Tempted to move some VLS into active

BananaRepublic

The performance is quite remarkable and very consistent. My concern is that it was started after the last crash, so we have no idea how it might behave in a future crash. It could be that the style suits the current bear market. In my opinion it's best to spread over a collection of active funds, and sectors, depending on the sums involved of course. £10,000 could go into Fundsmith, but not £100,000.

bowlhead99

BananaRepublic wrote: »

The performance is quite remarkable and very consistent. My concern is that it was started after the last crash

Launching a 100% equities fund in year 2 of a a nine year bull run is quite useful for the 'annualised return, inception to date' statistic.

Being heavily tilted towards US stocks was very good for returns in a period when USD became worth 20% more pounds.

Being invested with a high tilt towards 'high quality' businesses (however he defines them) or 'comsumer staples' etc has been very good for returns in the latter half of the fund's existence. Market participants became increasingly disappointed with prospective bond returns, and recalibrated upwards the level of risk they would be willing to take in the search for yield or a safe haven with returns potential. The valuations of equities of large and stable businesesses with reliable and defensive revenue streams, or those which offered a good return on caputal employed and could scale up to reinvest their cashflows at good rates of return, grew rapidly. And at the tail end of a near-decade long equities boom, everyone is looking for 'quality' companies such as the ones Mr Smith likes, hoping they won't suffer so much in a crash.

, so we have no idea how it might behave in a future crash

Of course, the fact that everyone has flocked to those companies and bid their prices up through the roof, means that when the crash comes, there's now a long way to fall. And as higher level of interest rates return (pulling money out of equities generally, and 'high quality companies' in particular as the money goes back to bonds)... you would not expect Smith's fund to do so well. Throw currency into the mix (85% non-UK listed investees) and there is another point of potential loss for a highly non-UK fund now sterling is strengthening relative to many other countries as some of the Brexit uncertainties get resolved.

firestone

while for whatever reason the fund has done well and could also make it do not so well in the future its managed like many funds with a long term growth.But due to its results and publicity people may look at it with a short term view.
Most big pension companies & trusts like City of London have used big quality companies for steady growth & income for decades and they will make up a large part of most popular trackers but its up to the funds to find the new quality companies and up to us to have a mix of investments.
You would hope the fund managers are aware of these blips on the horizon as thats what we pay for. Or you go back full circle in not wanting to find the best active fund and end up in a tracker or VLS or L&G multi asset etc

bostonerimus

bowlhead99 wrote: »

Of course, the fact that everyone has flocked to those companies and bid their prices up through the roof, means that when the crash comes, there's now a long way to fall. And as higher level of interest rates return (pulling money out of equities generally, and 'high quality companies' in particular as the money goes back to bonds)... you would not expect Smith's fund to do so well. Throw currency into the mix (85% non-UK listed investees) and there is another point of potential loss for a highly non-UK fund now sterling is strengthening relative to many other countries as some of the Brexit uncertainties get resolved.

Having only 29 holdings also means that a reversal in a couple of stocks could see a large correction in the fund's value.

Linton

I suggest you go ahead with your Fundsmith idea, though perhaps with 10% rather than 20%. You could do very well. With the conpany's Fundsmith invests in it is very unlikely to be a disaster. Anything really hitting Findsmith is likely to also hit an equity VLS investment.

Having tipped you toes into the actve water you could start exploring further. As Pip85 says it is worth looking at things like Small Companies which form only a very small part of the VLS funds.

Audaxer

Linton wrote: »

I suggest you go ahead with your Fundsmith idea, though perhaps with 10% rather than 20%. You could do very well. With the conpany's Fundsmith invests in it is very unlikely to be a disaster. Anything really hitting Findsmith is likely to also hit an equity VLS investment.

Maybe the way to do it is invest 10% now and if it continues to grow at the same rate as recently the OP will be happy. However if it goes the other way and there is an equity crash and it drops by 50% the OP will be disappointed, but maybe then it would be a good opportunity to invest the other 10%?