Move my Vanguard LS100 to FTSE Global All Cap Index?

GeoffTF

tebbins said:

GeoffTF said:

Thrugelmir said:

Alexland said:

aroominyork said:

Even if you want to keep the overweight UK of VLS100 there are cheaper ways to do it. VLS's 0.22% is only justified for rebalancing bonds and equities on the 20/40/60/80 products. So instead of VLS100 you could buy HSBC FTSE All World Index for 0.13% and top it up with a FTSE All Share tracker for 0.06% and occasionally rebalance the UK component.

Problem is that if they are on Vanguard Investor then they won't have access to the HSBC fund so to go cheaper they would end up with VEVE, VFEM and the FTSE All Share tracker fund. If they really want VLS100 with the automatic fixed allocation rebalancing then it's probably best to just buy it and accept the higher cost.

Not fixed allocation though. Vanguard investment team have the flexibility to reset the allocations as they think fit. There'll also be a range of exposure to avoid excessively trading their own  internal funds. 

There are just over 100 more stocks in VEVE than in Vanguard Developed Wold ex UK (they both track the FTSE indexes). On that basis, a FTSE 100 tracker would be a better fit for UK exposure than a FTSE All Share tracker. (There are no FTSE Russell Global Small cap trackers available to retail investors in the UK, so we cannot easily add the global FTSE 250 sized companies.)

...
I'm not sure I follow your reasoning, the FTSE All-Share includes, with around 1/6 of its market cap, the FTSE 250, the non-investment trust companies in which generate around half their earnings within the UK, as opposed to around 1/4 for FTSE 100, granted the difference isn't much though. Also what does the 100 extra names in the VEVE list have do with that? Those are global developed large and mid-cap indices, the UKs "mid cap" index falls into the global definition of small cap, I think that's why you've noticed what you've noticed. At the bottom of the FTSE 10 we have the likes of ITV, Royal Mail and Sainsbury's - hardly capable of being considered large by global standards.

Also Vanguard offer a global small cap index fund, I'm pretty sure other fund houses do too.

I have not said what I mean by better fit. What I was trying to say was that VEVE and Vanguard Developed World ex UK track the FTSE Russell large and medium cap indices, which contain FTSE 100 sized companies. If we want to be consistent in tracking FTSE Russell large and medium cap sized companies, we should choose the FTSE 100. That would make sense if we wanted to convert Vanguard Developed World ex UK into VEVE by adding the missing UK stocks, for example. Of course we can choose to add the FTSE Russell small cap stocks to just the UK, if we favour the FTSE 250, but that is an active investment decision. As I said, as UK retail investors, we cannot add these stocks to every international market, because we do not have access to a suitable tracker. That would not be a great solution anyway, because we would be paying transaction costs when stocks move between the medium and large cap indexes. An "all-cap" tracker is better, but more expensive that a "large and medium cap" tracker currently. Tax considerations stop me from changing horses anyway.

I am not particularly keen on the FTSE 250, because it contains the perennially under-performing Investment Trusts, which hold stocks that I already have with added costs. It is not really in the spirit of passive investment to include them. On the other hand, the Vanguard FTSE All-Share tracker does have lower transaction costs than the Vanguard FTSE 100 tracker. It is six of one and half a dozen of the other which is the better choice. If I was using ETFs, I would just use VUKE. I wrestled with this issue, and admit to making an active investment decision, and choosing the FTSE 100, because I preferred the prospects of the larger internationally focused companies. That may prove to be wrong, of course.

tebbins

Oh I think we actually agree then, it's Friday, not the best time for my wee brain to be thinking about all this.
Your view on the FTSE 100 vs 250 debate is probably the first I've heard it. I agree re investment trusts, apart from the real estate and infrastructure ones which I don't mind as much as they're closer to holding companies of operating companies than the ones that hold listed equities (thinking Greencoat, HICL, UNITE, Big Yellow, Grainger, Primary Health etc.). If people want to buy the ITs that are basically a vehicle to own listed equities, fine, but they do not belong in a UK equity index. The total last time I checked comes to around 35% of the market cap and has been growing slowly over time. That said, the 250 and 250 ex IT indices do perform almost similarly and the ITs arguably provide a bit of diversification in an index that can be fairly volatile. I do worry though that with the pace of acquisitions of 250 constituents, which has been the main driver of its outperformance since the turn of the Millennium, ITs could dilute operating companies to the the extent the 250 starts to look like the FTSE smallcap.

