so you get £10,185 from that bit, and then you'd have your £300 which perhaps gives an exceptional 10% performance instead of 5%, so you have £330 there. Together you would have £10185+330 = 10515.

So, your messing around with another fund that might perform twice as well as the generalist markets in a good year, has given you £10515 instead of £10500: an incremental £15 or 0.15% of your portfolio, if it works out to give a nice return rather than taking a dive. That's not really noticeable, especially after deducting any extra admin costs / dealing costs, time and effort researching etc.

Save it until you have a big portfolio - so that the returns from the extra specialist exposure is actually going to be an actual absolute of money that's worth writing home about.

coastline

A couple of links looking at the UK market over 1 and 10 years.

Few funds in the UK have beaten their benchmark while also generating lower volatility, according to data from FE Analytics.

https://www.trustnet.com/News/701671/the-charts-showing-the-uk-funds-with-the-years-best-risk-adjusted-returns

FE Trustnet looks at the funds that have beaten the FTSE All Share while exhibiting lower volatility over the last 10 years.

https://www.trustnet.com/News/702304/the-charts-showing-the-uk-funds-with-the-decades-best-risk-adjusted-returns

Linton

coastline wrote: »

A couple of links looking at the UK market over 1 and 10 years.

Few funds in the UK have beaten their benchmark while also generating lower volatility, according to data from FE Analytics.

https://www.trustnet.com/News/701671/the-charts-showing-the-uk-funds-with-the-years-best-risk-adjusted-returns

FE Trustnet looks at the funds that have beaten the FTSE All Share while exhibiting lower volatility over the last 10 years.

https://www.trustnet.com/News/702304/the-charts-showing-the-uk-funds-with-the-decades-best-risk-adjusted-returns

Looking at the second reference, some observations...

1) Why is the difference between the FTSE All Share Index 10 year return of of 64.84% and the average fund return of 63.51% so small. Surely over 10 years, unless the non trackers were performing better than the index before charges the difference should have been far greater.

2) Presumably included in the average UK fund data are all the FTSE100 trackers which performed significantly worse than the All Share Index. I wonder what the results would be if they were taken out of the equation.

3) Among the funds consistently underperforming the FTSE All Share Index are all the FTSE All Share Trackers. In fact, looking at the latest data from Trustnet all the FTSE All Share Trackers performed worse than the average UK fund over the past 10 tears.

talexuser

From my experience (which is by no means expert) the truly outperforming funds justifying their fees are relatively few and far between and need active research and constant monitoring. The large majority of dog funds from eg banks and insurance companies (and even famous names which have 300 - 400 funds to offer etc) are a lot of which turn out to be closet trackers with large fees and surely pull down the "average" fund to a poor result?

coastline

Linton wrote: »

Looking at the second reference, some observations...

1) Why is the difference between the FTSE All Share Index 10 year return of of 64.84% and the average fund return of 63.51% so small. Surely over 10 years, unless the non trackers were performing better than the index before charges the difference should have been far greater.

2) Presumably included in the average UK fund data are all the FTSE100 trackers which performed significantly worse than the All Share Index. I wonder what the results would be if they were taken out of the equation.

3) Among the funds consistently underperforming the FTSE All Share Index are all the FTSE All Share Trackers. In fact, looking at the latest data from Trustnet all the FTSE All Share Trackers performed worse than the average UK fund over the past 10 tears.

I'm thinking its volatility they are looking at and not the overall list of funds..
In the link below select ..IA Unit Trusts & OEIC's...Liontrust Fund Partners LLP...Liontrust Special Situations R Inc..
Over the 10 years the chart patterns look similar and Liontrust makes solid ground since 2008 again with volatility in tandem with the FTSE All share..

https://www.trustnet.com/Tools/Charting.aspx?typeCode=NASX

Many of the tracker funds listed on here appear to be FTSE 100 but yes it looks like they are underperforming..

https://www.trustnet.com/ratings/?moreresult=true&Fr_sortedColumn=P60M,UnitNameFull%20%20%20%20%20%20&Fr_sortedDirection=DESC&%20%20Fr_Subm%20%20it=tru%20%20e&Fr_Submi%20%20t=true&univ=O&Fr_Sector=O:UKALL&Fr_Submit=true

https://www.trustnet.com/News/657930/should-you-buy-the-most-or-least-volatile-uk-funds-of-the-last-decade