Performance, Benchmarks, Managers, comparison etc

coyrls

The funds mentioned aren't index funds, they are multi-asset funds made up of mutilple underlying index funds.

bowlhead99

ChilliBob said:

I see, so in effect once you take fees out of the equation the manager is trying to say they have the 'edge' over the competition as they have decided to weight Japan more in their index than another competitor or something similar.
So the concept that two index funds would be *identical* bar fee structure isn't ever the case... 

An index tracker fund follows an index. It doesn't get to 'decide' to buy something other than the constituents of the published index to try to get any significant edge, because that could result in them failing to deliver the result of the published index that they said they were tracking and then nobody would want to buy them because they didn't do what it said on the tin.
 
A 'pure' index which fund providers like Vanguard or HSBC or iShares may offer, tracking published indexes such as MSCI World, FTSE All-World, FTSE Global All-Cap etc, are not products that afford the fund manager any discretion other than perhaps only choosing to hold a 'representative sample' of 5000 stocks instead of all 6000 of them to make it a bit more efficient and cheap to run without changing the overall gross performance.

By contrast, the 'multi asset' funds mentioned above (e.g. Vanguard Lifestrategy or HSBC Global Strategy Balanced) are not pure index funds, instead they are a packaged fund investment product that you put money into and then they use your money to create a portfolio of a selection of other funds. In the cheap versions of these multi-asset fund of funds, generally each of those funds in their portfolio will be simple index funds for a particular geographic region or asset type. The manager of the packaged product controls the allocation to those separate underlying indexes.  In those cases they are deciding how much to 'weight' into one index versus another.  

But if you are investing into a fund, whether run by Vanguard or someone else, that is not a fund of funds and simply claims to track the FTSE All World index or MSCI ACWI index or FTSE Emerging etc, the fund manager is not picking and choosing to buy more or less Japan, he is buying whatever the index provider says is in the published index that quarter in the published weightings.

eskbanker

ChilliBob said:

Yeah, I get that, but I'm still not getting why someone would choose something that's not Vanguard Global for example, except for fees? What are the other considerations which mean more than one doing the same thing can exist! 

As above, my example may have confused matters a bit by referring to multi-asset funds rather than index trackers (you said you weren't looking at 100% equities to be fair), but if you're looking to track an index then you wouldn't use a product like Vanguard Global Equity, as this specifically says in its product info:

The Fund will be constrained by the FTSE All World Index (the “Index”) to a limited extent, with regard to its investment in sectors and country exposure. Whilst the Fund will invest in components of the Index, it is not tracking the Index and the Fund will hold investments that are not components of the Index.

AnotherJoe

ChilliBob said:

Yeah, I get that, but I'm still not getting why someone would choose something that's not Vanguard Global for example, except for fees? What are the other considerations which mean more than one doing the same thing can exist! 

Different brokers have different fees for holding different types of investments. NOt all brokers offer all funds. This may sway oor force you one way or another. OTOH it may make no difference at all.

FWIW a few years ago i realised i was suffering from analysis paralysis regards which of two global fund i shoudl hold (I wanted a global index fund). So, rather than continue prevaricating, I bought both.

5 years down the line they tracked each other and the index so precisely you'd have thought they were the same fund.

When i then came to reorg that portfolio and i couldn't continue to hold one of them (wasnt available in the new scheme) i obviously had no qualms about going fully into the other. for my  global fund.

One  lesson i wish id have known 20 years ago, dont go 100% global as thats biased to mega corps, also go smaller global companies (still in reality huge). For that you are best advised to get an active fund.

Another point you dont say how old you are (I think). If you are lets say under 35 them i'm going to go against the grain of most here and say go 100% in equities . Youve got 35+ years of investment, all a bond will do is act like a boat anchor.  Yes it may smooth returns but it will smooth them downwards.

There is almost no conceivable scenario where over that time span you'll get better performance from anything other than 100% equities.. And if you look at bond funds during the March/April  sell off, I think you'll see they crashed as well as equities. Received wisdom is they do the opposite to equities i dont think thats the case any more.

