VLS Region Breakdown

[Deleted User]

I've seen several comments on this forum that the VLS range is UK biased, yet when I look on Trustnet, the region breakdown for UK and USA is 25.83% and 39.01% respectively.  Now, I'm not doubting anyone here, but when I see these percentages, I'd say that VLS is USA biased.  I'd be grateful if someone can explain further. Here's the link for anyone interested     

Swipe

It is UK biased compared to other global trackers because it has 25.83% UK market exposure, when the UK accounts for just 3% of the global market.

tibbles209

An unbiased global tracker would represent the various regions by market share. The UK does not make up anything like 25.83% of the global market, so this is a heavy UK bias (which is not necessarily a good or a bad thing, just depends what you are after). 

eskbanker

As a point of comparison, the roughly equivalent fund in the HSBC Global Strategy range has a 3.44% UK presence, which is a much better approximation of the UK's unadjusted share of global market capitalisation:

https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio

mr_accountant

From my calculations about 2 month ago, the breakdown was as follows for
equities, USA 28%, UK 15, EU 6%, Japan & Asia Pacific 6%, developing Asia 4%, developing global equities 1%.
This was using various online sites.

on Vanguards on websites for UK bonds, gvt gilts 5.8%, inflation linked gilts 3.7%, corporate bonds 3.4%, total rounded up 13% 
15 + 13 =28%.
Overweighted to UK yes, massively so no 

Linton

mr_accountant said:

From my calculations about 2 month ago, the breakdown was as follows for
equities, USA 28%, UK 15, EU 6%, Japan & Asia Pacific 6%, developing Asia 4%, developing global equities 1%.
This was using various online sites.

on Vanguards on websites for UK bonds, gvt gilts 5.8%, inflation linked gilts 3.7%, corporate bonds 3.4%, total rounded up 13% 
15 + 13 =28%.
Overweighted to UK yes, massively so no 

I dont know where you got you numbers from but they are way out.  Japan is larger than the UK as is Europe (non UK).  See https://www.statista.com/statistics/710680/global-stock-markets-by-country/ for example.

mr_accountant

Linton said:

mr_accountant said:

From my calculations about 2 month ago, the breakdown was as follows for
equities, USA 28%, UK 15, EU 6%, Japan & Asia Pacific 6%, developing Asia 4%, developing global equities 1%.
This was using various online sites.

on Vanguards on websites for UK bonds, gvt gilts 5.8%, inflation linked gilts 3.7%, corporate bonds 3.4%, total rounded up 13% 
15 + 13 =28%.
Overweighted to UK yes, massively so no 

I dont know where you got you numbers from but they are way out.  Japan is larger than the UK as is Europe (non UK).  See https://www.statista.com/statistics/710680/global-stock-markets-by-country/ for example.

I was referring to VLS60 re the OP question 

Swipe

mr_accountant said:

From my calculations about 2 month ago, the breakdown was as follows for
equities, USA 28%, UK 15, EU 6%, Japan & Asia Pacific 6%, developing Asia 4%, developing global equities 1%.

The OP quoted the overall allocation of just the equities by region from their link, not taking into account the non equity 40% portion (breakdown section \ region breakdown).

bowlhead99

eskbanker said:

As a point of comparison, the roughly equivalent fund in the HSBC Global Strategy range has a 3.44% UK presence, which is a much better approximation of the UK's unadjusted share of global market capitalisation:

https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio

The LifeStrategy allocation is basically whatever percent equities you want, a quarter of them will be UK stock exchange listed. So the VLS100 will be 25% UK equities and the VLS60 will be 15% UK equities. 

Comparing the figure of 3.44% in an HSBC medium risk fund to the OP's figure of 25%+ is clearly not directly comparable, as the HSBC figure is UK equities as a percentage of total value in the product (which includes 40% of stuff that isn't equities at all, such as bonds, property etc) while the 25% numbers we hear for Vanguard is either 'UK equities out of total equities' or '[UK equities plus UK bonds and gilts] out of total investment'.

FWIW, the HSBC fund has a lot less of its equities in UK-listed companies than Vanguard, so that its UK equities as a percentage of total equities are closer to the 5-6% of global equities that the UK stock market represents, *but* some of their non-UK equities will be hedged to sterling because they know a typical balanced risk UK investor does not really have the risk appetite to hold 95% of his equity investments overseas .

eskbanker

bowlhead99 said:

eskbanker said:

As a point of comparison, the roughly equivalent fund in the HSBC Global Strategy range has a 3.44% UK presence, which is a much better approximation of the UK's unadjusted share of global market capitalisation:

https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio

The LifeStrategy allocation is basically whatever percent equities you want, a quarter of them will be UK stock exchange listed. So the VLS100 will be 25% UK equities and the VLS60 will be 15% UK equities. 

Comparing the figure of 3.44% in an HSBC medium risk fund to the OP's figure of 25%+ is clearly not directly comparable, as the HSBC figure is UK equities as a percentage of total value in the product (which includes 40% of stuff that isn't equities at all, such as bonds, property etc) while the 25% numbers we hear for Vanguard is either 'UK equities out of total equities' or '[UK equities plus UK bonds and gilts] out of total investment'.

As OP had linked to Trustnet's VLS60 page, I just took the corresponding figures for HSBC GS Balanced (as an approximate equivalent), and so my expectation was that the UK percentages would be quoted on a like-for-like basis.

As far as I can see, the Trustnet breakdown basis for VLS60 is the latter of your examples, i.e. '[UK equities plus UK bonds and gilts] out of total investment', but for whatever reason they don't break down the HSBC product in an equally granular manner, so yes, it's not a like-for-like comparison!

Thrugelmir

Taking Experian as an example. Location of brass plates means little these days.