SIPP Flexi access drawdown based on Vanguard Lifestrategy x% equities

shinytop

BPL said:

Has anyone considered or done this? I loved the low cost of 0.22pc plus platform fee 0.2pc and the fact these funds are rebalanced without having to pay an ifa or diy effort. I'm thinking accumulation and sell units for income rather than natural yield from distribution. 

I do something similar; my main holdings are VLS60 and HSBC Balanced.  No real reason for splitting other than hedging/curiosity.  I'm thinking about replacing one of them (probably VLS) with a managed wealth preservation fund but I'm not convinced.  I also have a few years of cash and a small amount (10%) in more specialist managed equity funds.   

BPL

TBC15 said:

I thought the platform fee was 0.15%?

Yes vanguard is. My platform charges 0.2% plus VLS 20 fee of 0.22%. i can buy the VLS underlying funds for 0.11% charges on average. I'm happy paying the 0.11% for V to rebalance to maintain diversification. 

Albermarle

I have three multi asset funds, partly because I have not fully consolidated my pensions yet , but also because they all have a different make up . Two are  fixed % equity allocation , one isn't . One has a highish UK weighting , one medium and one low.
It adds some small diversification/hedging against one having a weak year  and it does not cost any extra.
Plus the usual two wealth preservation ITs - PNL and CG.

BPL

Albermarle said:

I have three multi asset funds, partly because I have not fully consolidated my pensions yet , but also because they all have a different make up . Two are  fixed % equity allocation , one isn't . One has a highish UK weighting , one medium and one low.
It adds some small diversification/hedging against one having a weak year  and it does not cost any extra.
Plus the usual two wealth preservation ITs - PNL and CG.

They makes sense . I've never seen CGT and PNL (or mymap3) mentioned in any financial press. How do the first two sit on the active/passive Management spectrum, i realise they are investment trusts. I was thinking of posting for Morningstar x-ray but not sure if it analyse my entire portfolio for diversity.

Prism

BPL said:

Thrugelmir said:

BPL said:

Thrugelmir said:

Not just the fees to be considered. Also the funds performance. 

I'm a passive investor (evidence based) and given that past performance is no guide to future performance i have to look for diversification. Paying another 0.11% to vanguard to rebalance seems value for money. 

Vanguard VLS funds make an active choice as to fund allocation. Passively active.  

Yeah i understaff they are classed as passive or "stable" as the"active" management is limited to transparent rebalancing for diversification. They aren't claiming to"beat the market".

The active part of VLS is also related to asset allocation, as with all multi asset funds. Somebody has to decide how much to allocation to each country, which equity funds funds to use, which bond types to use and when to rebalance without incurring too many costs. So far I would say that the human element of VLS has been the weakest part of it. The best part is the simplicity and the fees.

Albermarle

BPL said:

Albermarle said:

I have three multi asset funds, partly because I have not fully consolidated my pensions yet , but also because they all have a different make up . Two are  fixed % equity allocation , one isn't . One has a highish UK weighting , one medium and one low.
It adds some small diversification/hedging against one having a weak year  and it does not cost any extra.
Plus the usual two wealth preservation ITs - PNL and CG.

They makes sense . I've never seen CGT and PNL (or mymap3) mentioned in any financial press. How do the first two sit on the active/passive Management spectrum, i realise they are investment trusts. I was thinking of posting for Morningstar x-ray but not sure if it analyse my entire portfolio for diversity.

Blackrock ( massive fund house like Vanguard) had the 'Consensus' range but always struggled to gain market share against Vanguard LS and I guess HSBC global strategy. Approx one year ago Blackrock brought the new 'mymap' multi asset funds, so still rather untested although they have come through this year pretty well.
The two investment trusts mentioned are mentioned often on this forum - basically they are managed low/medium risk for some growth but primarily for wealth preservation. They cost more ( 0.7% approx.) than the more passively managed ones but they both survived the Covid market drop quite well, so they did what it says on the tin.

BPL

Prism said:

BPL said:

Thrugelmir said:

BPL said:

Thrugelmir said:

Not just the fees to be considered. Also the funds performance. 

I'm a passive investor (evidence based) and given that past performance is no guide to future performance i have to look for diversification. Paying another 0.11% to vanguard to rebalance seems value for money. 

Vanguard VLS funds make an active choice as to fund allocation. Passively active.  

Yeah i understaff they are classed as passive or "stable" as the"active" management is limited to transparent rebalancing for diversification. They aren't claiming to"beat the market".

The active part of VLS is also related to asset allocation, as with all multi asset funds. Somebody has to decide how much to allocation to each country, which equity funds funds to use, which bond types to use and when to rebalance without incurring too many costs. So far I would say that the human element of VLS has been the weakest part of it. The best part is the simplicity and the fees.

Isn't the asset allocation fixed it just has to be achieved with fund purchases? If I put a VLS in x-ray every year wouldn't it come out with the same results. I wonder what a human could do without becoming an "active fund manager" which i would like to avoid. 

dunstonh

BPL said:

Prism said:

BPL said:

Thrugelmir said:

BPL said:

Thrugelmir said:

Not just the fees to be considered. Also the funds performance. 

I'm a passive investor (evidence based) and given that past performance is no guide to future performance i have to look for diversification. Paying another 0.11% to vanguard to rebalance seems value for money. 

Vanguard VLS funds make an active choice as to fund allocation. Passively active.  

Yeah i understaff they are classed as passive or "stable" as the"active" management is limited to transparent rebalancing for diversification. They aren't claiming to"beat the market".

