Why Vanguard's Tracking Error?

minimumcost

Why have Vanguard's Lifestrategy funds developed such a large tracking error? Should I be a concerned investor? A = the index. B +VLS 100%

dunstonh

VLS is not an index tracker.  It is a collection of multi-asset funds with weightings made under a management decision.

eskbanker

VLS 100 doesn't track an index!  What are you measuring it against?

Another_Saver

What index are you using?

Prism

I'm not even sure why VLS100 exists

ColdIron

minimumcost said:

A = the index.

What index is A?

Thrugelmir

Prism said:

I'm not even sure why VLS100 exists

Provides an attractive low cost option for small investors that will never be the best nor the worst.  While Vanguards management team pay themselves good remuneration packages. 

AnotherJoe

Yep, your question shows a couple of fundamental misunderstandings  such as "VLS tracks an index" (it tracks many and thus none) and the index it's tracking (which it isn't) would be a good one to track. 

And probably also, it's a good fund to hold better than other global low cost funds. Rather than one whose time has passed and whose underlying premise, that holding 25% nominally UK registered companies, was ever a good idea rather than a marketing gimmick. 

FWIW that recent diversion from whatever that benchmark  is , which might be an index but isn't one VLS is tracking but rather is being compared to, is most likely due to that 25% allocation. 

Alexland

It's worth noting that Vanguard themselves described the fund as "not benchmarked" so I don't know where you got the information about which benchmark to compare performance against? I'm with Prism and don't see the need for VLS100 as their All Cap fund is a better option at a similar ongoing charge.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

dunstonh

Alexland said:

It's worth noting that Vanguard themselves described the fund as "not benchmarked" so I don't know where you got the information about which benchmark to compare performance against? I'm with Prism and don't see the need for VLS100 as their All Cap fund is a better option at a similar ongoing charge.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

VLS100 is an anomaly and you can easily argue that it shouldn't exist.  But they have £2058.98m invested in it.  So, commercially, it makes sense for Vanguard to offer it.  That is £2058.98m worth of investors that don't know what they are doing.

Another_Saver

dunstonh said:

Alexland said:

It's worth noting that Vanguard themselves described the fund as "not benchmarked" so I don't know where you got the information about which benchmark to compare performance against? I'm with Prism and don't see the need for VLS100 as their All Cap fund is a better option at a similar ongoing charge.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

VLS100 is an anomaly and you can easily argue that it shouldn't exist.  But they have £2058.98m invested in it.  So, commercially, it makes sense for Vanguard to offer it.  That is £2058.98m worth of investors that don't know what they are doing.

It does seem pointless. They already have FTSE All World, FTSE Global All Cap, FTSE Developed World and FTSE Developed World ex UK, ESG Developed World All Cap, and the active and factor global equity funds.

Maybe they were thinking they'd look stupid if they brought out the LS range without a 100% option? It does provide consistency and simplicity, but the idea of Vanguard setting the home bias at 25% seems silly. Why not a global LS and a UK LS range to make it clearer? Why not provide educational materials to help more amateur retail investors "build your own portfolio".