Vanguard alternatives without too much UK exposure

eskbanker wrote: »

Blackrock Consensus, HSBC Global Strategy and L&G Multi-Index are typically seen as global multi-asset competitors to VLS, with a lower UK bias....

The Lifestrategy series all have 25% of their equities in UK index regardless of whether the equity content is 20 40, 60, 80, 100% of the overall fund.

For Blackrock Consensus, only the 'up to 100% equities' version, the highest risk one, has lower than Vanguard's 25% of equities in the UK (16%+ of UK equity and a couple of percent cash). All the other ones in the series, for people who are not super-gung-ho on equities, have a higher domestic percentage than Vanguard.

For example the Consensus 70, which promises to never have more than 70% in equities and is currently about 40% bonds and cash, has 26% of the whole fund (and implicitly over 40% of the equity content) in their UK index fund. Likewise the 85, which isn't going to get over 85% equity content, has 23% in a UK index fund and 6% in FTSE100. So that's definitely over a quarter of the equities being UK listed equities.


Likewise if you look at L&G multi-index 5 or 6, they don't really have lower UK content than Vanguard. Something like 23-24% of the equities are UK equities and they also have a few percent direct property component which is exclusively UK, in addition to their listed property and global infrastructure bit and global smallcap bit which will be partially UK. The bonds are a bit less UK than they might be at Vanguard, depending on which particular Vanguard...


HSBC Global strategy I would agree with you is significantly lower UK content.


The obvious overall comment to make however, is all these cheapo index-based funds-of-funds are using indexes for their exposure to the different regions. So when Vanguard puts a quarter of your equities money in 'the UK' we know that's not really the UK economy but simply shorthand for the UK index, which is dominated by companies that make most of their revenues and profits outside the UK. The top five companies in the UK index represent over a quarter of the index by themselves: HSBC, BP, Shell, BAT and Glaxo. Next you have AstraZeneca, Diageo, Rio Tinto, Vodafone. They are global players with revenues from developed and emerging markets, substantially in dollars but also HKD, Yuan, Euro etc.

So, having a quarter of your equities holdings in the UK stockmarket when we know the UK stockmarket is less than 10% of the global market by market cap, is not quite as bad as it sounds, because a lot of the profits and assets in those companies are not in the UK and not so subject to Brexit woes or UK politics that you might expect etc; if they want to move to Europe or the US or Asia because tax rates or regulations here change for the worse, they might just do so, without losing a lot of value in the process.

One approach if you want say 10-20%+ of your equities in the UK but don't like as much as 25%, is to get an HSBC Global Strategy Balanced or Dynamic fund and then simply add an actively managed (rather than indexed) UK fund on the side. Some people would say that's silly because HSBC (or L&G in the other direction) have come up with professional allocations to match a risk tolerance so you should not screw with it. But as the UK All-Share index is dominated by the FTSE100 (and therefore by big multinationals and certain industry sectors at the expense of others) I am generally not a fan of doing my UK allocation through an index alone.

Fed wrote: »

Vanguard FTSE Global All Cap Index Fund worth a look

It is worth a look to get an idea of where different countries and regions sit in the global pecking order of stock market size on a cap-weighted index (albeit, only of shares available in free float). But as it's 100% equity, not a direct substitute for a Lifestrategy 60 or 80.

xyz123 wrote: »

Any suggestions please? (I know vanguard do ex UK version but I don't want to omit 100%of UK).

Vanguard don't do an ex-UK version of their Lifestrategy product. It is designed as a self-rebalancing multi asset fund covering all major regions. If you wanted an equities-only fund with no bonds etc, then yes they do a world ex-UK or europe ex-UK equities-only index fund, but like the Global All Cap one mentioned, that isn't a substitute for what you currently have which isn't exclusively equities, and does contain bonds.

To go equity-only adds more risk. As does higher overseas exposure, but you might be happy with that if you are going to buy some non-equities fund(s) and add them into the mix