A complementary fund for Vanguard Lifestrategy 80?

hewhohuntselves

I have the bulk of my SIPP invested in VLS 80.  I'd like to add a fund to complement it.  I'm aware of HSBC Global Strategy Dynamic, Blackrock Mymap 6 and similar, but I was wondering whether anyone has any thoughts on BNY Mellon Multi-asset Balanced?  It is broadly the same in terms of risk albeit its equity/bond ratings are not fixed.

I ask since, while it is active, its fee is around 0.6 (so relatively modest) and its historic performance is generally slightly better than VLS 80.  Its recent performance - although I am not chasing excess performance - is significantly better.

Thank you.

El_Torro

I'm not familiar with BNY Mellon Multi-asset Balanced. As you say it appears to be similar to VLS 80, even with a similar amount of bonds and a similar UK weighting. 

Personally I'm going to stick to more tracker-like multi asset funds. I can't see anything significantly wrong with the fund you mention though, especially if you're happy with a more active approach to fund management.

hewhohuntselves

Thank you for your reply.  Are there any other tracker-like funds which you feel should be highlighted as a potential addition?

El_Torro

You've already mentioned a couple of multi asset funds. This article mentions some more: https://monevator.com/passive-fund-of-funds-the-rivals/

The article was updated about a year ago, so not 100% up to date.

Personally I use a combination of VLS, HSBC Global Strategy and Fidelity Multi Asset Allocator. Using multiple multi asset funds can be considered unnecessary complexity, though I'm happy with the mix. I'm not a big fan of VLS's high allocation to the UK but since it's not the only multi asset fund I hold it dilutes that concentration.

hewhohuntselves

Thanks again.  That's a good point re the UK overweight and definitely something to consider. That Fidelity fund looks decent.

MK62

You could have a look at Vanguard Global Small Cap Index.....picks up a lot of companies not represented in VLS80, and then perhaps Vanguard Global Bond Index, to bring bonds to the required weighting.........by no means an exclusive list, but you did say you were looking at "tracker-like funds"......

hewhohuntselves

MK62 said:

You could have a look at Vanguard Global Small Cap Index.....picks up a lot of companies not represented in VLS80, and then perhaps Vanguard Global Bond Index, to bring bonds to the required weighting.........by no means an exclusive list, but you did say you were looking at "tracker-like funds"......

Thanks for this suggestion, but I'd prefer an arrangement where the rebalancing is done automatically... But I appreciate the reply.

Beddie

hewhohuntselves said:

I have the bulk of my SIPP invested in VLS 80.  I'd like to add a fund to complement it.  I'm aware of HSBC Global Strategy Dynamic, Blackrock Mymap 6 and similar, but I was wondering whether anyone has any thoughts on BNY Mellon Multi-asset Balanced?  It is broadly the same in terms of risk albeit its equity/bond ratings are not fixed.

I ask since, while it is active, its fee is around 0.6 (so relatively modest) and its historic performance is generally slightly better than VLS 80.  Its recent performance - although I am not chasing excess performance - is significantly better.

Thank you.

I recently went through a similar thought process to you, except I compared the BNY fund to VLS60, as they had a similar split of share/bonds. Although it seems to be more into shares at the moment. Like you, I considered the reasonable charges and active management, as well as better past performance, so I went for it! It's my core ISA holding now.

Whether it was the right choice, only the future will tell, but I'm happy with my decision.

JohnWinder

All that you mention would be good choices: diversified (although BNY is a stock picker), reasonable risk, modest costs, well established, big names. That’s point #1.

Looking more closely depends a bit on your circumstances. I’ll guess you have 30 years investing ahead of you; 0.6%/yr cost instead of 0.3%/year can rob you of about 5% of your wealth after 30 years if you continue to add to the investment. Now that assumes both funds have the same returns, but Morningstar finds that more expensive funds tend to do worse, so factor that in.  I’m sure you’re up to working with a compound interest formula, via a spreadsheet program, including adding some savings each year. https://www.wallstreetiswaiting.com/running-the-numbers-1/calculating-interest-recurring-payments/ 

Point #3: if you don’t have much invested compared to what it will be worth in many years, the more important thing now is adding as much as possible to your investments (not how they’re invested). In later years, when the invested sum is big, what you add each year (if you’re an ordinary salary earner) will be modest in comparison and thus how it’s invested becomes the more important issue.

#4: A comparison of performances is fraught with danger. If the differences were due to a fundamental, like VLS prefers more ‘home bias’, then being better or worse over the last decade says nothing about what the next 3 decades will deliver. Choose the fund that accords with your beliefs about ‘home bias’ or whatever the comparison throws up rather than performance, and don’t change your approach without a sound basis. If the differences were due to the BNY manager choosing better assets in recent years, convince me that that is due to skill that will persist and not luck that will change. And being a LSE graduate or widely experienced in finance doesn’t convince me. And which of the managers is it with the ‘super skills’, and will you change funds when (s)he leaves? The SPIVA research, the ‘persistence’ analyses, the ‘t’ test that they do at ifa.com, all suggest there are few with the skill needed to pull off active management.

‘… its historic performance is generally slightly better than VLS 80.’

I read its 10 year return is worse, but I don’t know the SD or Sharpe ratios.

#5: Another view of performance comparison is available here: https://www.pipsbenchmark.com/2023/05/does-award-winning-fund-beat-benchmark.html

It chooses the recent 5 or 10 yr etc period, and graphs the return vs volatility of varying equity/bond mixes (using global equities and global bonds for the input). This gives a straight line showing more return and more volatility with higher equity percentages. It then plots the actual return and volatility for that 5 or 10 year period as a single point, for various funds like BNY’s. Over longer periods, few of the BNY, HSBC or Mymap 6 type funds fall on the better side of the line. It’s not supportive of active management over the longer period.

#6: it seems BNY engages in tactical asset allocation (they call it ‘dynamic’), changing asset allocation according to economic conditions. That’s fraught too: https://www.evidenceinvestor.com/tactical-allocation-funds-have-been-stinkers-morningstar, which shows many failed badly enough to close down. And the VLS series used to be tactical asset allocation funds, but did so poorly that Vanguard fixed their AA to become the VLS80, 60 etc. https://www.bogleheads.org/forum/viewtopic.php?p=6803589&sid=27956fac0ce5732f41dbdd6cc6f7c4a4#p6803589 

And what shortcoming does VLS80 have for you that needs some complement?

wiseonesomeofthetime

I hope your VLS80 is doing better than mine currently is.

I accept it's a long journey, however, nearly two years in and its current value is still less than my deposits, thanks to world events.

My two years old VLS100 though is rocking atm 🤷‍♂️🤣

GeoffTF

hewhohuntselves said:

I have the bulk of my SIPP invested in VLS 80.  I'd like to add a fund to complement it.  I'm aware of HSBC Global Strategy Dynamic, Blackrock Mymap 6 and similar, but I was wondering whether anyone has any thoughts on BNY Mellon Multi-asset Balanced?  It is broadly the same in terms of risk albeit its equity/bond ratings are not fixed.

I ask since, while it is active, its fee is around 0.6 (so relatively modest) and its historic performance is generally slightly better than VLS 80.  Its recent performance - although I am not chasing excess performance - is significantly better.

The whole point of VLS 80 is that you only have to buy that one fund. It already contains everything that matters. Past performance is irrelevant. Funds that have done better in the past are NOT more likely to do better in the future. 0.6% is expensive. That would compound up over the years and cost you a lot of money in the long run.