Index funds not tracking indexes falls?

Barry_Bear

Looking at some global index trackers, e.g. LEGAL GENERAL UT INTL INDEX TRUST Income (LGII), VANGUARD LIFESTRATEGY 100 PERC EQTY (VVLSRI), HSBC FTSE All-World Index Fund C.
These funds are down approx 25% year to date.

In the same period, the DOW and S&P are down close to 30%, the FTSE over 30%, Nikkie 30%. These are all major indexes. Maybe some smaller indexes haven't fallen as far, but global trackers are supposed to be weighted, and in all US allocation is the majority.

Why are none of the above global index trackers down as much as the main indexes year to date?

The index trackers would seem to reduce the opportunity to buy at the current discount v buying individual tracker funds for S&P, FTSE, Nikkie etc, so any future upside would be less too. These trackers seem to dampen falls - and therefore gains too?

mcooke999

Most likely explanation is that those funds are accumulation units, meaning they reinvest dividends and this is included in the prices you see.

Another possibility is that the falls in the markets today are not reflected in the price of those funds as they are only prices once per day so would reflect yesterday's prices...

Thrugelmir

To add to the above. When shares go ex-dividend. The price of the individual stock falls to reflect this. What indices fail to do is to reflect this income entitlement which will be paid at a future date. Whereas a fund will account for the fact they are going to receive this money when pricing the value of the fund on a daily basis. 
For example BP went ex-div on the 14th February with a payment date of the 27th March. The dividend in £ was 8.1558p. A fund holding a million shares would be accruing some £81,558 of income. 

To expand further. Major indices such as the FTSE can move by a sizable downward movement if a number of major payers are going ex-div on the same day and the market itself is negative. 

buffman

Have you taken into account the very recent steep fall in the pound in your caluclations?

Alexland

It's the currency movement. People flocking to the perceived safety of USD has provided some relief to UK based global investors in previous crashes 

bowlhead99

buffman said:

Have you taken into account the very recent steep fall in the pound in your caluclations?

This is a key factor given at 21 Feb the dollar was 1.297 and today it's 1.175. A drop in a world index from $100 to $75 overlaid with that exchange rate movement would give a drop in sterling from £77.10 to £63.83 which is only 17.21% instead of the 'assumed' 25%.

The other comments  are all valid too - i.e.  the raw indexes reported being capital values only (no dividends) and individual funds being subject to different valuation points (e.g. 12 noon, 9am, 9pm etc) can all make several percent of difference in choppy markets when fx rates and market movements are each several percent in a day.

Albermarle

Alexland said:

It's the currency movement. People flocking to the perceived safety of USD has provided some relief to UK based global investors in previous crashes 

It's not really very clear though why the Pound has dived against the Euro as well . >10% in a month, especially when some Euro countries have weaker economies than us .  In recent times movements have been largely confined  related to Brexit issues  but clearly we are in an unusual situation .

Thrugelmir

Albermarle said:

Alexland said:

It's the currency movement. People flocking to the perceived safety of USD has provided some relief to UK based global investors in previous crashes 

It's not really very clear though why the Pound has dived against the Euro as well . >10% in a month, especially when some Euro countries have weaker economies than us .  In recent times movements have been largely confined  related to Brexit issues  but clearly we are in an unusual situation .

Sell off of UK equities to some extent. International investors are (or possibly were) major holders. 
Euro is a collective that won't be allowed to fail..........

dunstonh

VANGUARD LIFESTRATEGY 100 PERC EQTY (VVLSRI)

..is not an index tracker.  It is a fettered fund of funds.

Barry_Bear

Thanks all for the replies. The dividend income and fall in GBP explains it.
donstonh yes Vanguard is a fund of fund, and whereas the other 2 were both down 26%, the Vanguard at the same point was down 24% so as you say, not index tracking, just globally diversified.