BlackRock launches rival to Vanguard LifeStrategy funds

dunstonh

When you use the phrase 'risk targetting' what does that mean for you?

Same as the regulatory position.

How would you describe this feature of the Consensus fund? Would you agree it's not fixed allocation?

Its not risk targetted. Which is why they have introduced risk targetted funds as its a gap in their provision.

What is it you think the MyMap fund gains from its approach? Why is that superior to alternatives?

They didnt have a risk targetted multi-asset solution. Now they do.

Simplicity and transparency are states on a spectrum. If one fund's parameters are relatively stable while the other has a wide-ranging remit to change its investments and asset allocation frequently based on the "absolute discretion" of its active managers, then it seems reasonable to me to conclude the second fund is not as simple and transparent as the first, as far as investors are concerned.

The VLS funds are relatively stable in asset allocation but not constant.

VLS also has the remit to change allocations at the discretion of the fund managers. They only have to keep the equity content at its chosen level. The underlying assets can move around within that at the managers discretion.

So, both mymap and VLS (and L&GMI, HSBC GS and Architas MAP amongst others) are transparent.

I think it's important to know that a fund targeting a volatility range may not do so, especially where that can be conceived of as innovation. I'd be surprised if many Monevator readers aren't aware that historical data doesn't predict the future, so you're right, I wasn't at pains to point that out.

It is also important to know that a multi-asset fund that is not risk targetted may also move around the risk range and suffer periods of greater volatility.

The standard risk profiles you refer to are a regulatory abstraction. To my mind, that's quite different from a fund that's marketing itself as being able to nail a volatility target.

It is acalled risk targetting. Not risk nailed on.

Is that target going to become the overweening focus of the fund? Will the manager's need to hit the correct volatility band come at the expense of cost and return?

That is normally the case of risk targetted funds. They "typically" aim for 95% of the time or thereabouts.

I didn't criticise MyMap for its transaction charges. They haven't published any. I just made the obvious point that as active management implies a higher level of transactions, future costs may well bite into the headline OCF advantage. We'll just have to wait and see.

The fact they are not known, like many other parts of the mymap funds, makes it difficult to comment. However, you suggested they would be higher than VLS. Yet VLS is higher than the other risk targetted options. So, it is a potential issue but may not be.

I really don't want to get into a sterile debate about the difference between active and passive. You seem to suggest that Vanguard LifeStrategy is active because some decisions are made about its composition at some point in time. You might as well be telling me that an index tracker based on the S&P 500 is active because there's a committee that makes decisions on the composition of the index.

They all have an element of active decisions. How much to hold in each sector. How often to rebalance and with what tolerance. How much to include a home bias (which is actually a significant active decision). The active nature is low on all of them because they all use underlying passives.

Whilst the risk targetted ones are slightly more active, they are all relatively low management in that respect. They are all active passives.

Personally I believe the evidence that active managers as a group do not add value. Therefore I do not see, given what we know at this stage, why I would invest in MyMap versus more 'passive' (or less 'active') alternatives that offer me certainty of asset allocation.

If you prefer the management decisions of VLS to have a home bias and a more rigid asset allocation with less frequent changes then that is your choice. If you prefer a less rigid allocation but targetting a volatility range then that is your choice. Personally, the lower risk end of the scale is better served with risk targetting. Those at the higher risk end of the scale probably better with returns focused versions.

I'd be really interested to know why you think MyMap is going to better than the alternatives.

I don't at this stage as not enough is known about the funds to make an informed decision. I would rather wait and see what the facts are before being critical about them.

However, there is now a good selection of multi-asset funds with underlying passives and there is more to life than Vanguard. It is time to accept that maybe some of the others are now more viable than Vanguard.

The_Accumulator

dunstonh wrote: »

Same as the regulatory position.

So what does it mean? What I'm really asking you is: why is this a great feature? Who would benefit from it? You described Consensus as fixed allocation when its asset allocation can move across a significant range which is obviously a way of controlling risk. Perhaps you're using the terms to refer to some precise, technical mechanism that makes all the difference to your view?

dunstonh wrote: »

The VLS funds are relatively stable in asset allocation but not constant.

