Lindsell Train Global Equity

csgohan4

Johnnyboy11 said:

Thanks DQ. My current investment strategy is a simple core of global passives VLS60/ V-FTSE-DW-ExUK and two satellites, Fundsmith Equity (16%) and LTGE (10%), both selected for no other reason than they were performing well and popular on the HL platform. Not the most exciting strategy, or objective selection process, but I don't have the insight or inclination to change or manage it much, other than to periodically monitor the performance of the two satellites. A lot of views have been expressed on this thread, which is great, and rightly or wrongly I'm still circumspect regarding LTGEs recent performance and mid-term prospects, hence my decision to exit and look for something else to fill that satellite slot.

Your fund choices look reasonable, I hold  your VG Ftse fund as well, especially so excluding UK as I feel they won't do well for sometime, especially with brexit looming. 

You could consider expanding your satellite to include sectors as well, the ATT is available on HL, sadly not on AJ bell which I use. 
https://www.hl.co.uk/shares/shares-search-results/a/allianz-technology-trust-ordinary-25p

Maybe consider renewable energy,  and an Emerging markets fund.  If your feeling adventurous, the BG US investment trust looks promising and it's a new trust. 

bowlhead99

Johnnyboy11 said:

Thanks DQ. My current investment strategy is a simple core of global passives VLS60/ V-FTSE-DW-ExUK and two satellites, Fundsmith Equity (16%) and LTGE (10%), both selected for no other reason than they were performing well and popular on the HL platform. Not the most exciting strategy, or objective selection process, but I don't have the insight or inclination to change or manage it much, other than to periodically monitor the performance of the two satellites. A lot of views have been expressed on this thread, which is great, and rightly or wrongly I'm still circumspect regarding LTGEs recent performance and mid-term prospects, hence my decision to exit and look for something else to fill that satellite slot.

What you haven't really explained is why you need the satellites at all? You only bought them because you thought they were popular and as you say, you don't have much insight or inclination to do anything with them.

You've made comments along the lines of "And arguably LTGE shouldn't be betting the farm on a handful of large caps in a 'Global Equity' marketed fund". But that is what Fundsmith do, and they had similar performance until the last year when it turned out that Fundsmith's picks did relatively better. 

You already have a core holding of broad global investments. The FS and LT funds were added because they weren't broad global funds, but were instead a gamble that a particular investment strategy using their managers' convictions would do better than a global index of equities that you could have added more of instead. As it turned out, both FS and LT have produced a substantially better result than the index over three, five or more years, so it's been good to have them in the portfolio. 

Some people would take the strong performance of  LT and FS over the last nine or ten years and say it shows that the managers know what they are doing and so it's worth keeping them. Others would say there's no reason to believe managers can outperform an index in the long term and the performance is simply because the market conditions that happened, happened to suit the particular style used by the manager at the particular time. So, keep them, or don't, depending on your ethos.

However, if (as you say), you don't have any particular insight into markets and fund management theory, it doesn't seem a great idea to keep one of them and dump the other based on one year performance. Unless your philosophy is 'buy whatever just went up the most in the market we just had, and hope that continues forever', which would seem like a bit of a stretch.

But if that's your plan, then it's quite easy to find a replacement for LT. Just buy whatever is in the 23 places above LT on current five year IA Global funds leaderboard and has the highest one year performance. Or perhaps whatever is in the 200 places below LT on the five year IA Global leaderboard but has the highest one year performance. 

csgohan4

bowlhead99 said:

Johnnyboy11 said:

Thanks DQ. My current investment strategy is a simple core of global passives VLS60/ V-FTSE-DW-ExUK and two satellites, Fundsmith Equity (16%) and LTGE (10%), both selected for no other reason than they were performing well and popular on the HL platform. Not the most exciting strategy, or objective selection process, but I don't have the insight or inclination to change or manage it much, other than to periodically monitor the performance of the two satellites. A lot of views have been expressed on this thread, which is great, and rightly or wrongly I'm still circumspect regarding LTGEs recent performance and mid-term prospects, hence my decision to exit and look for something else to fill that satellite slot.

What you haven't really explained is why you need the satellites at all? You only bought them because you thought they were popular and as you say, you don't have much insight or inclination to do anything with them.

You've made comments along the lines of "And arguably LTGE shouldn't be betting the farm on a handful of large caps in a 'Global Equity' marketed fund". But that is what Fundsmith do, and they had similar performance until the last year when it turned out that Fundsmith's picks did relatively better. 

You already have a core holding of broad global investments. The FS and LT funds were added because they weren't broad global funds, but were instead a gamble that a particular investment strategy using their managers' convictions would do better than a global index of equities that you could have added more of instead. As it turned out, both FS and LT have produced a substantially better result than the index over three, five or more years, so it's been good to have them in the portfolio. 

Some people would take the strong performance of  LT and FS over the last nine or ten years and say it shows that the managers know what they are doing and so it's worth keeping them. Others would say there's no reason to believe managers can outperform an index in the long term and the performance is simply because the market conditions that happened, happened to suit the particular style used by the manager at the particular time. So, keep them, or don't, depending on your ethos.

However, if (as you say), you don't have any particular insight into markets and fund management theory, it doesn't seem a great idea to keep one of them and dump the other based on one year performance. Unless your philosophy is 'buy whatever just went up the most in the market we just had, and hope that continues forever', which would seem like a bit of a stretch.

