Multi asset funds & global funds

B0bbyEwing

Trying to get an understanding on this & I'm sure I'll end up using some incorrect terminology along the way but here goes...

Now I understand the need global diversification. 
Note - I'm not wanting to play cat & mouse where someone asks "well why is there a need".

To give you a look at what angle I'm coming from...

After reading books by Tim Hale & Lars Kroijer especially, I feel what they were saying applies to me. I don't know more than the next person. I'm looking to replicate the global market in somewhat similar but not necessarily precise ratios, do this cheaply, set and forget.

I understand that Vanguard's LifeStrategy range has heavy UK weighting & as said before, I have no basis to say the UK are going to do exceptionally well to justify that selection.
As such I was looking at the HSBC Global Strategy range (specifically Dynamic / Adventurous), but I'm also wearing about being an eggs-in-one-basket kind of guy.

I have my SIPP and my LISA. My wife also has her SIPP and LISA which we all manage ourselves. For out contribution amounts and pot sizes, we don't think it's worth paying someone to do it.

So why would someone select something such as HSBC Global Strategy <specific> vs something like say Fidelity Index World Fund P.

And vice versa.

I understand the former is a multi asset fund? And the latter is just a global fund? But so what. Why would one be selected over the other? Is it literally just personal preference such as why did you pick those 6 numbers on the lottery instead of a different set of 6 numbers or is there more to it than that?

I know through Fidelity the HSBC is somewhere around 0.22% charge and the FIWFP is somewhere around 0.12% (may be slightly out on those) but as I say before, I'm weary of being eggs in one basket. I didn't want to just select one HSBC fund (for example) and have that run throughout everything - both our SIPPs and both our LISAs, which caused me to look at other options ... which then brought up questions.

dunstonh

I'm looking to replicate the global market in somewhat similar but not necessarily precise ratios, do this cheaply, set and forget.

Inexperienced investors wouldn't care about ratios.  Experienced investors do typically.  So, all fine so far.

I understand that Vanguard's LifeStrategy range has heavy UK weighting & as said before, I have no basis to say the UK are going to do exceptionally well to justify that selection.
As such I was looking at the HSBC Global Strategy range (specifically Dynamic / Adventurous), but I'm also wearing about being an eggs-in-one-basket kind of guy.

VLS is a fettered fund of funds.  HSBC is an unfettered fund of funds (although it is mostly HSBC trackers).
Eggs in one basket doesn't really matter with these funds but HSBC is slightly more preferable if that is one of your filtering requirements.

So why would someone select something such as HSBC Global Strategy <specific> vs something like say Fidelity Index World Fund P.

Fidelity is a global tracker and is a fixed risk in any conventional risk scale..   The HSBC GS range are multi-asset funds covering different risk profiles.  

 Why would one be selected over the other?

The average consumer in the UK is classified as cautious.  So, a global tracker would not be suitable for them (in isolation of other funds).   Only a minority would have the risk level.    HSBC GS range covers the majority of risk levels.

I know through Fidelity the HSBC is somewhere around 0.22% charge and the FIWFP is somewhere around 0.12% (may be slightly out on those) but as I say before, I'm weary of being eggs in one basket.

Not sure where your eggs in one basket thing is a concern here.   The charge difference is because one has management decisions and uses underlying passives.  The other is a passive.

I didn't want to just select one HSBC fund (for example) and have that run throughout everything - both our SIPPs and both our LISAs

Why?  If its good enough to be the first choice then why would you pick a second choice?

eskbanker

B0bbyEwing said:

I understand the former is a multi asset fund? And the latter is just a global fund? But so what. Why would one be selected over the other? Is it literally just personal preference such as why did you pick those 6 numbers on the lottery instead of a different set of 6 numbers or is there more to it than that?

As the name suggests, multi-asset funds hold not just equities but other assets such as bonds, commodities, cash, property, etc, whereas the global fund you're looking at is 100% equities - the latter is generally considered higher risk (and higher reward), so many investors prefer diversification, not just across geographies/markets/sectors but across asset classes too, the thinking being that bonds, for example, have traditionally dampened volatility, although this year hasn't been a good example....

tacpot12

The Fidelity Fund is a completely passive fund, the HSBC products are actively managed. This is reflected in the HSBC products having higher charges. The selection between passive and actively managed funds is a fundamental choice you need to make.

