Comparing IFA managed portfolio to Vanguard LS60

eskbanker

fred246 said:

VLS60 invests 4% in the world's largest companies. BG American has invested in the right horses for this year's pandemic. Is that luck or skill?

It's neither - they're not comparable as they're different products with different objectives, so it's inevitable that one is significantly more diversified than the other and that they'll have different performance profiles, but that doesn't mean that either is better/luckier/more skilful than the other, it's easy to spot winners with hindsight....

aroominyork

fred246 said:

BG American has invested in the right horses for this year's pandemic. Is that luck or skill?

What is the question you are asking?

1)      When the pandemic arrived, BG American invested in companies which it thought would profit from it.

or

2)      BG American historically invests in companies which, when the pandemic came along, performed strongly.

If you are asking question 1) the answer is: I do not believe BG changed their investment strategy when the pandemic arrived, so your question is not relevant.

If you are asking question 2) the answer is: if BG historically invested in companies which they thought would perform well during unforeseen global disturbances, but which also performed well during more stable times (no horse pun intended), then there was some skill.

m_c_s

It is also interesting to look at similar multi-assets funds like HSBC Global Strategy Balanced fund which is up approx 10% since Aug 2019. I believe it is more of an active fund than VLS 60. Also L&G and Blackrock multi-asset funds seem to follow the same trend. Although the OP used to hold VLS perhaps it is not the right single multi-asset benchmark fund to use?

zagfles

m_c_s said:

It is also interesting to look at similar multi-assets funds like HSBC Global Strategy Balanced fund which is up approx 10% since Aug 2019. I believe it is more of an active fund than VLS 60. Also L&G and Blackrock multi-asset funds seem to follow the same trend. Although the OP used to hold VLS perhaps it is not the right single multi-asset benchmark fund to use?

It isn't. VLS is "active" in so far as choosing the underlying passives, eg the UK bias. You don't have to have been an investment genius to beat VLS, you just need to have avoided UK bias which happened to be a drag on VLS over the last 5 years. Of course this could add currency volatility.

A_T

enthusiasticsaver said:

Cus said:

A_T said:

What is the full IFA portfolio? Without seeing it it's hard to say whether the outperformance over VLS60 has been down to taking significant extra risk.

OP had been investing in vls60. When OP went to this IFA a risk assessment should have been performed, so whatever the risk of the current portfolio is, it is the right one. (Assuming the IFA did his job)

One could argue that this is the point of employing an IFA.
If OP had stated that the IFA portfolio had underperformed versus VLS60, would we be questioning whether the underperformance was due to not taking appropriate risk? I doubt it..

Indeed the IFA  did do a risk assessment and actually moved us down from medium risk to low to medium risk because my husband is more risk averse than me.  When  I was managing our investments and invested in the VLS60 I never risk assessed him but on the online risk assessment the IFA did he came up considerably more risk averse probably because he is not at all knowledgeable or confident re investments. I actually was prepared for the portfolio to do worse than the VLS60 not only because it is supposedly a lower risk profile which I always assume means lower performance but because obviously the ongoing fees could reduce the valuation. I was therefore surprised pleasantly this morning when I checked the Fidelity performance report to see the 13.61%. 

There are four  Strategic bonds Jupiter, Rathbone, Royal London and Merian Global amounting to a total of 46%. Equities are split across Lindsell Train UK, Castlefield UK Buffetology, Baillie Gifford American, Man GLG continental Europe, Legg Mason Japan, Fidelity Asia Pacific, Fidelity Emerging Markets and Ninety One American Franchise totalling 54%. It is rebalanced quarterly so I cannot say that we have been invested in these funds for the whole year without drilling through all the many transactions. It is actually 12 funds still plus a cash fund. 

looking at those funds Baillie Gifford American, Legg Mason Japan, Ninety One American Franchise have really benefited from the effect Covid has had on certain sectors and explain the IFA portfolio's gfood performance - whereas VLS60's equities have been exclusively in index trackers. Might well be different next year

aroominyork

zagfles said:

m_c_s said:

It is also interesting to look at similar multi-assets funds like HSBC Global Strategy Balanced fund which is up approx 10% since Aug 2019. I believe it is more of an active fund than VLS 60. Also L&G and Blackrock multi-asset funds seem to follow the same trend. Although the OP used to hold VLS perhaps it is not the right single multi-asset benchmark fund to use?

It isn't. VLS is "active" in so far as choosing the underlying passives, eg the UK bias. You don't have to have been an investment genius to beat VLS, you just need to have avoided UK bias which happened to be a drag on VLS over the last 5 years. Of course this could add currency volatility.