Thrugelmir

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

Alexland said:

aroominyork said:

Even if you want to keep the overweight UK of VLS100 there are cheaper ways to do it. VLS's 0.22% is only justified for rebalancing bonds and equities on the 20/40/60/80 products. So instead of VLS100 you could buy HSBC FTSE All World Index for 0.13% and top it up with a FTSE All Share tracker for 0.06% and occasionally rebalance the UK component.

Problem is that if they are on Vanguard Investor then they won't have access to the HSBC fund so to go cheaper they would end up with VEVE, VFEM and the FTSE All Share tracker fund. If they really want VLS100 with the automatic fixed allocation rebalancing then it's probably best to just buy it and accept the higher cost.

Not fixed allocation though. Vanguard investment team have the flexibility to reset the allocations as they think fit. There'll also be a range of exposure to avoid excessively trading their own  internal funds. 

In a recent interview, two Vanguard chiefs said the the UK bias in LifeStrategy was for marketing reasons. Neither of them favoured a UK bias.

Care to link to the interview? Be an interesting read.

Appears to contradict their own Chief Economist who in his 2022 market and economic outlook said -

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%.". 

VLS was likewise created a decade ago in a very different investing era. 

They were not contradicting their Chief Economist, they were in effect saying that they do not consider their Chief Economist's views to be relevant to choosing their asset allocation. I expect that the Chief Economist's report is published for marketing reasons. Here is the interview:

https://www.youtube.com/watch?v=sppXXFwVWTk

No indication of a marketing ploy listening to the presentation. Purely tactical (though I assume this to US terminolgy for risk profiled). Seems as if the view held is that of the Chief Economist. In that the UK markets could well outperform the US. 

Interesting that the US guy has no knowledge of UK Investment companies. Holding property as an asset class need not result in an investor "gated".  

Seems as if Vanguard is positioning themselves to broaden the take up of their advisor driven funds. While quietly parking the VLS range. Which is rapidly being left behind by a new generation of investment funds. Remove the Vanguard logo and the opening part could have been any wealth manager in the UK. Though there are many that present in a far more interesting manner. 

GeoffTF

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

Alexland said:

aroominyork said:

Even if you want to keep the overweight UK of VLS100 there are cheaper ways to do it. VLS's 0.22% is only justified for rebalancing bonds and equities on the 20/40/60/80 products. So instead of VLS100 you could buy HSBC FTSE All World Index for 0.13% and top it up with a FTSE All Share tracker for 0.06% and occasionally rebalance the UK component.

Problem is that if they are on Vanguard Investor then they won't have access to the HSBC fund so to go cheaper they would end up with VEVE, VFEM and the FTSE All Share tracker fund. If they really want VLS100 with the automatic fixed allocation rebalancing then it's probably best to just buy it and accept the higher cost.

Not fixed allocation though. Vanguard investment team have the flexibility to reset the allocations as they think fit. There'll also be a range of exposure to avoid excessively trading their own  internal funds. 

In a recent interview, two Vanguard chiefs said the the UK bias in LifeStrategy was for marketing reasons. Neither of them favoured a UK bias.

Care to link to the interview? Be an interesting read.

Appears to contradict their own Chief Economist who in his 2022 market and economic outlook said -

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%.". 

VLS was likewise created a decade ago in a very different investing era. 

They were not contradicting their Chief Economist, they were in effect saying that they do not consider their Chief Economist's views to be relevant to choosing their asset allocation. I expect that the Chief Economist's report is published for marketing reasons. Here is the interview:

https://www.youtube.com/watch?v=sppXXFwVWTk

No indication of a marketing ploy listening to the presentation. Purely tactical (though I assume this to US terminolgy for risk profiled). Seems as if the view held is that of the Chief Economist. In that the UK markets could well outperform the US. 

