Additional fund recommendations?

aroominyork

bowlhead99 said:

aroominyork said: 

On a wider point, BG is an interesting one - the company has had a stellar few years so to what degree have people missed the boat?

Whereas, just because a fund run by BG has had some great portfolio performance in recent years, that doesn't mean the opportunities are gone for it to find interesting businesses at attractive valuations or with better growth prospects than the rest of the market expects. The portfolio is always under review and things will drop in and out, for better or worse. 

Obviously investing in a growth portfolio in 2000 and holding for a couple of decades over two long equity 'bull' markets is something that is a nice thing to do and the last two decades (450-500% return for BG UK Smaller compared to 120% for UK Smallcap index, 300% for IA UK Smallcap sector, 350-400% for FTSE  250), might have been better than the next two decades will be from here. But BG can create a 'clean slate' whenever they like by getting rid of things where the boat has sailed and adding things where the boat has not yet been missed.   So I wouldn't say 'the boat has sailed' on BG's funds, whether it is UK Smaller cos or  global growth or Japanese Smaller cos (400% over a decade). The markets in which they are investing may have headwinds, which may be stronger now than in 2010, but that doesn't mean you've missed out and shouldn't bother using them.

They do favour a growth style -  so if you think growth is now dead and value is where people should be looking, then you may prefer a different management group.

I'd not looked at BG before three years ago (but then I'd not looked at any investment management company) but I assumed - perhaps wrongly - that their house style favours tech-led innovation and growth, and that if that style falls out of favour their funds would suffer. It would be interesting to know whether they have been nimble and adaptable over the last few decades.

Edit: Article on BG in The Times (paywall) (https://www.thetimes.co.uk/edition/money/why-one-fund-house-just-keeps-trouncing-its-rivals-c29z50mlk

ger88

I’m happy with close to 100% equities. I’m young and have a long term outlook so don’t feel I need to add too much in bonds. 

VLS80 will become a fair chunk of my core PF.  Fundsmith as my defensive core global fund. I see tech as a vital part of the future hence the L&G fund but this will only be a satellite portion as well as BG Long term which I like as it has some HK/China and different to Fundsmith. 

I’d like to add another fund to either give me a global fund which is a little more aggressive than Fundsmith but with different holdings/style or possibly diversify into an Asia fund like BG Pacific.

83705628

ger88 said:

Currently have a PF consisting of the following and would like to add another fund.  Minimum 10 year investment. Appreciate any thoughts....

VLS80
Fundsmith Equity 
Baillie Gifford Long term global 
Legal & Genral global tech 

So some I've looked at are Rathbone global, Blue Whale and BG Pacific

Thanks 

Why?
VLS80 is more than enough, except that bond yields aren't worth holding. You have 4 global funds, why do you want to add another?

DairyQueen

The assumptions are that you are looking for equity diversification (10+ year investment) and have a high risk profile (equity heavy portfolio). You are weighted toward tech and to the USA.  There is duplication in underlying investments across your funds.

- Why VLS80? Assuming that you are evenly distributed across your funds why hold a smidge of bonds?  Given the risk profile of the rest such a small %age of bonds appears to have no function.

- Why such a small UK weighting? 

One strategy would be to hold one or two global passives and supplement with satellites that could either fill the gaps (small caps) or weight toward a particular sector or region.

In addition to the core global passives I hold actively-managed satellites that focus on small caps (USA/UK/Japan) or particular regions (Asia/China). 'Small cap' being a relative term with respect to the US market in particular. These funds have no holdings overlap with the global passives. They are more volatile but that's my trade-off for the additional diversification. 

ger88

DairyQueen said:

The assumptions are that you are looking for equity diversification (10+ year investment) and have a high risk profile (equity heavy portfolio). You are weighted toward tech and to the USA.  There is duplication in underlying investments across your funds.

- Why VLS80? Assuming that you are evenly distributed across your funds why hold a smidge of bonds?  Given the risk profile of the rest such a small %age of bonds appears to have no function.

- Why such a small UK weighting? 

One strategy would be to hold one or two global passives and supplement with satellites that could either fill the gaps (small caps) or weight toward a particular sector or region.

In addition to the core global passives I hold actively-managed satellites that focus on small caps (USA/UK/Japan) or particular regions (Asia/China). 'Small cap' being a relative term with respect to the US market in particular. These funds have no holdings overlap with the global passives. They are more volatile but that's my trade-off for the additional diversification. 

VLS80 I’ve held for a while and I like the stability.  I agree I could go VLS100 to correlate with the rest of PF but I’m happy with VLS80 and it’s worked well for me

UK only makes up a small portion of the world index and the last time I ran my PF via X-ray it was around 10% UK. 

I’m thinking I could weight some more towards Asia/Japan so would welcome some recommendations around these out with BG Pacific/Japan and JPM Asia Growth which I’ve looked at 

aroominyork

I hold an Asia Pacific fund which I could recommend but, seriously,why would you invest based on what two or three strangers on the Internet might recommend? Surely it's better to do your own research and rise or fall on it.

ger88

aroominyork said:

I hold an Asia Pacific fund which I could recommend but, seriously,why would you invest based on what two or three strangers on the Internet might recommend? Surely it's better to do your own research and rise or fall on it.

Don’t worry, I’m not going to buy the first recommended fund 

only asking for recommendations to see what people have chosen/why and will of course research myself before committing 

kinger101

ger88 said:

aroominyork said:

I hold an Asia Pacific fund which I could recommend but, seriously,why would you invest based on what two or three strangers on the Internet might recommend? Surely it's better to do your own research and rise or fall on it.

