Vanguard LS100 or Fidelity Index World Fund?

gdreyer

Hello everyone

I've been researching index funds and based on my investment criteria I am looking at the Vanguard LS100 or Fidelity Index World Fund. From what I can see they are quite similar except Vanguard has a heavier UK weighting. Both have performed well in recent years with the LS100 having a particularly strong 2016.

I'd be interested to hear if anyone has any experience with these funds or if you have recently moved from one to the other?

bowlhead99

I hold a relatively small amount of LS100 having bought a chunk of it as a decent 'general global equity' placeholder in my newly set-up SIPP and then gradually replaced it with more specialist funds over the subsequent couple of years. What's left is just a few thousand pounds worth held as filler ,or kept out of idle curiosity.

I originally paid £103.63 a share, four and a half years ago, and today worth £184.35. Without looking at the chart, I expect the Fidelity fund has done better because it is trying to track the global markets so will only have a few percent in the UK, and pounds sterling has devalued against other major currencies (notably the US, the largest stockmarket) in the last year.

Still, you don't need anyone with 'experience with these funds' to give you comments about how much they have made or lost with them. You can look at a chart and imagine what results people would have got if they invested and divested on any specific set of dates. More importantly you can look at what they hold and how they maintain their allocations.

For example, the Vanguard fund keeps a quarter of its equities in the UK and then maintains separate regional allocations by pushing the rest of the money into other Vanguard funds. Those allocations will move around over time with the markets but do not float completely freely. The allocations include developed and emerging markets, as you would want if you were trying to spread your money around the world with one product.

The Fidelity fund just tracks MSCI World, which is 23 developed markets based on their free float market capitalisation at a point in time. It's not the same as MSCI's ACWI (their all countries world index) which would also include 23 developing countries.

It's interesting that you say that after researching, 'based on my investment criteria' you are looking at these two funds:

Does your investment criteria say you are going to include emerging markets or exclude them because you are covering them with a different fund?

Does your investment criteria say you'd be happy with 94% of the fund being invested outside the UK, because you already have substantial holdings in your home market? Or does it say that more UK bias would be better because this fund is intended to be your entire portfolio.

Or does your investment criteria simply amount to "must be a 100% equity fund that's available as an accumulator, and be available on the platform I've picked, and throw the money around the major world markets without the fees being too high".

If the latter, then I can see why both these funds might have come up. To choose between them you would want to build the other questions into your investment criteria and then the answer of which one meets your needs will fall out. Or maybe neither are quite right and you could keep looking.

MonroeM

gdreyer wrote: »

Hello everyone

I've been researching index funds and based on my investment criteria I am looking at the Vanguard LS100 or Fidelity Index World Fund. From what I can see they are quite similar except Vanguard has a heavier UK weighting. Both have performed well in recent years with the LS100 having a particularly strong 2016.

I'd be interested to hear if anyone has any experience with these funds or if you have recently moved from one to the other?

The Fidelity Index World only holds about 6.8% UK as opposed to about 25% in the VLS100.

It also has about 60% US Equities and the second largest holding is Japan at 8.70% so the Fidelity fund is quite a different index in asset allocation to the Vanguard fund.

bowlhead99

MonroeM wrote: »

The Fidelity Index World only holds about 6.8% UK as opposed to about 25% in the VLS100.

It also has about 60% US Equities and the second largest holding is Japan at 8.70% so the Fidelity fund is quite a different index in asset allocation to the Vanguard fund.

The US allocation in Fidelity is following the developed world index more closely by being 6.9x Japan rather than about 6.5x Japan with Vanguard Lifestrategy. That goes along with what I was saying about the regional allocations not floating completely freely with Vanguard.

However, Vanguard don't specify a particular target level for those other country allocations when telling investors what their strategy is. To be honest, the main difference is not whether Japan is fourteen and a half percent of the US allocation or fifteen and a half percent of the US allocation, which you probably won't care about long term ; the main difference is that the Vanguard fund wants to create a chunk of 'home bias' for someone living in the UK and so it has grabbed about a fifth of what would be allocated to 'rest of the world' in a world index, and used it to allocate to the UK stockmarket instead.

Inevitably that means that the biggest 'rest of the world' regions such as USA and Japan and Europe will feel the largest drops in their allocation. They will also get a drop in their allocation (split proportionately among themselves) when Vanguard includes emerging markets which the Fidelity fund didn't bother with.

gdreyer

bowlhead99 wrote: »

Or does your investment criteria simply amount to "must be a 100% equity fund that's available as an accumulator, and be available on the platform I've picked, and throw the money around the major world markets without the fees being too high".

If the latter, then I can see why both these funds might have come up. To choose between them you would want to build the other questions into your investment criteria and then the answer of which one meets your needs will fall out. Or maybe neither are quite right and you could keep looking.

Thanks for the detailed response! Yes ultimately I am looking for a 100% equity accumulator fund however you are right - it looks like I need to widen my invesment criteria and go from there.