Portfolio review please

Linton

Trying a differejnt MSCI Europe Small Cap Tracker:


SPDR MSCI Europe Small Cap
5 Years: 69.6%, 15th out of 21
3 years: 30.2%, 10th out of 25


So 50% actives, 50% tracker. It does look like you need to choose your tracker carefully.

A_T

I'd only use trackers for the whole world, USA or Emerging Markets

aroominyork

Thanks Linton. I want to pick up your clear win/slight win conclusions. Your method is pretty crude, though I'm sure you know that. If 51% of funds fail to outperform their index does that mean you should choose an index fund? Well, of course not - unless you are pulling lots to decide your active fund in which case you would come out worse 51% of the time. So I'll refine your method: what percentage of money invested in active funds outperforms its index? For example, if ten funds each with £100m AUM underperform the index, and four funds each with £500m AUM outperform the index, then 66% of active money is outperforming the index. A pretty clear win.

Linton

aroominyork wrote: »

I’d appreciate a review of the equity part of my portfolio before my planned move from all invested in active funds, to a passive core with satellite active funds. .........
Current portfolio:
- Fundsmith 17%
- Artemis Global Growth 10%
- Smithson IT 10%
- S&P 500 ETF, hedged (XDPG) 18%
- Lindsell Train UK 5%
- Liontrust UK Smaller Companies 5%
- Barings Europe Select 6%
- Lindsell Train Japanese 9%
- Stewart Investors Asia Pacific Sustainability 8%
- Vanguard Global Emerging Markets 8%
- BlueStar Israel Technology ETF 4%

Proposed portfolio:
- Vanguard LifeStrategy 100 30%
- Fundsmith 12%
- Smithson IT 7%
- S&P 500 ETF, hedged (XDPG) 13%
- Liontrust UK Smaller Companies 5% (a bit more than I want but given its 3% bid-offer spread I will hold on and let it reduce when I add new money to other funds next year)
- Barings Europe Select 6%
- Lindsell Train Japanese 7%
- Stewart Investors Asia Pacific Sustainability 8%
- Vanguard Global Emerging Markets 8%
- BlueStar Israel Technology ETF 4% (geographically included in Developed Asia Pacific, and bought in Dec 2017 just before MiFID II put it out of reach – currently nicely up 35%)

Thanks in advance.

Blue Star Israel is very niche but it its only a small %.


I like your general approach, particularly your broad coverage and your choice of funds being based on the type of shares that those funds choose to invest in. Personally I have less faith in star managers and would cover most of the large companies across the world in a single tracker or good but unexciting active fund, as geography is not a major factor for the largest companies. However that is a personal choice and your choice could be interesting.


Perhaps you should check your SE Asia allocation as EM, particularly an EM tracker is largely SE Asia. I would use an SE Asia specialist fund for that geography and focus any EM allocation on other parts of the world. Whether you should try to include Latin America, East Europe, Africa is arguable. A sensible allocation is going to be pretty small anyway.

Linton

aroominyork wrote: »

Thanks Linton. I want to pick up your clear win/slight win conclusions. Your method is pretty crude, though I'm sure you know that. If 51% of funds fail to outperform their index does that mean you should choose an index fund? Well, of course not - unless you are pulling lots to decide your active fund in which case you would come out worse 51% of the time. So I'll refine your method: what percentage of money invested in active funds outperforms its index? For example, if ten funds each with £100m AUM underperform the index, and four funds each with £500m AUM outperform the index, then 66% of active money is outperforming the index. A pretty clear win.

Yes agreed, you could spend a lot more time and effort refining the data, though to do so I think you would need more information than is publicly and freely available. Another point worth checking is whether outperforming funds exceed the trackers by more than the trackers exceed the underperformers. And of course historic performance is far from being the only or even most important factor in choosing investments.



My point was to show that readily available and checkable data paints a very different, more nuanced,and intuitively believable picture than the highly non-transparent and sometimes misinterpreted SPIVA reports.

aroominyork

A_T wrote: »

I'd only use trackers for the whole world

...and satellite funds for the outer planets.

hit_and_run

aroominyork wrote: »

...and satellite funds for the outer planets.

What makes you think you know better than the solar system how to allocate capital? I don't think I know better, so I allocate my capital in proportion to the mass of bodies in the solar system. This gives me 99.86% in solar energy, and most of the rest in gas giants.

aroominyork

Linton wrote: »

Perhaps you should check your SE Asia allocation as EM, particularly an EM tracker is largely SE Asia. I would use an SE Asia specialist fund for that geography and focus any EM allocation on other parts of the world. Whether you should try to include Latin America, East Europe, Africa is arguable. A sensible allocation is going to be pretty small anyway.

Are you sure you mean South East Asia - Singapore, Vietnam, Philippines etc. - and not all Asian countries? Also, I think you might believe the Vanguard fund is a tracker - it's not, it's one of their active funds of which John Bogle greatly disapproved but having let go of the steering wheel couldn't stop being launched.

An EM tracker (looking at iShares) is China 15%, Taiwan 13%, Hong Kong 12%, India 11%, Brazil 9%, USA (?) 8%, South Africa 5%, Russia 4%, Thailand 4%, Mexico 3% etc. As well as liking the style balance provided by combining the Vanguard and Stewart Investors funds, they give a nice geographic spread with Stewart Investors focusing on Asia (ex-China) and Vanguard filling the gaps with China, Brazil, Russia, South Africa etc.

Thrugelmir

aroominyork wrote: »

Also, I think you might believe the Vanguard fund is a tracker - it's not, it's one of their active funds of which John Bogle greatly disapproved

When did he disapprove of this fund?

aroominyork

Thrugelmir wrote: »

When did he disapprove of this fund?

I’ve read about it but don’t have the reference to hand. The active Vanguard funds ran counter to everything Bogle believed. He saw active fund management as an industry created to make profit for Wall Street by buying/selling shares and charging high fund management fees. Bogle changed investing by popularising low cost index funds which put investors’ interests first. The two approaches could not be much more dissimilar.