All in Vanguard?

bobhopeful

Already diversified in assets and markets, and spread over dealing platforms, now considering also diversifying between Fund Managers. All funds are now Vanguard.

The Vanguard Group is owned by its funds and each fund is a separate legal entity. Because the funds own Vanguard Group, the investors in Vanguard Funds are themselves the ultimate shareholders of Vanguard Group.

So, nothing is ever zero risk, but it would appear that - on the spectrum of Fund Managers and potential for corporate failure - Vanguard is structured to be as low risk as it gets. If any risk can be applied to Vanguard, it can be applied to any other Fund Manager.

So would moving some investments from Vanguard to equivalent asset class funds with L&G, Fidelity, Blackrock or others be a wise move for diversifying or do these and other fund managers have possibly more risk?

Is diversifying away from Vanguard really increasing potential risk, like jumping from a plane with a parachute, and a winged flight suit for diversification, rather than sticking with the main and a reserve parachute?

dunstonh

Vanguard is structured to be as low risk as it gets.

There is cheaper but not by much and Vanguard are at the right end of things. There are some potential issues with some of the Vanguard funds which will probably get ironed out soon. Not enough to put you off at this stage but enough to be aware. i.e. the Dublin domiciled funds may not be able to be sold within the UK after Brexit. (only likely on a disorderly Brexit. The most likely outcome is some agreement or Vanguard making a UK domiciled version available).

Is diversifying away from Vanguard really increasing potential risk, like jumping from a plane with a parachute, and a winged flight suit for diversification, rather than sticking with the main and a reserve parachute?

1) FSCS protection is £50k per fund house. So, having multiple fund houses reduces risk.
2) Vanguard have some good funds but they are not present in all investment areas (so you would have to miss out several sectors if you limited yourself to Vanguard)
3) Vanguard are not the best option in every sector they have a fund available

No one fund house excels in all areas.

cogito

Vanguard is widely touted because it's cheap. Personally, I'd rather put my money with a manager who gives me a 20 percent return for a 1 percent fee than one that gives me 10 percent for a .25 percent fee.

badger09

cogito wrote: »

Vanguard is widely touted because it's cheap. Personally, I'd rather put my money with a manager who gives me a 20 percent return for a 1 percent fee than one that gives me 10 percent for a .25 percent fee.

Its great that you've found such a manager & I hope he/she continues to produce such fantastic results for you.

However, for many people, and especially for novice investors, the challenge is finding that particular manager. Most simply don't have the time, inclination, skill or luck to do it consistently.

Hence the popularity of cheap, multi asset, fund of funds type investments

debtfreehorizon

I was considering opening an ISA with Vanguard to start some later-in-life/ retirement planning but the current list of funds is too restrictive - I think they have between 70-80. Although the platform cost is very low at 0.15%, I've decided I'd rather pay slightly more (0.25%) with Cavendish and have over 3,000 funds to choose from. I'm 32 so looking to invest in the Vanguard Retirement 2050 fund as well as some others (Scottish Mortgage, FTSE 100 tracker, some emerging market funds).

bobhopeful

dunstonh wrote: »

There is cheaper but not by much and Vanguard are at the right end of things. There are some potential issues with some of the Vanguard funds which will probably get ironed out soon. Not enough to put you off at this stage but enough to be aware. i.e. the Dublin domiciled funds may not be able to be sold within the UK after Brexit. (only likely on a disorderly Brexit. The most likely outcome is some agreement or Vanguard making a UK domiciled version available).

1) FSCS protection is £50k per fund house. So, having multiple fund houses reduces risk.
2) Vanguard have some good funds but they are not present in all investment areas (so you would have to miss out several sectors if you limited yourself to Vanguard)
3) Vanguard are not the best option in every sector they have a fund available

No one fund house excels in all areas.

Thank you.

My main concern is corporate bankruptcy or fraud. Especially after reading about Beaufort Securities. With my total SIPP and life savings invested approaching £1m, if a Fund Manager or platform does a Madoff £50K from FSCS provides little comfort. It is the risk of corporate systemic failure I want to mitigate as far as reasonable.

