Comparing IFA managed portfolio to Vanguard LS60

zagfles

aroominyork said:

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.

Some decisions are more "active" than others. Building in a substantial unproportional bias towards your home country is a lot more "active" than the technical details how you weight the index.

But who cares, the point is above. Anyone boasting "we beat VLS with a similar portfolio" probably didn't. Their portfolio probably didn't have the UK bias, so not an appropriate benchmark to compare.

BananaRepublic

AnotherJoe said:

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

As I said on page 3: “ They might argue that although constituent funds are higher risk, by diversifying over many geographical sectors and markets, they are reducing the risk to the desired levels.”

You can also argue that as per cash and savings accounts, cautious funds are higher risk in the long term as they risk lower returns. I have a not dissimilar portfolio to the OP and it has done very well over the last five years (but not as well as the US market which I am underweight in). Over the last 20+ years the funds that have done best for me have been the so called higher risk ones, and the cautious ones have given more modest gains. Yes the worst funds have been high risk ones, but because I held many different such funds, the effect of the disappointing funds was mitigated. Over the last five years I had one mediocre high risk fund out of about 20 funds, the effect was a reduction of the order of 1% after five years on my entire portfolio compared to the average growth of the rest, insignificant compared to the benefits of the other funds. 

There is a later post from Bowlhead on this same issue. 

AlanP_2

zagfles said:

aroominyork said:

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.

Some decisions are more "active" than others. Building in a substantial unproportional bias towards your home country is a lot more "active" than the technical details how you weight the index.

But who cares, the point is above. Anyone boasting "we beat VLS with a similar portfolio" probably didn't. Their portfolio probably didn't have the UK bias, so not an appropriate benchmark to compare.

At the individual level, for the OP, then the most appropriate comparison they can make is between what they had (and would have been happy to continue with) and what they have now. Any other comparison, to an arbitrary benchmark or portfolio, is pretty meaningless for them as an individual investor. 

For a more generic or academic discussion / use case then you are right, VLS 60 wouldn't be an appropriate benchmark.

enthusiasticsaver

AlanP_2 said:

zagfles said:

aroominyork said:

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.

Some decisions are more "active" than others. Building in a substantial unproportional bias towards your home country is a lot more "active" than the technical details how you weight the index.

But who cares, the point is above. Anyone boasting "we beat VLS with a similar portfolio" probably didn't. Their portfolio probably didn't have the UK bias, so not an appropriate benchmark to compare.

At the individual level, for the OP, then the most appropriate comparison they can make is between what they had (and would have been happy to continue with) and what they have now. Any other comparison, to an arbitrary benchmark or portfolio, is pretty meaningless for them as an individual investor. 

For a more generic or academic discussion / use case then you are right, VLS 60 wouldn't be an appropriate benchmark.

Indeed that is the only reason I was comparing the VLS60 to my current portfolio because I had been invested in them for four years previously and that is probably where I would have  stayed had we not moved to an IFA.  However I had been uncomfortable with the high level of UK exposure given the problems with Brexit. 

AnotherJoe

enthusiasticsaver said:

AlanP_2 said:

zagfles said:

aroominyork said:

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.

Some decisions are more "active" than others. Building in a substantial unproportional bias towards your home country is a lot more "active" than the technical details how you weight the index.

But who cares, the point is above. Anyone boasting "we beat VLS with a similar portfolio" probably didn't. Their portfolio probably didn't have the UK bias, so not an appropriate benchmark to compare.

At the individual level, for the OP, then the most appropriate comparison they can make is between what they had (and would have been happy to continue with) and what they have now. Any other comparison, to an arbitrary benchmark or portfolio, is pretty meaningless for them as an individual investor. 

For a more generic or academic discussion / use case then you are right, VLS 60 wouldn't be an appropriate benchmark.

Indeed that is the only reason I was comparing the VLS60 to my current portfolio because I had been invested in them for four years previously and that is probably where I would have  stayed had we not moved to an IFA.  However I had been uncomfortable with the high level of UK exposure given the problems with Brexit. 

More luck than judgement then as its not a Brexit issue, its due to the  arbitrary focus on randomly selected mid caps (mid cap on a global perspective) which have not been a good place to be last 10 years.

IanManc

aroominyork said:

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

The decision to choose a market cap weighted tracker - or anything else - is an active decision, but the market weighted tracker fund itself is passive.

VLS isn't a passive fund. It doesn't follow an index. It is a tied fund of funds, where the proportions of the investments in tied funds are chosen by active decision, and those proportions have been changed over time. The proportion invested in the UK is now considerably less than in the past.

Prism

AnotherJoe said:

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

This is part of the problem. A hedged global aggregate bond fund such as the one used by VLS is rated as risk level 3 out of 7 and has low volatility. Thats all looking backwards. What we may feel about the risks of bonds as the moment doesn't change that rating. In the same way that an equity fund that performed very well this year isn't likely any higher risk than one that didn't since this type of risk is unrelated to performance

So on paper at least I am sure that this allocation fills the requirements to be low-medium risk. 

Prism

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?

I would suggest that BG are pretty good at this stuff under the current conditions. Should the conditions change then maybe their funds won't be the place to be.

Albermarle

Just for context, Fidelity have their own multi asset funds and one that is very similar to VLS 60 in that it has a fixed 60% equity part. The main difference is that it has no UK bias above the usual 4 or 5 % .
It ( Multi Asset Allocator Growth ) has grown 7.9% this year compared to 6.4% for VLS 60 .

NottinghamKnight

enthusiasticsaver said:

AlanP_2 said:

zagfles said:

aroominyork said:

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.

Some decisions are more "active" than others. Building in a substantial unproportional bias towards your home country is a lot more "active" than the technical details how you weight the index.

But who cares, the point is above. Anyone boasting "we beat VLS with a similar portfolio" probably didn't. Their portfolio probably didn't have the UK bias, so not an appropriate benchmark to compare.

At the individual level, for the OP, then the most appropriate comparison they can make is between what they had (and would have been happy to continue with) and what they have now. Any other comparison, to an arbitrary benchmark or portfolio, is pretty meaningless for them as an individual investor. 

For a more generic or academic discussion / use case then you are right, VLS 60 wouldn't be an appropriate benchmark.

Indeed that is the only reason I was comparing the VLS60 to my current portfolio because I had been invested in them for four years previously and that is probably where I would have  stayed had we not moved to an IFA.  However I had been uncomfortable with the high level of UK exposure given the problems with Brexit. 

Have you determined the reason for the bond fund weighting or has it been explained by your ifa or their research, or indeed has the fund allocation been changed to alter that?