VLS also has the remit to change allocations at the discretion of the fund managers. They only have to keep the equity content at its chosen level. The underlying assets can move around within that at the managers discretion.

So, both mymap and VLS (and L&GMI, HSBC GS and Architas MAP amongst others) are transparent.

This is like saying that because I play football on a Wednesday night I'm a footballer just like Lionel Messi.

One fund says it's managers have absolute discretion to achieve their goals - this is active. The other fund explicitly rejects tactical asset allocation and has published the rules that govern the portfolio:

"the LifeStrategy™ Funds invest approximately 25% of their portfolios in UK equities and the remaining equity portfolio in
unhedged market cap-weighted equities outside the UK. Vanguard believes these allocations represent a reasonable trade-off between investor preferences and ensuring that investors gain
exposure the potential of global investing."

dunstonh wrote: »

They all have an element of active decisions. How much to hold in each sector. How often to rebalance and with what tolerance. How much to include a home bias (which is actually a significant active decision). The active nature is low on all of them because they all use underlying passives.

Whilst the risk targetted ones are slightly more active, they are all relatively low management in that respect. They are all active passives.

See previous reply. What does active passive mean? Using index trackers to market time is no different from using shares to try to improve returns / lower risk. It's active management all day long. I disagree that committing yourself to a 25% fixed UK allocation transforms you into an active investor. Yes, it's deviating from the global market cap but then the vast majority of US passive investors have been doing that for decades.

dunstonh wrote: »

If you prefer the management decisions of VLS to have a home bias and a more rigid asset allocation with less frequent changes then that is your choice. If you prefer a less rigid allocation but targetting a volatility range then that is your choice. Personally, the lower risk end of the scale is better served with risk targetting. Those at the higher risk end of the scale probably better with returns focused versions.

I don't at this stage as not enough is known about the funds to make an informed decision. I would rather wait and see what the facts are before being critical about them.

However, there is now a good selection of multi-asset funds with underlying passives and there is more to life than Vanguard. It is time to accept that maybe some of the others are now more viable than Vanguard.

Yes, a stable asset allocation is exactly what I'm advocating but that's twice now you've accused me of having a Vanguard bias. Vanguard happen to provide the product which is the closest fit I can find to the passive investing ideal. It's not perfect by any means but it's the closest fit, that's why it gets my vote. I've explained my reasons in an extensive post.

I'm genuinely interested to hear your reasons for preferring the alternative.

firestone

been unable to to do the link but from an article in the Telegraph called - Vanguard were nudging investors away from a UK bias which should be easy to search for.Is the quote from Vanguard " There's a asset allocation committee that meets periodically to decide on appropriate allocations and weightings between asset classes.Typically those weights would be modified very infrequently"
So sort of active in their eyes

jaybeetoo

Does anyone know when the MyMap funds will be available to invest in?

london.cidade

jaybeetoo wrote: »

Does anyone know when the MyMap funds will be available to invest in?

i also wonder that!

TCA

Some info on MyMap fund holdings:

MyMap 3 (64% bonds, 34% equity, 2% alternative): https://www.sharesmagazine.co.uk/funds/fund/QD4E/holdings

MyMap 4 (46% bonds, 52% equity, 2% alternative): https://www.sharesmagazine.co.uk/funds/fund/QD4K/holdings

MyMap 5 (33% bonds, 67% equity): https://www.sharesmagazine.co.uk/funds/fund/QD4M/holdings

MyMap 6 (18% bonds, 82% equity): https://www.sharesmagazine.co.uk/funds/fund/QD4A/holdings

[Deleted User]

How do these differ from their Consensus funds?

TCA

newbinvestor wrote: »

How do these differ from their Consensus funds?

Consensus are not risk targetted. Page 1 of this thread.

barnstar2077

I haven't read the rest of the thread, but these funds are on HL now.

A_T

TCA wrote: »

Consensus are not risk targetted. Page 1 of this thread.

And in terms of content:

- the equity holdings are more in line with global market cap
- no corporate bonds
- bond holdings are mostly short-dated (less than 5 years) and only UK and US