On that basis there is no such thing as a passive fund. Every index fund chooses which stocks to use to replicate the markets, otherwise you would have to say that an index fund which does not include a £10m market cap Indonesian fruit canner was in fact an active fund. Just accept that VLS overweights the UK and then consider it passive.

enthusiasticsaver

Thank you all for the comments and indeed this is just a snapshot of one IFA managed portfolio  compared performance wise to one global passive tracker fund basket.  I think possibly the UK bias has affected the VLS60 over the last few years and one of the reasons I wondered two years ago if I should still be invested with them hence going with an IFA.  I could equally have changed to a different global passive fund with less UK stocks but was not confident in my ability to choose a risk appropriate fund alongside the much larger portfolio we had after DH and I had taken early retirement. As said previously we did not only go with an IFA to improve on performance although it has been nice that this year we are pleased with it.  It could be different next year of course.  Who knows with investing and I take the point that the BG has  certainly been the main reason why the portfolio has outperformed the benchmarks. Legg Mason Japan has also done well. 

I don't agree with the post who said only cautious funds should be included in a low to medium risk  profiled portfolio.  Most low risk funds are also low growth so we are happy for there to be a mix of both equities and bonds. On perusing the quarterly investment review we got this month the IFA says that fixed interest remains unattractive so having too much of that would surely bring the growth level down.  They have also excluded commercial property so next year should be interesting. 

AnotherJoe

Prism said:

enthusiasticsaver said:

Equities are split across Lindsell Train UK, Castlefield UK Buffetology, Baillie Gifford American, Man GLG continental Europe, Legg Mason Japan, Fidelity Asia Pacific, Fidelity Emerging Markets and Ninety One American Franchise totalling 54%. It is rebalanced quarterly so I cannot say that we have been invested in these funds for the whole year without drilling through all the many transactions. It is actually 12 funds still plus a cash fund. 

They seem pretty decent active funds. I would several of those myself if I went regional rather than global.

I would say that's a high risk set of active funds* balanced by bonds ,which I'm not sure are low risk any more, so i really doubt this is a low-medium risk selection, but essentially whilst the OP has come out good it could have gone the other way. OTOH, IMNSHO most people invest at a too low risk level so no harm done.

* good ones which i dont criticise at all , at least the ones ive heard of

zagfles

aroominyork said:

zagfles said:

m_c_s said:

It is also interesting to look at similar multi-assets funds like HSBC Global Strategy Balanced fund which is up approx 10% since Aug 2019. I believe it is more of an active fund than VLS 60. Also L&G and Blackrock multi-asset funds seem to follow the same trend. Although the OP used to hold VLS perhaps it is not the right single multi-asset benchmark fund to use?

It isn't. VLS is "active" in so far as choosing the underlying passives, eg the UK bias. You don't have to have been an investment genius to beat VLS, you just need to have avoided UK bias which happened to be a drag on VLS over the last 5 years. Of course this could add currency volatility.

On that basis there is no such thing as a passive fund. Every index fund chooses which stocks to use to replicate the markets, otherwise you would have to say that an index fund which does not include a £10m market cap Indonesian fruit canner was in fact an active fund. Just accept that VLS overweights the UK and then consider it passive.

Overweighting the UK etc is an active decision! It's not a world tracker like some others. But whether you call it active or passive isn't the point, the point is that the UK overweight caused a performance drag, and anyone who used a similar investment mix without the UK overweight should have beaten VLS60.

So it's not an appropriate benchmark to compare performance, even if it's often used as one by those who want to pretend they can deliver market beating performance.

aroominyork

zagfles said:

aroominyork said:

zagfles said:

m_c_s said:

It is also interesting to look at similar multi-assets funds like HSBC Global Strategy Balanced fund which is up approx 10% since Aug 2019. I believe it is more of an active fund than VLS 60. Also L&G and Blackrock multi-asset funds seem to follow the same trend. Although the OP used to hold VLS perhaps it is not the right single multi-asset benchmark fund to use?

It isn't. VLS is "active" in so far as choosing the underlying passives, eg the UK bias. You don't have to have been an investment genius to beat VLS, you just need to have avoided UK bias which happened to be a drag on VLS over the last 5 years. Of course this could add currency volatility.

On that basis there is no such thing as a passive fund. Every index fund chooses which stocks to use to replicate the markets, otherwise you would have to say that an index fund which does not include a £10m market cap Indonesian fruit canner was in fact an active fund. Just accept that VLS overweights the UK and then consider it passive.

Overweighting the UK etc is an active decision! It's not a world tracker like some others. But whether you call it active or passive isn't the point, the point is that the UK overweight caused a performance drag, and anyone who used a similar investment mix without the UK overweight should have beaten VLS60.

So it's not an appropriate benchmark to compare performance, even if it's often used as one by those who want to pretend they can deliver market beating performance.

Everything is an active decision. Choosing a market cap weighted index, instead of an equal weighted index, is an active decision.