How many funds needed to replicate Vanguard LS60?

dunstonh

Slight aside but what is the reason why some of these funds are only available to IFAs? 

Legal structure mainly.   
VLS OEICs are a discretionary portfolio within the OEIC structure.   So, the end user sees one fund even though there are 17 funds internally.   The fund manager rebalances and controls the weightings within the fund.  Hence why they are known as fund of funds.
VLS MPS is a discretionary portfolio where the underlying funds are held by the investor and its platform software that controls the weightings and rebalance.

So, first thing is that not many DIY platforms have the software to do that.
Second, under the "agent as client" legal structure, the IFA is responsible for ongoing suitability and any changes made.  The IFA can also prevent a rebalance that is unsuitable for the individual (subject to platform software) - such as on a GIA where CGT could be an issue.

I suspect the DIY platforms are not willing to take on the legal liability that the IFA has for ongoing suitability and, therefore, only offer the OEIC version.

The MPS method also allows for institutional share classes to be used rather than retail.    For some reason, Vanguard doesn't use institutional share classes in its own MPS but third party MPS can and do.  Indeed, via the MPS software that I use, I can build a VLS60 if I wanted using only Vanguard institutional funds and it would be cheaper than the VLS60 OEIC.  I don't know why Vanguard don't use institutional share classes on their own MPS but allow third party MPS to do so.

HSBC also do their Global Strategy Funds in MPS form and OEIC form.

There are also small differences in the OEIC vs MPS versions.
Take HSBC...

• Both methods use OEICs, ETFs and ICAVs.  However, the OEIC can use direct holdings and derivatives.   The MPS version will not.
• The OEIC is rebalanced daily effectively through inflows and outflows.  The MPS is allowed some drift and will rebalance 5-10 times a year.
• The OEIC achieves currency hedging via FX forwards at portfolio level.  The MPS will use currency hedged share classes of funds.

So, whilst they have a common investment strategy, there are some differences in the mechanism behind them, which leads to slightly different returns but not enough to write home about.  (see below with HSBC GS Balanced OEIC in red and MPS in blue - inc reinvested - for reference the ACC OEIC version was 34.81% vs the Inc at 34.82%).

BookofShadows

bolwin1 said:

If you are happy with the general Vanguard LS funds / approach, isn't it just a case of selling some of your VLS60 funds & buying VLS80 or VLS40 to maintain whatever equity / bond split you are aiming for ? Seems more straightforward than trying to recreate VLS. 

I started with just this VLS60 pot - then as I learnt a bit more and had some more funds available I decided to put those into 100% equities pots and then over time I've kept dripping cash in to both.  The VLS60 pot is now about 1/3 of the total SS ISA.  Have been happy with this as an accumulation process - but now thinking about when I come to use this ISA.  

Hopefully I will be taking probably half or more of the total value of the ISA in the first 5 or so years of retirement - long term state pension and a DB will cover my essential spends, but before that it is taking front loaded from DC and this ISA as a broad plan.  I'm kind of leaning towards 'lifestyling' the ISA as I approach starting to access it to ensure that that 5 years is covered.  I wanted the flexibility of having 'some' of the pot accessible if that 5 years coincides with a downturn without having to sell too many equities at a discount - fall back is don't retire yet if the downturn starts before I go.  

As well as the VLS60 pot I have a few premium bonds and a small cash ISA - these are my only non-equity investments (probably a case for considering the DB to be in the same group).  Everything else is 100% equities at the minute - which I'm ok with for now but beginning to think it would be prudent to 'lock in' a greater proportion of the ISA and DC over the next few years (5 to 7).