HSBC Global Strategy Dynamic vs L&G MI 6/7

Sally57

I am looking to invest my husband's ISA allowance in a multi-asset fund and although the Vanguard LS funds are highly regarded by many on this forum, we are looking at the HSBC Global Strategy Dynamic and the L&G MI 7 which are roughly the same risk score.

We understand these funds are managed with volatility in mind rather than performance as with VLS funds, however, is there any other difference between these 2 funds except for the asset class allocation?

StellaN

Sally57 wrote: »

I am looking to invest my husband's ISA allowance in a multi-asset fund and although the Vanguard LS funds are highly regarded by many on this forum, we are looking at the HSBC Global Strategy Dynamic and the L&G MI 7 which are roughly the same risk score.

We understand these funds are managed with volatility in mind rather than performance as with VLS funds, however, is there any other difference between these 2 funds except for the asset class allocation?

Yes, the VLS funds are very popular on the forum but there is nothing wrong with choosing something different! The HSBC Global Strategy Dynamic has performed very slightly better than the VLS80 over the past 5 years (although who knows over a longer period).

As far as I can see, its purely down to the different asset allocation in various sectors and geographical regions?

dunstonh

L&GMI is actively managed in terms of its allocations. i.e. they have made recent changes on their bond allocations and type of bonds. Whereas VLS is a static allocation. L&GMI includes property. VLS does not.

Sally57

dunstonh wrote: »

L&GMI is actively managed in terms of its allocations. i.e. they have made recent changes on their bond allocations and type of bonds. Whereas VLS is a static allocation. L&GMI includes property. VLS does not.

Thanks for that information. Is the HSBC also actively managed or static like the VLS funds?

MPN

The HSBC Global Strategy Dynamic fund has indeed done slightly better than VLS80 over the past 5 years but Vanguard are flavour of the month!

Dird

dunstonh wrote: »

Whereas VLS is a static allocation. L&GMI includes property. VLS does not.

LS still changes slightly though. Some notable changes from a few months ago:
United States: 44.54% to 45.13%
Asia - Emerging: 2.91% to 3.52%
Basic Materials: 5.48% to 6.34%
Financial Services: 17.54% to 19.14%
Healthcare: 11.67% to 10.76%

bowlhead99

Dird wrote: »

LS still changes slightly though. Some notable changes from a few months ago:
United States: 44.54% to 45.13%
Asia - Emerging: 2.91% to 3.52%
Basic Materials: 5.48% to 6.34%
Financial Services: 17.54% to 19.14%
Healthcare: 11.67% to 10.76%

But those sort of changes are not being made with a view to achieving a particular level of volatility to actively cap or manage risk. The holdings are passive trackers. So if the financial services component goes up or the healthcare goes down, it's just because that's what's happened to those industries' share of UK and world equity markets between last month-ends report and the older report you compare it to.

Similarly if US was half a percent different now than at some point in the past, it's likely not because they want to preserve some special mix of annualised volatility or outperform a fund with 0.5% fewer US equities due to a high conviction view. It's just that the US indexes they hold grew relatively more than a different regional index and they have never said that their US indexes will always be a consistent fraction of the international total. Holdings may drift up and down, as they acknowledge in fund documentation.

Similarly within bonds - a major holding will be a global bond index fund whose internal allocation between bond types and countries is determined by the whim of the market. It doesn't mean they actively determined that the mix ought to be changed following a shift in volatility or valuation attractiveness of index linked US treasuries vs Japanese corporate high yield.

Perhaps if US became 55% instead of 45% they may choose to adjust, but they have not published a target mix. What they try to keep balanced within the product is the mix of equities vs bonds at whatever the fund version has in its name, and the UK equities at c.25% of total equities in the absence of another announcement to the contrary.

So, people refer to it as a static allocation rather than an actively managed allocation. Rather than targeting a particular risk category on a 1-8 scale and shifting the balance as a result of macroeconomic and market changes over the global economic cycle (like L&G MI), the vanguard lifestrategy product is performance targeted: i.e., give me your money and I will get you the performance of a holding of 80% equities indexes and 20% global bond indexes with 25% of the 80% equities being UK indexes and 75% of it being international.

In the VLS scenario, your return will just "be what it will be", because you are not specifying a risk grade, you are specifying what asset class (via indexes) must be used to deliver your returns.

Hope that helps explain the conceptual difference.

greatkingrat

The big difference is the HSBC fund only has 5% in the UK, while the L&G fund has around 25%. So it is up to you whether you want a significant home bias or not.

StellaN

bowlhead99 wrote: »

But those sort of changes are not being made with a view to achieving a particular level of volatility to actively cap or manage risk. The holdings are passive trackers. So if the financial services component goes up or the healthcare goes down, it's just because that's what's happened to those industries' share of UK and world equity markets between last month-ends report and the older report you compare it to.

Similarly if US was half a percent different now than at some point in the past, it's likely not because they want to preserve some special mix of annualised volatility or outperform a fund with 0.5% fewer US equities due to a high conviction view. It's just that the US indexes they hold grew relatively more than a different regional index and they have never said that their US indexes will always be a consistent fraction of the international total. Holdings may drift up and down, as they acknowledge in fund documentation.

Similarly within bonds - a major holding will be a global bond index fund whose internal allocation between bond types and countries is determined by the whim of the market. It doesn't mean they actively determined that the mix ought to be changed following a shift in volatility or valuation attractiveness of index linked US treasuries vs Japanese corporate high yield.

Perhaps if US became 55% instead of 45% they may choose to adjust, but they have not published a target mix. What they try to keep balanced within the product is the mix of equities vs bonds at whatever the fund version has in its name, and the UK equities at c.25% of total equities in the absence of another announcement to the contrary.

So, people refer to it as a static allocation rather than an actively managed allocation. Rather than targeting a particular risk category on a 1-8 scale and shifting the balance as a result of macroeconomic and market changes over the global economic cycle (like L&G MI), the vanguard lifestrategy product is performance targeted: i.e., give me your money and I will get you the performance of a holding of 80% equities indexes and 20% global bond indexes with 25% of the 80% equities being UK indexes and 75% of it being international.

In the VLS scenario, your return will just "be what it will be", because you are not specifying a risk grade, you are specifying what asset class (via indexes) must be used to deliver your returns.

Hope that helps explain the conceptual difference.

That really does explain the difference in detail so thank you bowlhead.

So what about the other fund the HSBC Global Strategy Dynamic please?

TrustyOven

dunstonh wrote: »

L&GMI is actively managed in terms of its allocations. i.e. they have made recent changes on their bond allocations and type of bonds. Whereas VLS is a static allocation. L&GMI includes property. VLS does not.

Is that correct though?

These 2 say there's a small property allocation:

VLS 100:
http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-100-equity-accumulation/fund-analysis

VLS 80:
http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-accumulation/fund-analysis

masonic

TrustyOven wrote: »

Is that correct though?

These 2 say there's a small property allocation:

Presumably one gets a small property allocation by investing in the FTSE All share, which contains several REITs. I don't think that would typically be counted, and I assume the property in HL's x-ray is of a similar nature. 2% is fairly inconsequential.