Multi-asset fund vs own allocation

bowlhead99

TheTracker wrote: »

I suspect with HL it's nothing as blunt as paid for advertising. In providing preferential rates the fund houses receive more custom, and the platform receives more custom. You win I win, or at least they both win. Not sure about us.

Yes, as mentioned on other threads, effectively the negotiating of a management fee discount in exchange for driving business to the manager is a tool which allows HL to continue to charge the highest percentage based fees in the market and have the investors be more likely to accept them - because with the discount on the fund charges, the fund all-in cost is not much more expensive than changing provider and using a more cost effective platform which would be the proper beneficial solution for most investors.

Driving investors towards those discounted funds is absolutely key to achieving the mutual benefit and creating the perception that most of the funds at HL are cheaper than elsewhere by having all of the Wealth150+ marketing list be at special pricing and having no funds which offer the special pricing be excluded from that 'preferred' list.

Some fund managers refuse to play the game. At a Fundsmith investor meeting streamed online, in response to a floor question about perhaps offering a cheaper class to get promotional exposure, Terry Smith was happy to stand there and say no, of course the platform had offered it but what they demanded in discounts would skew the total remuneration way too much towards a platform getting a large piece of the pie while the manager doing all the work having to live off relative scraps, and he felt the fund returns would do the talking - easily good enough to find investors itself.

When you read the HL analysis they had posted up on his fund at the time, they said

We like the manager's long term, high conviction approach and our analysis suggests the majority of the fund's outperformance can be attributed to strong stock selection. The concentrated portfolio of between 25-30 holdings means each stock can contribute significantly to performance but is higher risk.

We currently feel there are alternative funds available which offer superior performance potential. The fund is therefore not currently on our Wealth 150 list of our favourite funds across the major sectors.

They have now archived that off so that from the summary page all you get is "objective: long term growth in value" and have to click through to the archived research page ; they have written nothing about the fund on their homepage for it for the last two years despite it having an outspoken celebrity manager, topping the popularity charts and being literally #1 for performance in its sector over 3 years and #2 over five. It would be like a top foodie guide to London pretending that they forgot to cover Gordon Ramsay's flagship other than a token, "serves: food and drink" - despite it being one of the only restaurants in the country with 3 stars.

Compare to the conclusion on Rathbone Global written the same month - is also a concentrated conviction driven portfolio in the Global equities space

Our analysis suggests good stock selection has been the primary driver of performance. The concentrated nature of the portfolio means each of the manager's investment choices has greater impact; however, it is higher risk.

We believe the manager's method offers investors a different approach with the potential to deliver returns divergent to the market and to other managers in the sector. This is one of our favoured funds for exposure to global equities and we are confident James Thomson has the ability to deliver over the long-term. We remain happy with this fund and it continues to feature on the Wealth 150 list of our favourite funds across the major sectors

Ah, so they both have outperformance which was attributable to stockpicking and have a higher risk concentrated portfolio, but THIS one has a "differentiated divergent approach" and is worth having, while Fundsmith can be skipped because others have better potential. Nothing at all to do with the 0.1% discount at Rathbones, who are 41 and 69 in the league tables over three and five years instead of Smith's #1 and #2.

Maybe it's because Fundsmith only has 6 years of operating history. I could buy that, investing's a long term game. Except the other one they promote in the sector is Lindsell Train Global, who have less than 6 years since their firm launched - yet magically appeared in the "funds we prefer" list right from the start, waving a flag saying 0.2% discount exclusive to HL.

bowlhead99

jm78 wrote: »

The crux of my dilemma: while my own choice of allocation is performing well and has much higher dividend yields than any of the multi-asset funds, I can't help thinking that the experts behind these multi-asset funds must know better than me! However, I am also wary of putting a lot of my eggs in one basket by investing heavily in a single fund.

You're getting plenty of other good comments and TheTracker's suggestion to seek and participate in other forums and blog comment pages is eminently sensible. There are lots of people to learn from and their own debate can be richer if you join in.

Just one quick observation. You mention your portfolio has higher div yields than the "pro" allocations. High yield does not mean better, just different. If your portfolio is tilted to higher yield shares while the global indexes are not, then it might just mean that your own portfolio is (on average) missing whatever other shares are yielding lower divs - eg Amazon or Tesla are focusing on growth rather than giving away profits to their owners and having nothing left with which to expand.

If you have a large allocation to listed infrastructure stocks which are cash cows (dividend paying utilities, rail, electricity distribution, toll roads etc) and to real estate companies and REITs (which have commercial renters throwing cash to their landlords month after month) then you will get more divs than an average global largecap fund.

Also - if you have a higher UK largecap allocation than something like a VWRL you will get a higher yield than that product, as the UK FTSE has a relatively large amount of high div payers than the global average where divs might be less popular.

HarryFlatters

jm78 wrote: »

Thanks for the feedback on my original post, everyone.

So the consensus is that I would be better off going with a multi-asset fund than persisting with my own portfolio along the lines of the Monevator model portfolios. I must say I'm a bit disappointed as I have enjoyed learning about all this and watching the success of my funds (albeit, I know, over a very short period of time), but I must be a realist given that there is money at stake!

Like StellaN, I shy away from the Vanguard funds given their considerable exposure to the UK. I can't help but see turbulent times ahead for the UK, at least in the short term, with Article 50 probably (so long as the anti-democracy faction don't get their way) going to be triggered at some point this year.

grey gym sock's point about the potential lack of currency hedging in the HSBC funds is food for thought though –!anyone know of any low-cost multi-asset funds without much UK exposure that do hedge against currency risk?