Many people will point to the research that has been done that shows that actively managed funds rarely outperform their passive counterparts to the degree that would offset their greater charges.

I would suggest that you split your investments between these two funds and see how they perform for you. I think that diversifying between (at least) two fund managers is a reasonable strategy.

El_Torro

If you really don’t want all your investments with one company you can split your money between different ones. There are various companies offering multi asset funds, and various ones offering global trackers too. 

Bear in mind that they’re all invested in more or less the same thing (with some differences, some of which you have already pointed out) so if one performs badly they probably all will.

if your concern is having all your money with Vanguard or HSBC, yes, the companies managing your investments can go bust. Your investments will be safe though, they will just be transferred to another company to manage. 

My pension currently has 4 different multi asset funds across 3 different platforms. Unnecessary complexity perhaps, I’m happy with it though. 

Linton

A global equity fund such as Fidelity Index Word only invests in shares.  A multi-asset fund invests in shares, fixed interest such as government bonds, and possibly other more niche areas.  These various types of asset would be expected to behave somewhat differently as the world ecconomy changes over time.

You understand diversification - this is diversification in types of asset.

Why would you want to diversify in type of asset?  It is a matter of risk.  Over the  very long term (perhaps >>15 years) 100% equiry would be expected to give the best returns but it could be an exciting journey with booms and crashes every few years.  Your timeframe may not be >15 years and your nerves possibly could not withstand a temporary 50% drop in the value of your investments.

So alongside your equity investments you hold less volatile ones which are as far as possible uncorrelated with equity so they rise and fall at different times. These less volatile investments should still give a positive return though one lower than equity in the long term.

A multi-asset fund will manage this for you by ensuring that the relative proportions of the various asset types dont wander off course.

aroominyork

Fidelity Index World is badly named - it does not include emerging markets. HSBC All World Index includes EMs.

Albermarle

tacpot12 said:

The Fidelity Fund is a completely passive fund, the HSBC products are actively managed. This is reflected in the HSBC products having higher charges. The selection between passive and actively managed funds is a fundamental choice you need to make.

Many people will point to the research that has been done that shows that actively managed funds rarely outperform their passive counterparts to the degree that would offset their greater charges.

I would suggest that you split your investments between these two funds and see how they perform for you. I think that diversifying between (at least) two fund managers is a reasonable strategy.

I think we need to be a bit careful about terminology here. Most people would consider an actively managed fund to be one where the fund manager is making decisions to invest in certain sectors, countries, even individual companies etc
Fund cost would typically be in the 0.7% to 1.5% region.
The HSBC global strategy funds juggle a mix of passive index funds, to target a certain risk rating and cost around 0.2% , not much more than the fully passive Fidelity fund. So they are in a kind of grey area between passive and managed. I think in the past I have seen them called 'Passively managed' although it is not an official term. 

B0bbyEwing

Thanks to all. Helpful responses & clears up a lot of what I wanted to know.

@Linton - you touch on something I forgot to include in my OP - timeframe. 

For this, unless I get super lucky, we are talking 26 years I would say. If it's less than that then it wont be by much. It most certainly wont be less than 20-21 years (unless as I said, I get super lucky) and as much as I hope it doesn't, it may stretch a bit beyond that.

So in short, we're working with 26 years. 

bostonerimus

B0bbyEwing said:

Trying to get an understanding on this & I'm sure I'll end up using some incorrect terminology along the way but here goes...

Now I understand the need global diversification. 
Note - I'm not wanting to play cat & mouse where someone asks "well why is there a need".

To give you a look at what angle I'm coming from...

After reading books by Tim Hale & Lars Kroijer especially, I feel what they were saying applies to me. I don't know more than the next person. I'm looking to replicate the global market in somewhat similar but not necessarily precise ratios, do this cheaply, set and forget.