Interesting that the US guy has no knowledge of UK Investment companies. Holding property as an asset class need not result in an investor "gated".  

Seems as if Vanguard is positioning themselves to broaden the take up of their advisor driven funds. While quietly parking the VLS range. Which is rapidly being left behind by a new generation of investment funds. Remove the Vanguard logo and the opening part could have been any wealth manager in the UK. Though there are many that present in a far more interesting manner. 

People should watch the video and form their own conclusions. The interviewees do not go any further than saying the Vanguard model "makes a case" for a UK bias. Of course, the UK market could out-perform, but it also might not. They make it clear that they do not believe in tactical allocation.

14 minutes - Question 5: Can I just choose a global all cap fund and be done?
"Great staring point and great ending point." They also recommend a global all cap fund for bonds.

25 minutes - Question 10: Would Vanguard consider introducing a LifeStrategy range without the UK bias?
They say that everybody seems to like home bias, as a generalisation across countries. (That sounds like a marketing reason to me.) They that is OK if it is strategic rather than tactical. (I take that to mean that the allocation should not be influenced by the latest forecasts.) "We believe in market cap weighting." They say that Vanguard's model would suggest that the UK will outperform which makes a case for a UK bias, but they again caution against tactical allocation.

Vanguard LifeStrategy 60 alone has £12.5 billion AUM. LifeStrategy has been a success, and Vanguard is most unlikely to ditch it. They did not mention their new advice service at all.

IanManc

GeoffTF said:

Vanguard LifeStrategy 60 alone has £12.5 billion AUM. LifeStrategy has been a success, and Vanguard is most unlikely to ditch it. They did not mention their new advice service at all.

No one has suggested that Vanguard will "ditch" Lifestrategy. However, they may well alter the UK proportion of their equity allocation in the future.

They last did this in 2014, when the UK proportion of the equity element of the funds was reduced from 35% to 25%.

Vanguard slashes UK exposure in LifeStrategy funds - FTAdviser.com

Thrugelmir

IanManc said:

GeoffTF said:

Vanguard LifeStrategy 60 alone has £12.5 billion AUM. LifeStrategy has been a success, and Vanguard is most unlikely to ditch it. They did not mention their new advice service at all.

No one has suggested that Vanguard will "ditch" Lifestrategy. However, they may well alter the UK proportion of their equity allocation in the future.

They last did this in 2014, when the UK proportion of the equity element of the funds was reduced from 35% to 25%.

Vanguard slashes UK exposure in LifeStrategy funds - FTAdviser.com

To coin US terminology a "tactical" move. We may speak the same language but words have very different connatations. 

Thrugelmir

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

Alexland said:

aroominyork said:

Even if you want to keep the overweight UK of VLS100 there are cheaper ways to do it. VLS's 0.22% is only justified for rebalancing bonds and equities on the 20/40/60/80 products. So instead of VLS100 you could buy HSBC FTSE All World Index for 0.13% and top it up with a FTSE All Share tracker for 0.06% and occasionally rebalance the UK component.

Problem is that if they are on Vanguard Investor then they won't have access to the HSBC fund so to go cheaper they would end up with VEVE, VFEM and the FTSE All Share tracker fund. If they really want VLS100 with the automatic fixed allocation rebalancing then it's probably best to just buy it and accept the higher cost.

Not fixed allocation though. Vanguard investment team have the flexibility to reset the allocations as they think fit. There'll also be a range of exposure to avoid excessively trading their own  internal funds. 

In a recent interview, two Vanguard chiefs said the the UK bias in LifeStrategy was for marketing reasons. Neither of them favoured a UK bias.

Care to link to the interview? Be an interesting read.

Appears to contradict their own Chief Economist who in his 2022 market and economic outlook said -

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%.". 

VLS was likewise created a decade ago in a very different investing era. 

