Bond fund to replace VLS

tigerspill

Hi,
I am looking to move one of my investments (Vanguard Lifestrategy 80 Acc within an ISA) into a Bond fund.
I have decided that with the recent good increases in equities, I decided to reduce or remove equities from this particular investment.
I have looked at VLS 20 as an easy option, but ideally I would like to move all to a bond fund rather than retain 20% in equities.
Would anyone have any suggestions as as to a bond fund (maybe more than one) that might be similar to the bond part of the VLS without having to buy all of their funds that comprise their bond fund.

I have cash to cover 5-7 years so I am looking for a 7-10 year time frame.  

I am basically looking to move my diversification a little from equities to bonds. 

Thank you.

masonic

A global aggregate bond fund would be the most diversified option available in a single fund. For example Vanguard Global Bond Index Fund or Vanguard Global Aggregate Bond ETF. You will probably want to hedge to GBP (which the former does and the latter has a share class which does). This will differ slightly from the bond mix in VLS.

ColdIron

tigerspill said:

Would anyone have any suggestions as as to a bond fund (maybe more than one) that might be similar to the bond part of the VLS without having to buy all of their funds that comprise their bond fund.

What about the Vanguard Global Bond Index (Hedged)? It makes up most of the bond component of your VLS80

El_Torro

Why are you looking at bonds and not say a short term money market fund? I'm not saying you're making the wrong choice, just curious about why you are making this choice.

A short term money market fund is not likely to keep up with a bond fund over a 7-10 year period, it is less risky though. 

masonic

El_Torro said:

A short term money market fund is not likely to keep up with a bond fund over a 7-10 year period, it is less risky though. 

I rotated out of STMMF holdings a while back when the yield curve normalised. There is now a fair duration risk premium. But I have opted to stick to UK government bonds (index linked) and global corporates.

A timely article over at Monevator discusses the role of bonds (and their duration) as a defensive asset: https://monevator.com/defensive-asset-allocation/

Bobziz

@masonic I'm looking to do likewise. Any view on a decent corporate fund ? I've been looking at the below which seems decent. Thanks.

Royal London Shrt Dur Crdt M Acc GB00BJ4KW792

masonic

Bobziz said:

@masonic I'm looking to do likewise. Any view on a decent corporate fund ? I've been looking at the below which seems decent. Thanks.

Royal London Shrt Dur Crdt M Acc GB00BJ4KW792

It's a very reasonable choice if you want to keep duration short, and you're paying very little for the active management, which is a plus. It is a sterling corporate bond fund, rather than global hedged if that was what you were after.

aroominyork

As masonic and ColdIron have said, your starting point is Vanguard's global aggregate fund. But they are global cap weighted whereas VLS overweights the UK. If you want that UK tilt, you would need to add a UK gilt fund and UK investment grade corporate bond fund. 

aroominyork

Bobziz said:

@masonic I'm looking to do likewise. Any view on a decent corporate fund ? I've been looking at the below which seems decent. Thanks.

Royal London Shrt Dur Crdt M Acc GB00BJ4KW792

It's a good fund which I've held in the past and was going to buy again this week, but I've changed my mind to Artemis Short-Duration Strategic Bond. Artemis has the flexibility to hold govt as well as corporate bonds and has more ex-UK than Royal London. That said, their fees and past performance are similar. 

tigerspill

aroominyork said:

As masonic and ColdIron have said, your starting point is Vanguard's global aggregate fund. But they are global cap weighted whereas VLS overweights the UK. If you want that UK tilt, you would need to add a UK gilt fund and UK investment grade corporate bond fund. 

That was something I wondered about.  Any thoughts on  the two UK fund types you refer to?

masonic

tigerspill said:

aroominyork said:

As masonic and ColdIron have said, your starting point is Vanguard's global aggregate fund. But they are global cap weighted whereas VLS overweights the UK. If you want that UK tilt, you would need to add a UK gilt fund and UK investment grade corporate bond fund. 

That was something I wondered about.  Any thoughts on  the two UK fund types you refer to?

In another thread I recently listed out the bond component holdings of VLS. See entries 2 and 3.