If you have a reasonable value investment why not split into several pots, take a multi asset fund in one, your allocation in another, possibly such as Vanguard FTSE All Cap Index/Vanguard FTSE All World Hi Div/ Fidelity Index World/Vanguard Global Small Cap etc etc with bond funds in another, just choose a different focus to your other pots...just a thought then you can compare in the much longer term while retaining a level of control.

No one knows if the future journey of the UK is any less certain than other areas, there is certainly potential volatility in the USA and the Eurozone.

MPN

jm78 wrote: »

Thanks for the feedback on my original post, everyone.

Like StellaN, I shy away from the Vanguard funds given their considerable exposure to the UK. I can't help but see turbulent times ahead for the UK, at least in the short term, with Article 50 probably (so long as the anti-democracy faction don't get their way) going to be triggered at some point this year.

grey gym sock's point about the potential lack of currency hedging in the HSBC funds is food for thought though –!anyone know of any low-cost multi-asset funds without much UK exposure that do hedge against currency risk?

I'm not sure if the currency risk in the HSBC Global Strategy Portfolio's are a big issue and most currencies fluctuate on a regular basis so as long as your invested for the long term and have enough cash in reserve then generally developed world currencies would be OK.

I personally feel you can still build your own portfolio in line with your risk. As I have enough cash in high interest accounts and 2 properties I am thinking of an all world tracker.

digannio

Re some of the above, HL has updated its comments about Fundsmith in a recent article about the most popular SIPP funds of 2016.

It says:

Terry Smith invests globally in high quality companies which are difficult to replicate and have low levels of debt. The fund is heavily weighted towards the consumer goods and services sectors and his investments in this area, which include companies such as Estee Lauder and Philip Morris, currently account for around 34% of the fund.

This positioning has aided long-term returns as investors have favoured these companies for their dependable earnings. However, over the past year, investors have preferred to invest in undervalued and economically-sensitive areas of the market, causing this fund to lag its peers. This period of underperformance is to be expected based on the fund’s positioning and all managers undergo periods where their style is out of favour. The fund is concentrated at around 27 holdings, which enables each position to have a significant impact on overall returns, but is higher-risk.

Terry Smith's track record is relatively short and he is as yet untested in an environment of prolonged falling prices so the fund is not currently under consideration for the Wealth 150 list of our favoured funds across the major sectors.

This comes after HL details Fundsmith's superb set of figures dating back to 2011 and showing how in the last year alone the fund would have converted a £10,000 investment into £12,816.02. I could certainly live with "underperformance" like that. And I would really love to hear Terry Smith rip into HL's latest assessment of his merits and justification of why the fund doesn't warrant a place among the "elite."

grey_gym_sock

MPN wrote: »

I'm not sure if the currency risk in the HSBC Global Strategy Portfolio's are a big issue and most currencies fluctuate on a regular basis so as long as your invested for the long term and have enough cash in reserve then generally developed world currencies would be OK.

that might be reasonable if you're going for a portfolio which is mostly equities. dollar bonds specifically might even be a useful hedge when equities are falling, because the dollar often rises when equity markets are crashing.

i think it makes less sense if your portfolio is mostly bonds. then you're just getting currency volatility with no obvious gain.

MPN

grey_gym_sock wrote: »

that might be reasonable if you're going for a portfolio which is mostly equities. dollar bonds specifically might even be a useful hedge when equities are falling, because the dollar often rises when equity markets are crashing.

i think it makes less sense if your portfolio is mostly bonds. then you're just getting currency volatility with no obvious gain.

Yes, I totally agree, I myself, in my current position am not really interested in bonds at the moment, so, yes if you sure mainly invested in equities then the HSBC Global Portfolio's are worth taking a look at as opposed to VLS and the L&G funds.

Another point is I'm not sure it's great to be in bonds at all if you are financially secure. I obviously understand it diversifies your portfolio, however, if your investment is long term and you have enough cash in reserve then why bother with bonds at all?

StellaN

MPN wrote: »

Yes, I totally agree, I myself, in my current position am not really interested in bonds at the moment, so, yes if you sure mainly invested in equities then the HSBC Global Portfolio's are worth taking a look at as opposed to VLS and the L&G funds.

Another point is I'm not sure it's great to be in bonds at all if you are financially secure. I obviously understand it diversifies your portfolio, however, if your investment is long term and you have enough cash in reserve then why bother with bonds at all?

I tend to agree with you about bonds, I think you might as well invest in high interest cash accounts than bonds. I think I will stick with equities and property in my portfolio at the moment.

MonroeM

StellaN wrote: »

I tend to agree with you about bonds, I think you might as well invest in high interest cash accounts than bonds. I think I will stick with equities and property in my portfolio at the moment.

When I re-balance my portfolio I will stick with mainly equities and a small proportion in properties, however if your risk factor is low then I would certainly diversify a lot more have have much less invested in equities so it 'horses for courses'!

I think you are right that it is currently better to hold high interest cash than bonds.

racey

MonroeM wrote: »

When I re-balance my portfolio I will stick with mainly equities and a small proportion in properties, however if your risk factor is low then I would certainly diversify a lot more have have much less invested in equities so it 'horses for courses'!

I think you are right that it is currently better to hold high interest cash than bonds.

What high interest cash options do you suggest?