Lifestrategy Vs 2 global funds

safe_hands2

Hi all. I've been investing for the past 2 years in LS60. Out of interest, I looked at the comparison of its performance compared with investing 60% in global equity fund and 40% in global bond fund. In all cases the latter would have given better performance. I know LS60 means I don't have the hassle of rebalancing, but is there anything else I'm missing that's a benefit of sticking with LS60?

kuratowski

Which global equity fund?  Bear in mind the equity component of Vanguard Lifestrategy is not a market cap weighted global equity fund, it has much more UK weight than market cap.

Which global bond fund?  Is it GBP hedged?

grumiofoundation

Lifestrategy have a higher weighting to UK equities than the corresponding global index (~25% vs 5%). 

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-60-equity-fund-accumulation-shares/portfolio-data?intcmpgn=blendedlifestrategy_lifestrategy60equityfund_fund_link
FTSE UK-All share ~15%

UK equities have underperformed versus global*, explaining the underperformance. Whether this will continue is another matter?

Unless you are tied to vanguard there are other multi-assest funds you could consider which wouldn't have the higher to UK weighting and mean you wouldn't have to rebalance (some in link below).

https://monevator.com/passive-fund-of-funds-the-rivals/ 

*Edit - by global assume you meant e.g. FTSE Global All Cap Index Fund - Accumulation
https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

safe_hands2

Thanks for replies. It was Vanguard​ FTSE global all cap and Vanguard global bond index hedged I was looking at. ISA is with Vanguard.

dunstonh

I've been investing for the past 2 years in LS60. Out of interest, I looked at the comparison of its performance compared with investing 60% in global equity fund and 40% in global bond fund. In all cases the latter would have given better performance.

What was the asset allocation of the global equity fund vs the equity content of VLS?   VLS has a home bias.  Did the global equity fund?

Global bonds (unhedged as most are - although some hedged do exist) are higher risk than UK gilts and UK bonds (mainstream not high yield).    So, the volatility risk level of the two funds vs the VLS are unlikely to be the same.

Prism

safe_hands2 said:

Thanks for replies. It was Vanguard​ FTSE global all cap and Vanguard global bond index hedged I was looking at. ISA is with Vanguard.

Both the equity and bond elements of VLS 60 are overweighted to the UK which probably explains most of the difference.

JohnWinder

dunstonh said:

Global bonds (unhedged as most are - although some hedged do exist) ...

? the other way around.

MX5huggy

safe_hands2 said:

Thanks for replies. It was Vanguard​ FTSE global all cap and Vanguard global bond index hedged I was looking at. ISA is with Vanguard.

Those are my 2 holdings which I hold at 75/25 in my small ISA. I like having something to do which is rebalancing although so far this just means the split of new investment is not 75/25 the plan is if it gets 5% or more out of balance to only then actually move money between the 2. 

This saves a little fee over LS because the fee on the bonds is less. Once my total holding becomes significant I plan to split the All World and into FTSE Developed World and Emerging Markets saving more fee. 

The 75/25 split is so I have a little dry powder to take advantage of buying opportunities that may arise in the next year or 2. 

Prism

JohnWinder said:

dunstonh said:

Global bonds (unhedged as most are - although some hedged do exist) ...

? the other way around.

I have been looking at global bond funds for a couple of years and I would say that most are unhedged with a reasonable choice being hedged to GBP (which is important). Vanguard seem to be the exception where I think all of theirs are hedged but they don't have a very good range which is a shame.

bostonerimus

Of course there will be differences in performance for different portfolios...VLS60 is not the same as a global equity fund and a global bond fund. However, the returns will fall within a distribution for 60/40 funds. You should not be worrying about what I imagine is a small and totally expected difference.

Thrugelmir

safe_hands2 said:

Hi all. I've been investing for the past 2 years in LS60. Out of interest, I looked at the comparison of its performance compared with investing 60% in global equity fund and 40% in global bond fund. In all cases the latter would have given better performance. I know LS60 means I don't have the hassle of rebalancing, but is there anything else I'm missing that's a benefit of sticking with LS60?

If you knew the other two funds combined would produce a better return why didn't you invest in them two years ago, rather than in VLS60?