I think point 1 is a consideration and means that it may be worth at least £50,000 allocation to another Fund Manager such as L&G, Blackrock etc. knowing that the first £50,000 would be covered.

But what I wonder is whether the likes of Vanguard are - when compared to other Fund Managers - at least less likely to suffer either fraud or legitimate trading bankruptcy - because of the group structure. So does moving any more than the £50K FSCS covered to another Fund Manager simply increase the risk unnecessarily by exposing that amount to higher risk?

My allocation requirements are simple enough. I stick to low cost accumulation trackers, 'All World', and 'Emerging Markets', 'Small Cap' and 'High Dividend Yield'. Currently Vanguard for all, but I would be interested to hear any suggestion on better alternatives to look at for those areas.

bostonerimus

cogito wrote: »

Vanguard is widely touted because it's cheap. Personally, I'd rather put my money with a manager who gives me a 20 percent return for a 1 percent fee than one that gives me 10 percent for a .25 percent fee.

So would I, it's just one of those difficult thinks to find....along with unicorns.

bostonerimus

There are plenty of good platforms and plenty of good funds, pick the one you like and worry about fees and asset allocation. If you go with Vanguard in the UK you'll only be able to buy their funds. This means that you won't be able to invest in a fund devoted to Asian Small Cap or in this year's highest returning actively managed funds and ITs....so no Fundsmith. That's definitely a limitation, but not necessarily a bad thing. If you thing you need a wider fund universe go with another platform where you can by Vanguard funds and everything else too.

bowlhead99

bobhopeful wrote: »

The Vanguard Group is owned by its funds and each fund is a separate legal entity. Because the funds own Vanguard Group, the investors in Vanguard Funds are themselves the ultimate shareholders of Vanguard Group.

So, nothing is ever zero risk, but it would appear that - on the spectrum of Fund Managers and potential for corporate failure - Vanguard is structured to be as low risk as it gets.

Certainly having a huge amount of assets under management or administration means the relative impact of senior management nicking a billion dollars and running off to Brazil is lower per investor than if you were an investor with a smaller manager.

However, I wouldn't put the ownership structure out there as a bullet proof insurance policy. Having the 'backing' of the funds that they manage might be good for longevity, but could perhaps encourage complacency that you might not have at a stock market listed rival who has the natural scrutiny and the reporting obligations that go with the territory of being listed.

The fact that they are owned by their investors doesn't mean those investors will turn up to meetings or get to appoint board directors etc, any more than if you owned BlackRock through shares listed on NYSE. And on our side of the pond if you own a vanguard UK FTSE tracker you don't actually own the vanguard UK management company as part of that.

Is diversifying away from Vanguard really increasing potential risk, like jumping from a plane with a parachute, and a winged flight suit for diversification, rather than sticking with the main and a reserve parachute?

FSCS protection being 'per person per financial institution' is a tangible advantage of using multiply managers no matter how immune you might feel Vanguard is to corporate failures and fraud etc.

And as others mentioned, Vanguard only offer funds investing in what they want through the methods they want, based on what they think people will buy a lot of. I'm all in favour of choice as they can't be the best at everything. If you are using multiple platforms already, as you mention, then you have ample opportunity to spread your money around between managers without too much hassle in doing so. So, I would do that.

cogito

bostonerimus wrote: »

So would I, it's just one of those difficult thinks to find....along with unicorns.

Terry Smith, Nick Train and two or three others. Why would I want to invest in an index tracker containing good, bad and indifferent companies when I can invest in the good ones?

When I look at the companies in the Lindsell Train funds there's only Pearson that I wouldn't want to buy.

bobhopeful

bowlhead99, thanks for those obervations.

As Vanguard alternative accumulation index trackers I have short listed:
For EM: Fidelity Emerging Markets P
For Global: Fidelity Index World Fund P
Global High Yield accumulation is not so easy to find an equivalent for Vanguard, Legal & General Global 100, is a possible although relatively limited in scope.

Cognito, thanks but with respect can we bang the drum for active fund management on another thread? I only invest in low fee trackers (for the reasons normally advocated which I am sure you know even if you choose to disagree). Thanks.