Newbie questions on Asset Allocation and Passive v Active

Prism

Filo25 wrote: »

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Would you also view a Japanese smaller companies fund such as Baillie Gifford Japanese Smaller Companies worthwhile, or are we starting to get to the stage of adding too many funds at that stage!

For Japan you could look at Legg Mason which I hold. Its a single fund that spans large, mid and small cap with an emphasis on mid cap. My wife holds Baillie Gifford Japan.

For Europe the Henderson fund holds mainly small companies whilst the Threadneedle is a bit more mid cap focused.

To keep it simnple you could also look at a global small/mid cap fund like Baillie Gifford discovery.

Filo25

Many thanks Prism, plenty here for me to research over the Christmas break, it is all much appreciated

bostonerimus

As is my bias I would probably just do this to get a 60/40 allocation

50% Vanguard FTSE Global All cap
50% VLS20

Audaxer

bostonerimus wrote: »

As is my bias I would probably just do this to get a 60/40 allocation

50% Vanguard FTSE Global All cap
50% VLS20

I've just compared the above on Morningstar to a VLS60. The only big difference is that the UK equity in the above is about 9% compared to the VLS at 23%. So if OP does not want UK bias the above is a good option. If the OP wants to keep it low-cost and passive but also add some small companies, how about:
40% Vanguard FTSE Global All cap
10% Vanguard Global Small-Cap Index
50% VLS20

AnotherJoe

As this £90k is segregated and will be partitioned off from your other pension investments and will be there for perhaps another 25 years before you touch it, I'd go 100% into equities, over 25 years 100% will / ought to / statistically, do much better than 60/40, I see no need to be so cautious, after all in 3 years time your intended investment from salary will match and then quickly overtake it.

Also, for 25 years view, worrying that you are overweight in the US is taking a very short term view so I'd most likely put it all in a general world fund and perhaps if you fancy a punt some reasonable % say 10-20%, in small companies or whatever floats your boat (mine is healthcare/biotech, but whatever )

chrisgg

If you want the allocation you've set out then my suggestions for funds would be as follows, with a mix of active and passive.

US 20.0% Vanguard US Index
UK 8.0% HSBC FTSE 250
Europe ex UK 7.0% Vanguard Europe ex UK
Asia Pacific/EM 15.0% Baring Eastern Trust/OM Asia Pacific
Smaller companies 10.0% Invesco Global Smaller Companies
Short dated investment grade bonds 20.0% iShares 0-5yr Corporate Bond
High Yield bonds 20.0%Liontrust Monthly Income Bond/RL Short Duration High Yield

However, for a 15 year time horizon this looks a little high in bonds for my liking. It may be worth considering reducing the allocations to bonds in favour of a Japan fund or maybe something like Private Equity which will increase diversification.It may also be worth adding in an Emerging or even a Frontier Market fund to complement the Asia Pacific holding, but this is only of you're comfortable with the extra volatility that comes with a higher equity content, and moving the portfolio from what would probably be considered medium risk to medium/high.

bostonerimus

Audaxer wrote: »

I've just compared the above on Morningstar to a VLS60. The only big difference is that the UK equity in the above is about 9% compared to the VLS at 23%. So if OP does not want UK bias the above is a good option. If the OP wants to keep it low-cost and passive but also add some small companies, how about:
40% Vanguard FTSE Global All cap
10% Vanguard Global Small-Cap Index
50% VLS20

Yes looks ok

IanSt

A +1 for being 100% in equities. Bonds can have their use when you are close to retirement, but at your age I think they aren't needed and will just be a drag on the gains that a 100% equity portfolio is likely to bring over longer terms.

But if you are at all likely to panic and sell up when the next dip comes then keep to your 40% bonds position so that the dips don't look as bad.

Filo25

Thanks again everyone the advice is once again much appreciated.

To be honest before I started reading on here my initial thought was just to go 100% equity (even my taste in bonds was very much towards higher yielding stuff like Gam Star Credit Opportunities), so I am certainly open to that approach.

I like to think I wouldn't panic at a market collapse at least over the short to medium term, I will be feeding enough into my pension and ISA that I would actually welcome one in the near future, maybe just reassess that in another 5-10 years.

On the US note I suppose in addition to valuation concerns I also feel that I don't necessarily want that big an exposure to any one market even if it is just following Global Cap weighting, although maybe that is somewhat old-fashioned given the global nature of a lot of US large cap.

So I have an alternative alloc based on that and other comments then, once again I welcome any comments!

Heavier ASPAC/EM exposure now as well

US 32%
UK 18% (weighted towards small - midcap)
Europe 15%
Japan 15%
Asia Pacific 15%
Other EM/Frontier 5%

In addition to mentioning small cap previously, is there any benefit in looking at some of the value funds as well?

bostonerimus

Filo25 wrote: »

Heavier ASPAC/EM exposure now as well

US 32%
UK 18% (weighted towards small - midcap)
Europe 15%
Japan 15%
Asia Pacific 15%
Other EM/Frontier 5%

In addition to mentioning small cap previously, is there any benefit in looking at some of the value funds as well?

What are your reasons for choosing those percentages?