Don’t worry, I’m not going to buy the first recommended fund 

only asking for recommendations to see what people have chosen/why and will of course research myself before committing 

The easiest way to see what people are buying would be looking at fund size on Trustnet.  I wouldn't rely too heavily on other peoples reasons as they've made a decision at a different point in time, and they might have considered factors specific to them like what's already in their portfolio.  Some actively managed global and tech funds for example already have a heavy weighting in Tencent and Alibaba, so they might be concerned about holding too much of them with some of the AP funds.

DairyQueen

ger88 said:

VLS80 I’ve held for a while and I like the stability.  I agree I could go VLS100 to correlate with the rest of PF but I’m happy with VLS80 and it’s worked well for me

UK only makes up a small portion of the world index and the last time I ran my PF via X-ray it was around 10% UK.

I’m thinking I could weight some more towards Asia/Japan so would welcome some recommendations around these out with BG Pacific/Japan and JPM Asia Growth which I’ve looked at 

VLS80 v VLS100: Potential 40% drop v 50% drop. Not a great deal of difference in volatility. Add in your other 100% global equity funds and you are possibly talking a couple of % difference in volatility.

Anyways...

No recommendations from me but happy to mention my satellites. Warning: these are volatile funds and not for the faint-hearted. I only hold a small % of the portfolio in each:

BG Shin Nippon
Fidelity Asian Values
Fidelity China Special Situations
Artemis US Smaller Companies
TB Amati UK Smaller Companies

.... and, no, please don't ask me to explain my choices. Primarily, they are a good diversification fit with the rest of my portfolio. 

bowlhead99

DairyQueen said:

ger88 said:
 VLS80 I’ve held for a while and I like the stability.  I agree I could go VLS100 to correlate with the rest of PF but I’m happy with VLS80 and it’s worked well for me

VLS80 v VLS100: Potential 40% drop v 50% drop. Not a great deal of difference in volatility. Add in your other 100% global equity funds and you are possibly talking a couple of % difference in volatility.

I would agree. Vanguard's VLS100 dropped 27.1% from late Feb to late March, and VLS80 still dropped 22.6% across the same date range which is more than 80% of the drop despite it only being an '80%' fund. And as OP holds a bunch of other 100% equity funds on the side, and is proposing to buy more 100% equity funds to add to the portfolio, the idea that the '80' fund is providing 'stability' is somewhat fanciful in the context of the overall portfolio. The difference between 80 and 100 would get lost in the roundings in the short term while ultimately being a slight drag on performance in the long term.

In ger88's thread last month, he said "Money will not need accessed for +10years but I don’t want 100% equities either to balance some risk". However if most of what you are adding is 100% equity funds, the small amount of bonds within a VLS 80 product which itself makes up only some part of the overall whole, will not really 'balance some risk' at all, the whole portfolio is mostly high risk. In looking at potential additions to what is already an equities-heavy portfolio, he now seems to have been distracted by funds which have  'gone up a lot in recent years' rather than funds that 'balance some risk'.

Currently have a PF consisting of the following and would like to add another fund.  Minimum 10 year investment. Appreciate any thoughts....
VLS80
Fundsmith Equity 
Baillie Gifford Long term global 
Legal & Genral global tech 
So some I've looked at are Rathbone global, Blue Whale and BG Pacific

If the existing funds include an international fund holding predominantly equity-focused index funds (VLS), a tech equity index fund (L&G), and two actively managed, conviction-driven global equity funds with a relatively low number of holdings such as Fundsmith and BG, what does adding another conviction-driven global equity fund with a relatively low number of holdings such as Blue Whale bring to the party?  Or Rathbone's global fund, which may be a little more diversified than Fundsmith but less diversified than VLS? Don't you already have funds doing the jobs that Blue Whale or Rathbone would offer to do for you?

Or BG's Pacific fund, which only looks at investment opportunities in Asia but outside Japan. If you decide to buy it, would you not also then need to add a fund that looks at investment opportunities inside Japan, and one that looks at continental Europe, and a UK one, and a North American one, and a South American, African, Russian or other Emerging Markets one? And 14% of BG's Pacific fund is concentrated in Alibaba, Tencent and Meituan Dianping, just like 16% of BG's Long Term Global Growth is allocated to those stocks. Tencent will also be several percent of L&G's Tech index that you own, as well as (with Alibaba) being by far the largest holdings within the Emerging Markets component of the VLS.

You say those three funds are "some of the ones you looked at". What do they offer that made you shortlist them compared to the other things you looked at - do they improve your portfolio in some way or bring it closer to some target allocations that you worked out in your mind but have neglected to tell us?

Ultimately there are over 1000 funds and investment trusts to choose from, so inviting us to shout out some of their names for you - while acknowledging that we may have different objectives to you and will almost certainly not have the rest of our funds in the same allocations as you anyway - is perhaps a fruitless task. Funds that we use will typically be held as part of a cohesive plan together with other portfolio components that you don't happen to hold either.

Probably what you are missing in your mix (by substantially using cap-weighted index funds and largecap global growth plays) is smallcaps and emerging markets (other than the largest four or five EM companies held by your BG fund or to a smaller extent within VLS).  If you consider smallcap, then assuming your allocation is equally weighted between the four funds you mention, UK equity is under 10% of your total allocation so you would be forgiven for considering a UK smaller companies fund among what you add, rather than simply looking at (e.g.) europe and asia.

You did already have a thread last month asking for ideas and suggestions how to approach your ISA. It probably doesn't need a new one each time you get stuck, feel free to keep adding to it and then people won't give you ideas you've already had.