Vanguard or legal and general

webjaved

chris1 wrote: »

Please could someone explain what this means?
In relation to VLS 20 or 40.

They are different life strategy funds.

Think of it as low to high risk.

chris1

Thanks for replying, but I was asking what they meant by Vanguard Life Strategy not being as good as others due to having a "lack of risk targeting" at the VLS 20 or 40 end.

MarkBargain

Albermarle wrote: »

Both are OK .
L&G have a one flat fee around 0.5%/0.6% I think , which is similar to other companies offerings.

You can get L&G funds through iWeb from 0.1%, see https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/ then filter L&G and sort by ongoing charges. They also sell Vanguard funds from 0.06%. iWeb costs £25 to join and is then £5 a trade thereafter, which is great value when your fund value starts to grow.

aroominyork

Alexland wrote: »

My view is VLS60 and VLS80 are both good funds to preserve spending power and deliver real growth (respectively) over the medium to long term (respectively).

If investing at a lower equity exposure than VLS60 it might be better to hold some cash alongside VLS60 rather than go too heavy on bonds right now.

If investing at 100% equities then there are better options than VLS100 such as the Vanguard FTSE All Cap fund or All World ETF.

VLS has a UK bias so why do you see that as OK if you are holding 60% or 80% equities but not if holding 100% equities? If you prefer a global approach with no UK bias, then surely instead of VLS60 you would put 60% of your funds into a global all cap and 40% into a bond fund.

dunstonh

chris1 wrote: »

Please could someone explain what this means?
In relation to VLS 20 or 40.

VLS is not risk targetted. This means it is not invested with weightings designed to keep it at a certain risk level. The fixed weightings mean that over the economic cycle, the risk level of VLS funds will go up and down.

For those investing at the upper end of the risk scale, this may not be an issue as they are quite happy with the risk movements. However, at the lower end of the risk scale where people are nervous of much smaller levels of loss, then VLS may not be the right option for them.

For example, VLS20 has had periods that put it in the risk level that VLS40 has been. That difference may be small but when you are an investor that is not very tolerant of losses, that is actually a big difference. A higher risk investor wouldnt bat an eyelid at a 5% difference in loss. A low-risk investor can panic with that level.

The risk targetted multi-asset funds (such as HSBC, L&G and Architas amongst others) will be more fluid in their weightings to different areas to try and keep the risk within a target range.

So, broadly speaking, risk targetted funds are better for lower risk investors as it keeps their investments at a certain risk level and doesn't allow it to drift as much. All will drift a little over a cycle but VLS is limited in how it can deal with that. Most of the others are not.

aroominyork

dunstonh wrote: »

VLS is not risk targetted. This means it is not invested with weightings designed to keep it at a certain risk level. The fixed weightings mean that over the economic cycle, the risk level of VLS funds will go up and down.

For those investing at the upper end of the risk scale, this may not be an issue as they are quite happy with the risk movements. However, at the lower end of the risk scale where people are nervous of much smaller levels of loss, then VLS may not be the right option for them.

For example, VLS20 has had periods that put it in the risk level that VLS40 has been. That difference may be small but when you are an investor that is not very tolerant of losses, that is actually a big difference. A higher risk investor wouldnt bat an eyelid at a 5% difference in loss. A low-risk investor can panic with that level.

The risk targetted multi-asset funds (such as HSBC, L&G and Architas amongst others) will be more fluid in their weightings to different areas to try and keep the risk within a target range.

So, broadly speaking, risk targetted funds are better for lower risk investors as it keeps their investments at a certain risk level and doesn't allow it to drift as much. All will drift a little over a cycle but VLS is limited in how it can deal with that. Most of the others are not.

Is there any analysis of how successful the risk targeted funds have been in meeting their objectives, and comparing their performance over time to the closest equivalent VLS fund?

A_T

dunstonh wrote: »

VLS is not risk targetted. This means it is not invested with weightings designed to keep it at a certain risk level. The fixed weightings mean that over the economic cycle, the risk level of VLS funds will go up and down.

