2022 Performance - SW PPP1 vs PP1 vs Vanguard LifeStrategy

engagedandopen

I was interested to notice that my Scottish Widows Premier Pension Portfolio One fund (series 2) only fell by 2.8% 31/12/21-5/1/23 (last year, basically) whereas the tracker-only fund, Scottish Widows Pension Portfolio One fund (series 3) decreased by 11.4%.  I'd rather pay an extra 0.4% for smart beta and a small amount of absolute return and active bond funds if it protects my investments like this, as it doesn't have as much 'clawing back' to do from a 2.8% drop (even though it would probably not increase so much in a rally).  For reference (and I realise one fund might look better than another over a different time period in all kinds of combinations), it seems Vanguard LifeStrategy 100% equity decreased by 6.3% and Vanguard LifeStrategy 80% equity decreased by 8.8% over 2022.

[Deleted User]

In any given year a fraction of active funds will outperform passive.  Information is readily available.   The trick is knowing which ones are going to do it next year.  Consistent outperformance over meaningful periods of time is extremely rare.  Particularly so for funds with high costs. 

A minor issue… but you should make sure you are comparing over the exact same periods of time.   Markets can move by 3% in a day and do so quite regularly. 

Mutton_Geoff

Viewing these sort of investments over such a short period of time is meaningless (imho).

dunstonh

The Premier version is a hybrid of active and passive.   Some consider that to be an ideal method as you can use the best of both.  

it seems Vanguard LifeStrategy 100% equity decreased by 6.3% and Vanguard LifeStrategy 80% equity decreased by 8.8% over 2022.

Anything with gilts would have created a drag.  VLS100 is a managed global equity fund rather than a multi-asset fund.   This is why you often see references to using a global tracker if you are going 100% equity rather than use the more expensive VLS100.  Or look at the HSBC GS range instead.

[Deleted User]

Every single mutual fund is managed by definition.  Thats why each fund has a manager listed on its website. 

VLS 100 is a collection of passive funds with stable allocation and home bias.  It covers far, far more medium and small stocks than global trackers available in Britain seem cover. The cost difference between VLS and “trackers” is around 10 basis points vs circa 90 extra points British active funds seem to charge. 

JohnWinder

I'm lost.

whereas the tracker-only fund, Scottish Widows Pension Portfolio One fund (series 3) decreased by 11.4%

19% of this fund is 'ACS Climate Transition World Equity', about which: 'The aim of the Fund is to provide exposure to companies within the MSCI World Index (Index) that are well-positioned to maximise the opportunities and minimise the potential risks associated with a transition to a low carbon economy relative to other companies in the Index.'

https://www.trustnet.com/factsheets/p/qg28/scottish-widows-pension-portfolio-one-pension-series-3

That doesn't sound like a fund tracking an index.

So, if the SW series 3 is a 'tracker', what index is it tracking?

engagedandopen

Mutton_Geoff said:

Viewing these sort of investments over such a short period of time is meaningless (imho).

In general, maybe yes, but in the context of the last year's less usual events, I found the contrast noteworthy.

engagedandopen

Deleted_User said:

Every single mutual fund is managed by definition.  Thats why each fund has a manager listed on its website. 

VLS 100 is a collection of passive funds with stable allocation and home bias.  It covers far, far more medium and small stocks than global trackers available in Britain seem cover. The cost difference between VLS and “trackers” is around 10 basis points vs circa 90 extra points British active funds seem to charge. 

I cannot think of any reputable asset manager that does not have a stable allocation.  In the case of Vanguard, they told me they review the strategic asset allocation annually.  This frequency might appeal to some, but annually seems too inflexible for me.  I am also not keen on Vanguard's synthetic replication of an index rather than actually holding the index.  Finally, I prefer to support UK-based asset managers.

Your comments on VLS 100 as compared to global trackers are interesting.  It seems to me that a multi-asset risk-targeting fund of trackers uses smaller company trackers to increase volatility if the overall volatility is reaching the lower bounds; surely active management (including investment trusts) is particularly appropriate for investing in global smaller companies.

engagedandopen

JohnWinder said:

I'm lost.

whereas the tracker-only fund, Scottish Widows Pension Portfolio One fund (series 3) decreased by 11.4%

19% of this fund is 'ACS Climate Transition World Equity', about which: 'The aim of the Fund is to provide exposure to companies within the MSCI World Index (Index) that are well-positioned to maximise the opportunities and minimise the potential risks associated with a transition to a low carbon economy relative to other companies in the Index.'

https://www.trustnet.com/factsheets/p/qg28/scottish-widows-pension-portfolio-one-pension-series-3

That doesn't sound like a fund tracking an index.

So, if the SW series 3 is a 'tracker', what index is it tracking?

It is a mult-asset fund that uses trackers almost exclusively, John.  The Blackrock ACS Climate Transition World Equity fund applies ESG-scored tilts to the MSCI world index.  In contrast, the Premier version uses smart beta (minimum volatility and fundamental index products) and some active management for things like corporate bonds and absolute returns.

engagedandopen

dunstonh said:

The Premier version is a hybrid of active and passive.   Some consider that to be an ideal method as you can use the best of both.  

Thank you for your comment, dunstonh.  If I were going to settle for one fund, it would probably be a hybrid with ESG-tilting and smart beta on the passives.  Indeed, it is getting hard to invest without ESG tilts since it seemed suddenly to become popular last year!

I have gone through every holding in Myfolio Multi-Manager V (as of September 2022) and worked out they seem to be charging 0.49% for selecting and monitoring those underlying funds.  Am I right in thinking this is comparable to what an IFA would charge for managing a portfolio on behalf of a client, please?

engagedandopen

Deleted_User said:

In any given year a fraction of active funds will outperform passive.  Information is readily available.   The trick is knowing which ones are going to do it next year.  Consistent outperformance over meaningful periods of time is extremely rare.  Particularly so for funds with high costs. 

A minor issue… but you should make sure you are comparing over the exact same periods of time.   Markets can move by 3% in a day and do so quite regularly. 

For me, it comes down not to picking a winner for the next year, but rather to trusting the asset manager with the active components and making sure the costs are reasonable.  Over the long haul, I am not convinced that cheapest is always best.  Even Vanguard have started offering active funds in the UK, after all.