The active part of VLS is also related to asset allocation, as with all multi asset funds. Somebody has to decide how much to allocation to each country, which equity funds funds to use, which bond types to use and when to rebalance without incurring too many costs. So far I would say that the human element of VLS has been the weakest part of it. The best part is the simplicity and the fees.

Isn't the asset allocation fixed it just has to be achieved with fund purchases? If I put a VLS in x-ray every year wouldn't it come out with the same results. I wonder what a human could do without becoming an "active fund manager" which i would like to avoid. 

The asset allocation is not fluid throughout the economic cycle like many of the other similar funds.  So, that is a negative of VLS.  However, Vanguard to periodically adjust the weightings but have a rigid equity/fixed interest split.  Some consider that a negative as well.
Management decisions are made on the weightings to the sub funds and the arbitrary equity/bond split.
Not all management decisions are bad.   Adjustments to the weightings to reflect risk and reward are positive actions.  Stock picking is where some people do not consider them to be positive.   Being too rigid in asset and sector weightings can be a negative.   For example, most fluid models have reduced property, corp bonds and UK equity allocations pretty consistently over the last few years.  Static models have barely moved.    
The use of underlying passive funds keeps that part passive but its impossible to fully passive unless you go with a global tracker and 100% equities.

BPL

dunstonh said:

BPL said:

Prism said:

BPL said:

Thrugelmir said:

BPL said:

Thrugelmir said:

Not just the fees to be considered. Also the funds performance. 

I'm a passive investor (evidence based) and given that past performance is no guide to future performance i have to look for diversification. Paying another 0.11% to vanguard to rebalance seems value for money. 

Vanguard VLS funds make an active choice as to fund allocation. Passively active.  

Yeah i understaff they are classed as passive or "stable" as the"active" management is limited to transparent rebalancing for diversification. They aren't claiming to"beat the market".

The active part of VLS is also related to asset allocation, as with all multi asset funds. Somebody has to decide how much to allocation to each country, which equity funds funds to use, which bond types to use and when to rebalance without incurring too many costs. So far I would say that the human element of VLS has been the weakest part of it. The best part is the simplicity and the fees.

Isn't the asset allocation fixed it just has to be achieved with fund purchases? If I put a VLS in x-ray every year wouldn't it come out with the same results. I wonder what a human could do without becoming an "active fund manager" which i would like to avoid. 

The asset allocation is not fluid throughout the economic cycle like many of the other similar funds.  So, that is a negative of VLS.  However, Vanguard to periodically adjust the weightings but have a rigid equity/fixed interest split.  Some consider that a negative as well.
Management decisions are made on the weightings to the sub funds and the arbitrary equity/bond split.
Not all management decisions are bad.   Adjustments to the weightings to reflect risk and reward are positive actions.  Stock picking is where some people do not consider them to be positive.   Being too rigid in asset and sector weightings can be a negative.   For example, most fluid models have reduced property, corp bonds and UK equity allocations pretty consistently over the last few years.  Static models have barely moved.    
The use of underlying passive funds keeps that part passive but its impossible to fully passive unless you go with a global tracker and 100% equities.

Thanks for the detailed response. If you change asset allocation based on the "economic cycle" isn't that active management? Also i wonder what patty of the cycle covid, ww2 or the ws crash were on. I thought a passive investment used a predetermined asset allocation to achieve diversification. The evidence is that only 25% of active funds beat the market. Even then the failures are culled so they don't appear in the statistics. I take your point about the bond element, i guess there must be a rule of thumb equivalent for bonds though with lower volatility allowing some degree of accuracy. 

dunstonh

Thanks for the detailed response. If you change asset allocation based on the "economic cycle" isn't that active management? 

It is.  Just as leaving the asset allocation unchanged is active management.  Or changing it every few years instead of every year.  These are all active decisions.

 I thought a passive investment used a predetermined asset allocation to achieve diversification. 

That is only achievable on a global equity tracker.     VLS is not a passive investment.  Some refer to it (and the other similar funds) as active passives.

 The evidence is that only 25% of active funds beat the market. 

That figure is often debated as it varies in different countries. In the US virtually no managed fund beats passive.   In Norway its something like 94% dont beat passive.  The UK has a much better track record on active than most.  However, that is in part due to the larger number that have a focused style or objective that is different to a tracker.      There is also the issue that the sheer volume of managed funds includes a vast number of computer controlled funds or investment by committee.  When you eliminate these and run a few more filters, you are left with a much smaller range that can include some pretty decent options.

If you wanted to invest in a general UK equity fund, you would pick passive rather than managed.  If you wanted to have a UK equity satellite fund that focused in a certain area or style, you would likely pick a managed fund.

The managed vs passive debate is not black and white. Despite what those biased either way will try and tell you, in reality, the best of both worlds usually provides the better outcome.    

Ultimately, you are not using trackers.  You are using a multi-asset fund that makes the asset allocation management decisions but then uses trackers to fulfil the management objectives.

 i guess there must be a rule of thumb equivalent for bonds though with lower volatility allowing some degree of accuracy. 

Nope.   There is a wide range of fixed interest securities. Gilts, index linked gilts, investment grade bonds, high yield bonds, global bonds and so on.   The decisions on how to split  money between UK equity, US equity EU equity etc applies much the same way on how you split the fixed interest securities.     At the moment, investment grade bonds are not considered to be very good risk reduction investments.  However, high yield bonds, which do not reduce volatility, are still viewed as offering upside potential.

So, a decision needs to be made on how much to allocated to fixed interest securities.  Is the upside enough to warrant removing x% from the equities?   Is the downside enough to allow us to maintain y% in equities whilst still hitting the target risk level?

Or should we just stick with a rigid allocation even though we know that its not the right time to hold that asset and it will hurt performance or increase the risk?

All management decisions.