They were not contradicting their Chief Economist, they were in effect saying that they do not consider their Chief Economist's views to be relevant to choosing their asset allocation. I expect that the Chief Economist's report is published for marketing reasons. Here is the interview:

https://www.youtube.com/watch?v=sppXXFwVWTk

No indication of a marketing ploy listening to the presentation. Purely tactical (though I assume this to US terminolgy for risk profiled). Seems as if the view held is that of the Chief Economist. In that the UK markets could well outperform the US. 

Interesting that the US guy has no knowledge of UK Investment companies. Holding property as an asset class need not result in an investor "gated".  

Seems as if Vanguard is positioning themselves to broaden the take up of their advisor driven funds. While quietly parking the VLS range. Which is rapidly being left behind by a new generation of investment funds. Remove the Vanguard logo and the opening part could have been any wealth manager in the UK. Though there are many that present in a far more interesting manner. 

People should watch the video and form their own conclusions. The interviewees do not go any further than saying the Vanguard model "makes a case" for a UK bias. Of course, the UK market could out-perform, but it also might not. They make it clear that they do not believe in tactical allocation.

14 minutes - Question 5: Can I just choose a global all cap fund and be done?
"Great staring point and great ending point." They also recommend a global all cap fund for bonds.

25 minutes - Question 10: Would Vanguard consider introducing a LifeStrategy range without the UK bias?
They say that everybody seems to like home bias, as a generalisation across countries. (That sounds like a marketing reason to me.) They that is OK if it is strategic rather than tactical. (I take that to mean that the allocation should not be influenced by the latest forecasts.) "We believe in market cap weighting." They say that Vanguard's model would suggest that the UK will outperform which makes a case for a UK bias, but they again caution against tactical allocation.

Vanguard LifeStrategy 60 alone has £12.5 billion AUM. LifeStrategy has been a success, and Vanguard is most unlikely to ditch it. They did not mention their new advice service at all.

Much has changed since Vanguard launched in the UK a decade ago. Serious investment is going into their new range of investment options. Promotion through financial advisers as well.  Hence having a Charted FinancialPlanner on the presentation. As in the US. Vanguard is going to offer far more than simply passive investment services.  Here's a link. 

https://www.vanguard.co.uk/professional?cmpgn=PS1020UKBABCO2001EN&s_kwcid=AL!11156!3!558779985283!e!!g!!vanguard advisor&gclid=CjwKCAiAwKyNBhBfEiwA_mrUMlLE2p3uHKUlmzq1uAZhVmBNLc4EL5XXoYxQarjipOdGekLRnTdc7xoC8nEQAvD_BwE&gclsrc=aw.ds

GeoffTF

IanManc said:

GeoffTF said:

Vanguard LifeStrategy 60 alone has £12.5 billion AUM. LifeStrategy has been a success, and Vanguard is most unlikely to ditch it. They did not mention their new advice service at all.

No one has suggested that Vanguard will "ditch" Lifestrategy. However, they may well alter the UK proportion of their equity allocation in the future.

They last did this in 2014, when the UK proportion of the equity element of the funds was reduced from 35% to 25%.

Vanguard slashes UK exposure in LifeStrategy funds - FTAdviser.com

You are right "ditch" was not a good word. I expect that Vanguard will follow their model in the US: offer advice for those who need lots of hand holding, perhaps introduce a robo-adviser, keep LifeStrategy for those who have a strategy and want to maintain a fixed equity percentage with no hassle, and offer the lower level funds for those who do not mind getting their hands dirty.

I have listened to the video again. They said that the UK bias of LifeStrategy is driven by "what the investors want". They also said that Vanguard would be open to introducing a version with no UK bias, but obviously that would depend on their assessment of market demand, and I do not expect they want to confuse the issue either. The LifeStrategy UK allocation of 25% closely matched that of the average institutional fund when I last looked. That may be a merit for those looking for a plug-in replacement for a higher cost portfolio.

Yes, Vanguard has reduced the UK bias. They have also made the LifeStrategy portfolios more complicated over time. I doubt whether that is worthwhile. Indeed, in the video James said (in a more general context): "adding more funds, adding more complexity, are these added funds really adding value to the investor?" Perhaps Vanguard is making LifeStrategy more complicated for marketing reasons.