Investment period VLS

sixpence.

album_song said:

They're the second biggest asset manager in the world and if you buy a VLS fund they aren't "choosing" anything so I don't know how you can say they aren't renowned as great ones.
Their funds are not missing property, they own every REIT in the world, and many of the bonds are mortgage backed securities or propery/infrastructure related.
They have no "goals", VLS are passive mixed stock/bond funds with set allocations from 20% to 100%. The purpose is to provide a fund with that allocation, which they do.

They own every REIT in the world? I thought that the VLS was famously without property investment. I feel like I also read this in Lars Kriojer's book. I might have that wrong though... 


@bowlhead Okay, so you're basically saying what @Audaxer is saying which is that this would be the same as holding something like a VLS 60; the only difference would be psychological. 

bowlhead99

sixpence. said:

album_song said:

They're the second biggest asset manager in the world and if you buy a VLS fund they aren't "choosing" anything so I don't know how you can say they aren't renowned as great ones.
Their funds are not missing property, they own every REIT in the world, and many of the bonds are mortgage backed securities or propery/infrastructure related.
They have no "goals", VLS are passive mixed stock/bond funds with set allocations from 20% to 100%. The purpose is to provide a fund with that allocation, which they do.

They own every REIT in the world? I thought that the VLS was famously without property investment. I feel like I also read this in Lars Kriojer's book. I might have that wrong though... 

They have no dedicated 'property' holding, because they are just holding shares in whatever companies have the most equity in free float, whether those are companies making iphones or selling netflix streaming services or holding a portfolio of properties, so a couple of percent of your equities money will be invested in the latter category, i.e. REITs.  Not literally every REIT in the world though, as there are plenty of UK REITS holding hundreds of millions or low billions of property which are not big enough to feature in the FTSE100 and therefore will have no meaningful allocation in a passive global or regional equity fund.

In making Lifestrategy a cheap and easy fund to operate and wondering what investors would value (in terms of them being able to charge a higher fee for it and/ or get some better performance or volatility benefit which would attract more people to the fund and grow their management fee income), they decided that shares of property-holding companies would still crash in a global equities crash (as they saw in the 2008 global financial crisis, and have seen since in the 2020 covid crisis) - one of the reasons for that being, as mentioned on your REIT thread, the value of property investment companies will drop lower than the theoretical value of the underlying properties when the market is having a meltdown; REITs will move to discount pricing. 

As they don't want to manage and hold a direct portfolio of properties themselves (which would be illiquid and not be able to grow or shrink as the lifestrategy fund had inflows and outflows) and they don't want to bother with adding extra REIT exposure, they simply don't have a dedicated property holding at all.  

So, you could say that VLS is 'without property investment' as there is no dedicated property holding; any property exposure they do have (e.g. due to Land Securities or British Land being £3-4bn companies propping up the bottom of the FTSE100) will simply grow or shrink along with other equities and will never be rebalanced or adjusted to manage exposure to that sector, just like they don't rebalance or adjust energy companies or tech companies or banking businesses or retailers.

Other mixed asset funds do take a dedicated property exposure.  For example, HSBC Global Strategy invests in iShares Developed Real Estate Index Fund, and L&G Multi Asset will invest in both real estate investment trusts and L&G's own open ended direct property fund; other mixed asset investment vehicles that aren't open ended (e.g. investment trusts or other investment companies) might have dedicated exposure to institutional closed ended private property funds that aren't listed on stock exchanges and are simply managed by a fund manager on behalf of other institutional investors.

@bowlhead Okay, so you're basically saying what @Audaxer is saying which is that this would be the same as holding something like a VLS 60; the only difference would be psychological. 

If setting up something for psychological reasons rather than purely practical reasons is something that helps you, don't knock it.