Self Investment into Passive Fund of Funds

funkey_monkey · 29 July 2018 at 9:33PM

Hello,

I've got the majority of my savings invested with an IFA and I'm happy enough with the preformance of the investment.

I'd like to self invest some money in order to move some money out of a badly performing savings account with Sainsburys, but avoid going through my IFA, as I want to take some control myself.

I'm not looking to invest directly in companies etc, but was considering using the Vanguard LS 80 and/or alternatives. I've read up a bit on passive investments and it seems to be where I want to be - although I'm uncertain about dropping money in now prior to Brexit happening (considering the state of the negotiations I can't help but feel that a dip is on the horizon).

I'm already on the Hargreaves Lansdown platform for a LISA I opened with a nominal amount so that I would have it opened before my age ruled me out.

I've taken a look at some funds and was considering the following:

Baillie Gifford Managed B Acc (0.35% TER)
Baillie Gifford Managed B Acc

Royal London Sustainable World Trust C Acc (0.77% TER)
Royal London Sustainable World Trust C Acc

Vanguard LifeStrategy 80% (0.22% TER)
Vanguard LS 80%

Blackrock Consensus 85 (0.09% TER)
Blackrock Consensus 85

I know there are cross over between these, but I was considering using a mixture of these. The only things I really note at present are the TER associated with the Royal London and Blackrock offerings.

However, Royal London (alongside Baillie Gifford) are a consistent first quartile performer and there is not much more than you can ask than that.

I'm hoping to initiate with approx £5,000 and make some additional drops throughout the term.

Any suggestions as to what I should do here considering that my savings account is providing terrible returns?
I am considering purchasing a property, but I hope not to need all of my investment money for this.

dunstonh · 29 July 2018 at 10:44PM

TER ishouldnt be used with UT/OEICs. It is OCF with UT/OEICs.

I'm hoping to initiate with approx £5,000 and make some additional drops throughout the term.

So just one fund needed wtih that amount.

All the funds are at the medium/high risk end of the scale. (30-35% loss potential during a major downturn). Are you accepting that you could lose £1500 within weeks of your purchase?

although I'm uncertain about dropping money in now prior to Brexit happening (considering the state of the negotiations I can't help but feel that a dip is on the horizon).

There are always events happening. Brexit may be your current excuse to hold back but when that is out of the news there will be something else to replace it. You will never invest if you keep being concerned about events that could affect the markets.

funkey_monkey · 29 July 2018 at 10:58PM

dunstonh wrote: »

So just one fund needed wtih that amount.

At what stage, can you start considering multiple funds? Which out of these would you recommend and would you consider them comparable? Or is there an alternative that I've missed which you would recommend ahead of these?

All the funds are at the medium/high risk end of the scale. (30-35% loss potential during a major downturn). Are you accepting that you could lose £1500 within weeks of your purchase?

I'd rather not, but I'm investing for 10+ yrs, so I hope that over time it will work in my favour.

Thanks for your reply.

Prism · 29 July 2018 at 11:22PM

funkey_monkey wrote: »

At what stage, can you start considering multiple funds? Which out of these would you recommend and would you consider them comparable? Or is there an alternative that I've missed which you would recommend ahead of these?

I can't speak for anyone but myself but I moved from a single fund to multiple at around £100,000. One thing to look at is if you pay a charge per investment when you add funds. One of my platforms does and the other does not.

dunstonh · 30 July 2018 at 12:10AM

At what stage, can you start considering multiple funds?

Assuming you are going to stick with multi-asset, then £85,000 should be fine.

TheShape · 30 July 2018 at 12:18AM

dunstonh wrote: »

TER ishouldnt be used with UT/OEICs. It is OCF with UT/OEICs.

Perhaps unhelpful that the HL At a Glance Page lists:

Ongoing charge (OCF/TER):

The wording suggests that they are interchangeable.

funkey_monkey wrote: »

Blackrock Consensus 85 (0.09% TER)
Blackrock Consensus 85

Worth noting also that 0.09% is the Net Ongoing charge after the 0.13% saving from HL. The OCF is 0.22%.

