BlackRock launches rival to Vanguard LifeStrategy funds

blinko

I think overall this is good news for consumers now a little competition at this end of the market and FINALLY the big players are waking up to their rip off practices are now no longer viable:T:T

OldBill

One respected reviewer is non-too impressed:
https://monevator.com/blackrock-mymap-fund-of-funds/

dunstonh

OldBill wrote: »

One respected reviewer is non-too impressed:
https://monevator.com/blackrock-mymap-fund-of-funds/

I suspect it was written by his apprentice whilst he was on holiday as it is clearly way off the mark.

That said, having read some of the comments that follow that article, it does suggest a lot of people reading with a low level of knowledge and the article appears to play to that audience a bit.

Alistair31

dunstonh wrote: »

I suspect it was written by his apprentice whilst he was on holiday as it is clearly way off the mark.

That said, having read some of the comments that follow that article, it does suggest a lot of people reading with a low level of knowledge and the article appears to play to that audience a bit.

Can you please expand on this.

Thanks

dunstonh

Alistair31 wrote: »

Can you please expand on this.

Thanks

It doesn't think they are simple. It doesn't think they are transparent and they don't think there is any strategy.


Simple: It suggests not for mymap. However, Mymap has an underlying portfolio of index trackers with weightings to keep it within a target volatility (risk) range.
Unlike VLS which can move around the risk range because of its rigidity.

Both are pretty simple.

Transparent: I think the article was being arsey here. The weightings do change periodically on VLS as well. MyMap will just be more fluid. Transparency doesn't become less because weightings will change.

Aligned with sound financial theory: VLS is aligned to a fixed equity weighting but it lacks risk focus. MyMap does not have a fixed equity weighting but targets a volatility range. Both have their strategy which are different.

The article uses standard risk warnings against the Mymap funds but doesn't appear to have used standard risk warnings against VLS.

For example, the VLS KIID says its risk profile is....
"This indicator is based on historical data and may not be a reliable
indication of the future risk profile of the Fund."
"The risk category shown is not guaranteed and may change over time."

It criticises Mymap about turnover charges and how they will change because of activity. Yet VLS charges have changed (i.e. transaction costs reported under MIFID II).

The regulator and FOS are more comfortable with risk targetted options. Blackrock had no offering in the risk targetted section, just like Vanguard. HSBC, Architas and L&G amongst others chose to focus on risk targetted rather than fixed allocation. Blackrock have chosen to have risk targetted with mymap and fixed allocation with consensus. They straddle the two methods.

The article finishes with

The main argument against active management is it’s not worth the cost. But where does that leave us if MyMaps’ active management is cheaper than a pure passive alternative?
MyMap is marginally cheaper than Vanguard LifeStrategy at the OCF level. Only time will tell whether it can maintain that advantage once transaction costs are tallied and the total cost of ownership is known.

The article seems to think that transaction charges will increase because of increased turnover because mymap is risk targetted, unlike VLS. That is a possibility. However, it is an unknown at this time but if we look at the other major risk targetted multi-asset funds, they have lower transaction charges than Vanguard.

it also seems to think that picking a rigid equity weighting with overall weightings changing periodically within that and a management decision to have home bias is not active. Yet mymap which adjusts its weightings without the management decision to have a fixed equity weighting is active. They both have a degree of active decision making but both use underlying passives.

You just get the feeling that the article was written by someone who is in love with Vanguard and cannot possibly think better alternatives may exist.

OldBill

Given all of the above, it would be pertinent to quote from Lars Kroijer's Investing Demystified [sec ed], which I've just finished reading.

In Chapter 15 (A Wish List Aimed at the Financial Sector, he calls for Enhanced Independent Comparison Sites:
" . . . . with the large increase in choice [of financial products] comes confusion over what is the best product for any one investor. We should have a simple comparison site . . . . . In short, it's not that simple to compare the all-in costs of owning an index tracker and applying an educated view of your risk tolerances. A large, independent and credible website that did this would be incredibly valuable to the investing community" (pp.175-176).

"Amen" to that.

dunstonh

I forgot to mentiont that the article made no reference to it being a Unit Trust and not an OEIC and that a bid/offer spread exists or that there are multiple share classes with different charges.


That is very pertinent information when comparing charges.

IanManc

dunstonh wrote: »

I forgot to mentiont that the article made no reference to it being a Unit Trust and not an OEIC and that a bid/offer spread exists or that there are multiple share classes with different charges.


That is very pertinent information when comparing charges.

Please forgive my ignorance Dunst, but what's the significance for an ordinary investor of a fund being a unit trust and not an OEIC?

seacaitch

IanManc wrote: »

Please forgive my ignorance Dunst, but what's the significance for an ordinary investor of a fund being a unit trust and not an OEIC?

What dunston already mentioned: the main noticeable difference for investors is that of pricing:
- unit trusts have a bid/offer "spread" (ie. you are quoted a slightly lower price to sell at than you are able to buy at)
- whereas OEIC funds quote a single price for you to buy or sell at.

A unit trust's spread should be very narrow since the fund manager themself is no longer allowed to profit from this "market making" activity, hence the spread should just account for the transaction costs etc so as to ensure that existing unit holders aren't disadvantaged by the creation of new units.

Reaper

This link explains all the differences quite well
https://www.thisismoney.co.uk/money/investing/article-1583957/Unit-trusts-and-Oeics.html

I'm a little surprised to see a new fund launched as a Unit Trust, I thought they were on the way out.