HSBC Global Strategy funds

GeoffTF

Not surprisingly, LS does very well against active rivals. There are lots of comparisons, but they do not usually take account of survivor bias (active funds that do badly disappear from the tables and are usually not included in comparisons). Here is a comparison with passive rivals:

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

LS is not bested there either.

dunstonh

GeoffTF said:

Not surprisingly, LS does very well against active rivals. There are lots of comparisons, but they do not usually take account of survivor bias (active funds that do badly disappear from the tables and are usually not included in comparisons). Here is a comparison with passive rivals:

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

LS is not bested there either.

The article you link to also has opinions that could be countered.  For example, it says active funds are higher risk but that is not correct.  The intention is to say that HSBC GS is higher risk because of the fact it makes active decisions on the weightings.  However, VLS has made active decisions on its weightings too.    The difference is that VLS doesn't care about risk whereas HSBC does as it will adjust the weightings to remain within a target volatility band.   

It says they like the more natural weightings of HSBC and don't like the active decision of VLS to have home bias.  That active decision to have home bias has been the cause of the underperformance of VLS for a good number of years now.   Both fund houses have made an active decision on their weightings to set them at where they are and either adjust them or leave them.

The article seems to have a bias to VLS.  It asks if HSBC will be better than Vanguard over the next 5 years.  It seems to assume that VLS is the one that will be top or if it's not, then it's beaten by a lesser fund due to anomalies in the lesser fund rather than a negative in the VLS fund.  It also says that VLS has clearly defined rules (i.e. asset weightings) and infers that VLSs weightings match your preferred asset allocation.  In reality, most investors in these funds don't have preferred weightings.  If they did, they are probably more likely to prefer HSBC GS over VLS because of the lack of home bias.

In reality, out of all these similar funds, each will have periods where they move up and down the performance table because of active decisions made on how much should be invested in each sector/region/country.

  

GeoffTF

dunstonh said:

GeoffTF said:

Not surprisingly, LS does very well against active rivals. There are lots of comparisons, but they do not usually take account of survivor bias (active funds that do badly disappear from the tables and are usually not included in comparisons). Here is a comparison with passive rivals:

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

LS is not bested there either.

The article you link to also has opinions that could be countered.  For example, it says active funds are higher risk but that is not correct.  The intention is to say that HSBC GS is higher risk because of the fact it makes active decisions on the weightings.  However, VLS has made active decisions on its weightings too.    The difference is that VLS doesn't care about risk whereas HSBC does as it will adjust the weightings to remain within a target volatility band.   

It says they like the more natural weightings of HSBC and don't like the active decision of VLS to have home bias.  That active decision to have home bias has been the cause of the underperformance of VLS for a good number of years now.   Both fund houses have made an active decision on their weightings to set them at where they are and either adjust them or leave them.

The article seems to have a bias to VLS.  It asks if HSBC will be better than Vanguard over the next 5 years.  It seems to assume that VLS is the one that will be top or if it's not, then it's beaten by a lesser fund due to anomalies in the lesser fund rather than a negative in the VLS fund.  It also says that VLS has clearly defined rules (i.e. asset weightings) and infers that VLSs weightings match your preferred asset allocation.  In reality, most investors in these funds don't have preferred weightings.  If they did, they are probably more likely to prefer HSBC GS over VLS because of the lack of home bias.

In reality, out of all these similar funds, each will have periods where they move up and down the performance table because of active decisions made on how much should be invested in each sector/region/country.

"For example, it says active funds are higher risk but that is not correct."

If we are comparing equity funds in the same market, an active fund clearly has the higher chance of under-performing the index by a significant amount than an index fund does. If we are comparing an active bond fund with a bond index fund then no.

"That active decision to have home bias has been the cause of the underperformance of VLS for a good number of years now."

As the article shows, VLS has not done badly compared with its peers. The home bias has not helped, but Vanguard believes that it is what the market wants (according to a recent interview).

"The difference is that VLS doesn't care about risk whereas HSBC does as it will adjust the weightings to remain within a target volatility band."

VLS does what it says on the tin. Vanguard believes that market wants a fixed equity percentage, so that is what Vanguard provides. They have been right so far. If there is enough demand for a different product, I expect that Vanguard will provide it. In the meantime, there is nothing much wrong with VLS, it is a best seller, and it is an easy and relatively cheap option for many people.

LouP25

thank you so much for the detailed answers. I'm new to this, and reading your answers helps a lot to see whole picture

dunstonh

As the article shows, VLS has not done badly compared with its peers. The home bias has not helped, but Vanguard believes that it is what the market wants (according to a recent interview).

The article is from 2019.  The gap opened up more over the years.   Vanguard does have a preference for home bias but that makes it an active decision.   The article was critical of HSBC because of its active decisions but didn't really take VLS to task on its active decisions.

VLS does what it says on the tin. Vanguard believes that market wants a fixed equity percentage, so that is what Vanguard provides. They have been right so far. If there is enough demand for a different product, I expect that Vanguard will provide it. In the meantime, there is nothing much wrong with VLS, it is a best seller, and it is an easy and relatively cheap option for many people.

I don't have an issue with VLS.   I had an issue with the way the article promoted VLS as effectively the best option by using pretty weak reasons to put you off the alternatives.   It read as if a Vanguard fanboy wrote the article rather than an unbiased individual.

GeoffTF

dunstonh said:

As the article shows, VLS has not done badly compared with its peers. The home bias has not helped, but Vanguard believes that it is what the market wants (according to a recent interview).

The article is from 2019.  The gap opened up more over the years.   Vanguard does have a preference for home bias but that makes it an active decision.   The article was critical of HSBC because of its active decisions but didn't really take VLS to task on its active decisions.

VLS does what it says on the tin. Vanguard believes that market wants a fixed equity percentage, so that is what Vanguard provides. They have been right so far. If there is enough demand for a different product, I expect that Vanguard will provide it. In the meantime, there is nothing much wrong with VLS, it is a best seller, and it is an easy and relatively cheap option for many people.

I don't have an issue with VLS.   I had an issue with the way the article promoted VLS as effectively the best option by using pretty weak reasons to put you off the alternatives.   It read as if a Vanguard fanboy wrote the article rather than an unbiased individual.

Here is a more up to date article:

https://www.ajbell.co.uk/news/10-years-vanguard-lifestrategy-performance-analysis

As I have said, LifeStrategy has not done badly. The UK bias is there because of market research. It has not helped in the last ten years, but that says nothing about the future. The Accumulator does not only have Vanguard funds in his illustrative portfolio:

https://monevator.com/the-slow-and-steady-passive-portfolio-update-q4-2021/

He also maintains a list of the cheapest trackers, which mostly are not Vanguard:

https://monevator.com/low-cost-index-trackers/

Some of those trackers will, however, have negative tracking errors than cannot be explained by their stated costs. Vanguard and BlackRock have the best reputations.