Of course, if you do do that you will need to hold on during crashes. Watch that Peter Lynch video where he talks to that..

ChilliBob

That's really interesting AnotherJoe, it says to me that if you go for a PURE index tracker, and two given funds are tracking the same index then you choose the one with lower fees - as they're ultimately the same product - akin to choosing between two savings accounts where one is 0.25 and one is 0.28 and both are fully FSCS backed and all that jazz. 
Funnily enough I looked on HL site earlier today and there was some interesting article from earlier this year saying how  100% global does mean you're in effect 'weighting' a lot towards Amazon/Microsoft/Google/Apple, which was an interesting take on it. 

I'll be 38 in just over a week. 

Right now I'm totally undecided how to split my 'portfolio' - the first step is to diversify across bank accounts as I'm over the 85k limit for the selection of current accounts I have. Once I have that spread out and with a pitiful level of interest I can turn to investments.

As per a previous thread, unlike some of you (perhaps many of you) who've built up a pot steady as she goes from leftover earnings I'm sort of doing the opposite - I have a large pot (due to forced circumstances I won't go into) and just savings accounts.

In the new year I intend to read the Investing Demystified book and take notes and start to build up some idea of portfolio makeup. I also need to work out how much I need to keep in instant access for an upcoming house purchase, think about my tax bill, on and a wedding

AnotherJoe

ChilliBob said:

That's really interesting AnotherJoe, it says to me that if you go for a PURE index tracker, and two given funds are tracking the same index then you choose the one with lower fees - as they're ultimately the same product - akin to choosing between two savings accounts where one is 0.25 and one is 0.28 and both are fully FSCS backed and all that jazz.

Yep exactly, for sure you'd do that but taking into account the fees the platform charges

Funnily enough I looked on HL site earlier today and there was some interesting article from earlier this year saying how  100% global does mean you're in effect 'weighting' a lot towards Amazon/Microsoft/Google/Apple, which was an interesting take on it. 
Yes but thats just the way the index has worked out it didnt used to be that way say 20 years ago. There are also equal weighted indexes you can choose to track, eg instead of putting the money on a cap weighted basis you'd have the same % for each company, eg for S&P500 you'd have $10 in every single stock if you had $5k in that fund.

I'll be 38 in just over a week. 
Well Id say go all equities but I am a high risk / chance taker and have weathered multiple crashes including dropping $1/4M in the dot com bubble..
Right now I'm totally undecided how to split my 'portfolio' - the first step is to diversify across bank accounts as I'm over the 85k limit for the selection of current accounts I have. Once I have that spread out and with a pitiful level of interest I can turn to investments.
Unless you are saving for a house or similar sounds as if you have too much cash. far too much.
As per a previous thread, unlike some of you (perhaps many of you) who've built up a pot steady as she goes from leftover earnings I'm sort of doing the opposite - I have a large pot (due to forced circumstances I won't go into) and just savings accounts.

In the new year I intend to read the Investing Demystified book and take notes and start to build up some idea of portfolio makeup. I also need to work out how much I need to keep in instant access for an upcoming house purchase, think about my tax bill, on and a wedding

Ah so you DO have an ongoing house purchase coming. Fair enough.

Also, dont forget your pension, Check what thats invested in. UK pension funds seem to have, in general, a terrible default investing option, highly biased to UK and a high bonds % as well. generally to try and protect themselves from accusations of being too risky I suspect.

ChilliBob

That's very interesting and helpful, thanks. Without knowing you I sense I'm probably quite a bit more risk averse!
Yep, considering the house purchase, wedding, tax will probably be sbout 1/3rd of the pot I'll need to do more with the cash than have a tonne of bank accounts.

Yep, a, friend in a similar position a few years ago has advised on going the sipp route, which I will look into at some point. 

Also have an isa I need to move over too etc. 

Basically a full financial audit is in order, then a new plan. Not had a moment to look into it in recent times, but now it's in effect be one my 'next job' now I'm unemployed!