For those investing at the upper end of the risk scale, this may not be an issue as they are quite happy with the risk movements. However, at the lower end of the risk scale where people are nervous of much smaller levels of loss, then VLS may not be the right option for them.

For example, VLS20 has had periods that put it in the risk level that VLS40 has been. That difference may be small but when you are an investor that is not very tolerant of losses, that is actually a big difference. A higher risk investor wouldnt bat an eyelid at a 5% difference in loss. A low-risk investor can panic with that level.

The risk targetted multi-asset funds (such as HSBC, L&G and Architas amongst others) will be more fluid in their weightings to different areas to try and keep the risk within a target range.

So, broadly speaking, risk targetted funds are better for lower risk investors as it keeps their investments at a certain risk level and doesn't allow it to drift as much. All will drift a little over a cycle but VLS is limited in how it can deal with that. Most of the others are not.

Of course that relies upon whether the fund managers choose assets that do turn out to be low risk. It's arbitrary. There's no guarantee that risk-targeted funds will reduce risk any better than Vanguard.

chris1

dunstonh wrote: »

The risk targetted multi-asset funds (such as HSBC, L&G and Architas amongst others) will be more fluid in their weightings to different areas to try and keep the risk within a target range.

Thank you very much for your explanation.
If HSBC and L&G make sure the risk is not too high by altering the weightings, does this mean that the balance between bonds and equities will change instead, and between global market weightings?

Apologies if it's a stupid question.

TCA

MarkBargain wrote: »

You can get L&G funds through iWeb from 0.1%, see https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/ then filter L&G and sort by ongoing charges.

iWeb don't appear to offer the various L&G Multi Index funds, which is a pity:

https://literature-lgim.huguenots.co.uk/srp/documents/?type=FS&ISIN=GB00BYXQ3L49

dunstonh

If HSBC and L&G make sure the risk is not too high by altering the weightings, does this mean that the balance between bonds and equities will change instead, and between global market weightings?

VLS is fixed (hence the name of the funds). The others will change their weightings on a much more fluid and frequent basis. There is nop fixed weighting to equities.

Of course that relies upon whether the fund managers choose assets that do turn out to be low risk. It's arbitrary. There's no guarantee that risk-targeted funds will reduce risk any better than Vanguard.

When you are looking at the lower end of the risk scale, its not about who has the best return. It's about who reduces the volatility best. Especially with MIFIDII requirement of quarterly statements and nervous investors seeing losses like they have never seen them before. There are no guarantees who will do it best as risk targetted options involve management decisions on the weightings and are not set to a fixed level.

Is there any analysis of how successful the risk targeted funds have been in meeting their objectives, and comparing their performance over time to the closest equivalent VLS fund?

Its difficult as they dont really map well against each other. (you can effectively get 40% equity, 45%, 50%,55% etc). Plus, some of the funds did not start life as risk targetted but changed to make them so and the fluid ones change equity content.

One of the closest matches is VLS20 and L&GMI3. In terms of returns over the long term, there is nothing in it. 34.25% vs 32.42% over 6 years. They take it in turns as to who returns the most. So, nothing in it. However, VLS20 is the more volatile of the two. And this is important at the lower risk end of the scale as generally, lower risk investors often forget past growth when it comes to losses.

When we use multi-asset funds with underlying passives, we use an L&GMI fund for two risk levels, Architas for another two and HSBC for another two. This is why I believe you cannot be fund house loyal to cover all risk profiles. All that said, these are mostly variations of a theme and over the long term, the returns between all versions are going to be very similar in their respective risk bands. If you are a "returns focused" person who doenst worry about loss periods then it doesnt matter really which one you go for as long as you are broadly at the right risk level and have the asset mix you want. It is only if you are a "loss focused" person who worries during negative periods that perhaps you should consider using the risk targetted ones.