Not a recommendation for the OP but i originally invested in VLS100 in my HL SIPP but having noticed the fund saving on the Blackrock Consensus 100 Fund I chose that for my LISA and switched my regular saving instruction from VLS100 to Blackrock Consensus 100 in the SIPP.

dunstonh · 30 July 2018 at 11:02AM

Perhaps unhelpful that the HL At a Glance Page lists:

Quote:
Ongoing charge (OCF/TER):
The wording suggests that they are interchangeable.

That is a shame as the FCA made clear in TR14/7 that:

3. For UCITS funds, information on charges in marketing material (including websites) must
be presented to investors in a way that is consistent with the key investor information
document (KIID).6
This means using the OCF as the headline charges figure.

4. Platforms, advisers and other intermediaries should also use the OCF as the headline charges figure for UCITS funds.

The FCA also had a section on consistency (not flitting between them unless necessary).

Effectively, UCITS have to use OCF and not TER or AMC. Non UCITS do not have that requirement but as the FCA wants consistency, the OCF should be used wherever it is available. Most non UCITS funds declare an OCF.

funkey_monkey · 30 July 2018 at 12:48PM

Thanks for all the replies.

I'm now deciding for which fund to opt for.

Baillie Gifford, Royal London and LS80 are consistent first quartile performers according to Trustnet.

The LifeStrategy 80 and 100 outperform their Blackrock equivalents (85 and 100), however the Blackrock funds have a lower OCF by a margin of 0.13% (0.09% versus 0.22%).

However, there will also be a 0.45% platform fee for HL for all funds. Maybe an alternative platform would be better?

I've looked at Cavendish Online for the Baillie Gifford fund (as an example):

Annual Management Charge (AMC) 0.4%
Total Expense Ratio (TER) 0.44%
Cavendish ongoing charge 0.05%
FundsNetwork Service Fee 0.20%

Is this 0.79% total fees or 1.19%?

dunstonh · 30 July 2018 at 1:06PM

The LifeStrategy 80 and 100 outperform their Blackrock equivalents (85 and 100), however the Blackrock funds have a lower OCF by a margin of 0.13% (0.09% versus 0.22%).

When it comes to multi-asset passives and looking at performance you are really looking at asset weightings and luck. The US has been the main driver over the last 10 years. Whereas the 10 years prior to that the US was underperforming global equities. So, a multi-asset passive that was weighted heavy to the US would have likely outperformed others that had lower US in the last decade but underperformed in the previous one to that. This is largely why VLS has outperformed some of the others.

As you dont know what the next decade is going to hold, you largely have to ignore the performance. You have to look at strategy, cost and asset weightings to see what you prefer.

VLS are not risk targetted. They move around the risk profile. L&G, HSBC, Architas are risk targetted. So, if downside is a concern, they may be more appropriate for you. A couple of those include property as well.

Deciding between VLS, L&GMI, HSBC GS, Architas MAP etc is a bit like going to the supermarket to buy apples and deciding which apple takes your fancy. They are variations of a theme. Each will have its period when it is best of the bunch and worst of the bunch. But you wont know in advance.

[Deleted User] · 30 July 2018 at 1:30PM

Hello funkey monkey,
I have Vanguard funds within the Vanguard platform, it may be worth you having a look to see if it is appropriate for your needs.
Regards
mrwmartin

funkey_monkey · 30 July 2018 at 9:16PM

How can you tell the maturity rate of the bonds in these funds? i.e how long are the terms of the bonds? My understanding is that long term bonds can be bad as rises in interest rate are missed.

I'm thinking that my strategy is going to be opt for low funds costs. I'm in two minds about UK exposure as I don't think a Hard Brexit will come to fruition as both sides, but specifically the UK, need a deal and the border needs resolution - I can sense an extension. What are peoples thoughts on this?
I am considering going for a more global outlook as it has more wriggle room to change tact depending on the outlook.

Self Investment into Passive Fund of Funds

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