Are the big funds all the same?

ChequeBookGerry

Dear all,

I really just don't have the time to actively monitor my pension funds so for the last few years I've got the lot (£236k) in Vanguard Life Strategy 100.  I'm happy with the equity risk profile, I understand what the fund is/does and I'm aiming to retire between 5 and 9 years from now.  I have 2x that in company pensions with a variety of suppliers so have a level of diversification there (sort of, as they'll be invested in the same sort of stocks). 

So, the question is, are all the very big, general funds really just delivering the same performance over the medium term - give or take - from what you've seen?  Ovbs you can tweak, based on included sectors, but for massive, general funds they are all the same?  (Given it's size, I'm presuming there is not a lot of point in diversifying into other funds in case they "go bust".)

Thanks.

hara____

If you're focusing on 100% equity, they will be similar but not the same.

e.g. VLS 100 has 25% of funds in UK equities whereas a global equity tracker would be closer to 5% UK.

artyboy

How exactly do you define 'massive, general fund' - I'm genuinely curious...? 

There is just so much variety out there in terms of industry, geo, asset class, and manager/management style that makes a difference to performance. So the simple answer to your question will be 'No'

dunstonh

So, the question is, are all the very big, general funds really just delivering the same performance over the medium term - give or take - from what you've seen? 

If you hold the same investment fund with different providers, then the returns will be identical.
i.e. VLS100 held with Aviva, Aberdeen, Aegon, Scot Wid, HL, II blah blah blah is the same VLS100 fund.

If you mean different global equity funds (size is irrelevant) then the returns on each will be different.  The provider you use for the pension is irrelevent.

VLS100 is the odd one out in the range.  The others are multi-asset.     VLS100 is a global growth.  So, you would need to compare VLS100 with global equity funds.  Each of which will have different returns depending on the management decisions.   VLS100 has a higher home bias as a management decision.

Ovbs you can tweak, based on included sectors, but for massive, general funds they are all the same? 

Its unclear why you are referring to size or why you think size matters.    But no, they are not all the same.

Assuming SIPP availability (so no insured funds that are on personal pensions or stakeholder pensions),  the top performing fund in the IA global equity sector returned 50.26% over the last year whilst the bottom performer returned -16.22%
Over 5 years, the top performing global equity fund returned 201.82% and the bottom -42.04%

Management decisions, and particular focuses, mean that you cannot compare all of them as like for like.
For example, the most volatile fund in the global equity sector had a 1 year volatility rating of 58.80 whilst the least volatile was 5.90.

ComicGeek

No, there can be a significant difference in performance. I have three 100% equity funds, over the same period these are at +8.03%, +8.90% & +5.90%.

VLS 100 is the lowest performing of the 3 at the moment, but I've deliberately picked 3 different funds for specific reasons. Just because they are all 100% equity funds doesn't mean that they are all investing in the same companies or regions, or have the same objectives.

Linton

ChequeBookGerry said:

Dear all,

I really just don't have the time to actively monitor my pension funds so for the last few years I've got the lot (£236k) in Vanguard Life Strategy 100.  I'm happy with the equity risk profile, I understand what the fund is/does and I'm aiming to retire between 5 and 9 years from now.  I have 2x that in company pensions with a variety of suppliers so have a level of diversification there (sort of, as they'll be invested in the same sort of stocks). 

So, the question is, are all the very big, general funds really just delivering the same performance over the medium term - give or take - from what you've seen?  Ovbs you can tweak, based on included sectors, but for massive, general funds they are all the same?  (Given it's size, I'm presuming there is not a lot of point in diversifying into other funds in case they "go bust".)

Thanks.

There is no point in diversifying massive general funds (MGFs) in case they go bust  They wont, barring the end of the world when you wont care anyway.

Whether its worth diversifying MGFs depends on how much effort you want to put into it.  They may have some differences - eg many just invest in the developed world, some just invest in very large companies, none invest in very small companies.  Some may tilt towards safer value shares, others focus more on growth shares. Then there are the Shariah funds.

My belief is that ignoring charges and given sufficient time all MGFs will provide the same return. In the short/medium term some of the factors may have a noticeable effect but unfortunately you cannot reliably predict which those will be.

El_Torro

I'm not a fan of VLS 100. One reason being that it's a bit more expensive than a global tracker (not massively so). The other more important reason is because it is overweight in the UK. If you want this then fine, if you don't then I would move to a global tracker.

ChequeBookGerry

artyboy said:

How exactly do you define 'massive, general fund' - I'm genuinely curious...? 

There is just so much variety out there in terms of industry, geo, asset class, and manager/management style that makes a difference to performance. So the simple answer to your question will be 'No'

I mean the funds with a value of multiple billions with a spread across different sectors.  So, for instance, I would not include a tech focused fund or a green fund.

ChequeBookGerry

ComicGeek said:

No, there can be a significant difference in performance. I have three 100% equity funds, over the same period these are at +8.03%, +8.90% & +5.90%.

VLS 100 is the lowest performing of the 3 at the moment, but I've deliberately picked 3 different funds for specific reasons. Just because they are all 100% equity funds doesn't mean that they are all investing in the same companies or regions, or have the same objectives.

Thanks.  What is your best, please?  

ChequeBookGerry

Just flipped £100k into HSBC FTSE all-world index tracker and that is my investing done for another year.

artyboy

ChequeBookGerry said:

artyboy said:

How exactly do you define 'massive, general fund' - I'm genuinely curious...? 

There is just so much variety out there in terms of industry, geo, asset class, and manager/management style that makes a difference to performance. So the simple answer to your question will be 'No'

I mean the funds with a value of multiple billions with a spread across different sectors.  So, for instance, I would not include a tech focused fund or a green fund.

What asset mix?
Actively managed or passive/tracker?
What geographical split?
Trad fund or ETF?

There are still a lot of dimensions with large funds, aside from industry sector or ethical considerations!

But let's just assume that with VLS100 as your starting point, you're actually targeting a low cost globally diversified equity tracker? Something that effectively gives you the same average performance as global stock markets?

Well... as already mentioned you don't exactly have one because of the VLS100 home bias. Plus the fees are a bit on the chunky side. HMWO is often mentioned as a popular option here, as it's cheap and more accurately reflects equity splits globally by overall market size. That said it's an ETF, not a trad fund, which may or may not be what you want...