I understand that Vanguard's LifeStrategy range has heavy UK weighting & as said before, I have no basis to say the UK are going to do exceptionally well to justify that selection.
As such I was looking at the HSBC Global Strategy range (specifically Dynamic / Adventurous), but I'm also wearing about being an eggs-in-one-basket kind of guy.

I have my SIPP and my LISA. My wife also has her SIPP and LISA which we all manage ourselves. For out contribution amounts and pot sizes, we don't think it's worth paying someone to do it.

So why would someone select something such as HSBC Global Strategy <specific> vs something like say Fidelity Index World Fund P.

And vice versa.

I understand the former is a multi asset fund? And the latter is just a global fund? But so what. Why would one be selected over the other? Is it literally just personal preference such as why did you pick those 6 numbers on the lottery instead of a different set of 6 numbers or is there more to it than that?

I know through Fidelity the HSBC is somewhere around 0.22% charge and the FIWFP is somewhere around 0.12% (may be slightly out on those) but as I say before, I'm weary of being eggs in one basket. I didn't want to just select one HSBC fund (for example) and have that run throughout everything - both our SIPPs and both our LISAs, which caused me to look at other options ... which then brought up questions.

You are asking excellent questions and doing some research to understand your choices. But be careful not to ascribe too much significance to small differences and understand that there are multiple good approaches for you - do not fixate on trying to find the "optimal solution" because it doesn't exist. There are multiple products available, many of which are the same thing just with a different name. If you don't want a UK bias then avoid VLS funds, but any global index equity fund from Vanguard, Fidelity, HSBC will work for you just fine. If one doesn't have EM or Indonesian pork bellies don't worry about it because how do you know if that's good or bad right now? A criticism of the Vanguard platform in the UK and it's VLS funds is that they are "fettered" ie you can only have access to Vanguard funds. Well there's plenty of choice just within Vanguard and more choice really isn't worth much and it can actually lead to a paralysis are worry where you are always second guessing yourself. Being in an unfettered environment might give you more choice, but I don't think it's of much use in the end.

Keep things simple and keep fees low. Use multi-asset and index funds and try not go "fund shopping happy" where you buy a bit of everything. Keep the number of your funds in single digits maybe even below five. There's no need for most people to get more complicated.

B0bbyEwing

bostonerimus said:
You are asking excellent questions and doing some research to understand your choices. But be careful not to ascribe too much significance to small differences and understand that there are multiple good approaches for you - do not fixate on trying to find the "optimal solution" because it doesn't exist. There are multiple products available, many of which are the same thing just with a different name. If you don't want a UK bias then avoid VLS funds, but any global index equity fund from Vanguard, Fidelity, HSBC will work for you just fine. If one doesn't have EM or Indonesian pork bellies don't worry about it because how do you know if that's good or bad right now? A criticism of the Vanguard platform in the UK and it's VLS funds is that they are "fettered" ie you can only have access to Vanguard funds. Well there's plenty of choice just within Vanguard and more choice really isn't worth much and it can actually lead to a paralysis are worry where you are always second guessing yourself. Being in an unfettered environment might give you more choice, but I don't think it's of much use in the end.

Keep things simple and keep fees low. Use multi-asset and index funds and try not go "fund shopping happy" where you buy a bit of everything. Keep the number of your funds in single digits maybe even below five. There's no need for most people to get more complicated.

Thanks.
To take my explaining one step further - I was actually looking at our SIPPs. I set these up a few years ago & went with VLS as at the time I was even more clueless than I am now but knew I needed to make a start because doing that was better than doing nothing.

Over the years that have passed, I've learned a little more about global markets & their weightings, why people say VLS has a heavy UK bias (read it at the time but didn't understand what this meant) etc. and thought it's about time I took a look at what our money is invested in and move away from VLS to something a little more geographically accurate in terms of being in line with the global markets.

When searching global funds, I don't think the HSBC Global Strategy range came up & I didn't understand why. 
I started looking in to what did come up. I liked the look of the Fidelity option I linked to (with Fidelity, not HL), its global spread and on going cost.

I'd seen VLS & even the HSBC ranges get mentioned frequently on here and other online areas but wondered what the exact differences were - hence coming here to ask.

Glad I did. Very helpful replies.