But if that's your plan, then it's quite easy to find a replacement for LT. Just buy whatever is in the 23 places above LT on current five year IA Global funds leaderboard and has the highest one year performance. Or perhaps whatever is in the 200 places below LT on the five year IA Global leaderboard but has the highest one year performance. 

having a blend of active and passive funds would be reasonable as well if one is not sure which to go all in. Which the OP has done. I'm keeping the main bulk of my equities in passive trackers, but diversifying by having some active funds such as fundsmith, SMT e.t.c seems reasonable

Johnnyboy11

Thanks bowlhead99, I can't argue with your posts, they all make sense to me and I am genuinely appreciative of your time and reasoned argument. My apologies for not being more engaging in my responses, mainly down to my not having any counter argument to offer. I hold the FS and LT funds for a bit of sport in an otherwise passive portfolio, which is perhaps illogical but works for me. As for an alternative to LTGE I have no idea, but my current thinking is to avoid individual shares and also funds which are heavy in the Tech sector and UK/Europe/Japan markets. I'm in no rush, so will exit LTGE and take things from there.

kinger101

Just one note to add based on your last post.  Your passive funds probably contain more Tech than they ever have in the past.  Remember that before buying more.

csgohan4

kinger101 said:

Just one note to add based on your last post.  Your passive funds probably contain more Tech than they ever have in the past.  Remember that before buying more.

Alot of passive funds have microsoft, Apple e.t.c so that is a good point but usually only a few percent. However depending on ones strategy, that may not matter.

Although you could overboard on said shares and look at the LG tech fund with more than 10% in each, but depends on your risk appetite.  

But seems OP wants to avoid tech and UK/EU/JP markets, so probably a safe bet to use passive tracker again, either more of their current VG one, or others like VWRA, HMWO e.t.c

Or if wanting to avoid tech completely, to consider safer sector investments/ ETF's 

Thrugelmir

csgohan4 said:

kinger101 said:

Just one note to add based on your last post.  Your passive funds probably contain more Tech than they ever have in the past.  Remember that before buying more.

Alot of passive funds have microsoft, Apple e.t.c so that is a good point but usually only a few percent.

If the share price retreats 50% then that few % of a fund results in a sizable drop in overall value. 

itwasntme001

If you invest passively in a globally diversified 100% equities fund, then you are probably looking at something like the Vanguard FTSE All Cap.  This currently has a 60% weighting to the US and a 20% weighting to "technology" - presumably "technology" does not even include names like Amazon which would fall under another category.

To me this is already pretty concentrated quite heavily to one region and perhaps also to one sector.  The difference in diversification between this fund and a managed fund like LT or FS is therefore pretty meaningless.  If the US today starts a long stretch of a bear market, you could find a passive fund such as this pretty dissappointing in terms of performance in 10 years time.  Even if other regions do well, the 60% weighting in US would be a drag.

When selecting a passive fund you are taking no manager risk but you still have a concentrated portfolio - market weighted indices are one way to allocate capital but it does not mean it is necessarily the most optimal way.

Passive trackers are reasonable for purchases in bear markets, when valuations are low and in corrections/crashes.  But I would not like to buy them at current levels.  On the other hand, finding good fund managers on a consistent basis is also not going to be easy.

There really are no easy answers to any of this and thats how it is meant to be.

csgohan4

Thrugelmir said:

csgohan4 said:

kinger101 said:

Just one note to add based on your last post.  Your passive funds probably contain more Tech than they ever have in the past.  Remember that before buying more.

Alot of passive funds have microsoft, Apple e.t.c so that is a good point but usually only a few percent.

If the share price retreats 50% then that few % of a fund results in a sizable drop in overall value. 

but as investment should be long term, one will accept fluctuations, I see that that the mentioned tracker funds have almost recovered to pre covid levels

csgohan4

itwasntme001 said:

If you invest passively in a globally diversified 100% equities fund, then you are probably looking at something like the Vanguard FTSE All Cap.  This currently has a 60% weighting to the US and a 20% weighting to "technology" - presumably "technology" does not even include names like Amazon which would fall under another category.

To me this is already pretty concentrated quite heavily to one region and perhaps also to one sector.  The difference in diversification between this fund and a managed fund like LT or FS is therefore pretty meaningless.  If the US today starts a long stretch of a bear market, you could find a passive fund such as this pretty dissappointing in terms of performance in 10 years time.  Even if other regions do well, the 60% weighting in US would be a drag.

When selecting a passive fund you are taking no manager risk but you still have a concentrated portfolio - market weighted indices are one way to allocate capital but it does not mean it is necessarily the most optimal way.

Passive trackers are reasonable for purchases in bear markets, when valuations are low and in corrections/crashes.  But I would not like to buy them at current levels.  On the other hand, finding good fund managers on a consistent basis is also not going to be easy.

There really are no easy answers to any of this and thats how it is meant to be.

I agree with you there. Passive or active funds/trackers they will invariably be biased towards US companies and for better or worse that's how it goes at present. Probably why some  people prefer sector investment to reduce this risk, but looking deeper, I'm sure each sector will have a heavy US weighting as well. 

No right or wrong, only in hindsight we can say sadly

but passive funds have in theory a more broader spread of companies and shares in each. Take SMT with a large share in Tesla and the VG FTSE dev ex uk only around 0.8% as an example. Take some of the gains but not hedge heavily to lose more in the long run in case a bear market.

Effectively in theory established passive  funds will be more defensive and lower risk, but will not grow as much as active funds as a payoff. So it depends on your risk appetite.

I am still suffering from new investor syndrome and trying to resist to back today's winners and not be too tempted seeing the gains this year from todays stars. I might invest a smaller proportion of my equities in active global funds, but not more than 25% imo. 

However there will be another bear market and I am hoping to keep some money back to strike when the time is right