Multi-Asset Funds - Differences?

rathernot wrote: »

I'm looking to put some money away into a LifeStrategy type multi-asset fund, around 40-50% equities maximum.

From looking around the options seem to be:

• LifeStrategy
• HSBC
• L&G
• Blackrock consensus
• Architas Passive

They are far from the only multi-asset funds - of which there are hundreds, really - but I suppose you could say they are the most commonly-discussed popular options for what you're calling "LifeStrategy type multi-asset funds" i.e. the subset of open-ended funds that span multiple asset classes but are built out of mostly passive building blocks for the underlying exposure to stocks and bonds etc.

LifeStrategy seems the most often mentioned as it's pretty much "fire and forget" which is the point.

With a number of the rivals, you pick your risk level and the fund manager takes care of sticking to it for you, with the portfolio allocation mix changing from time to time in pursuit of the overall objective - following whatever strategy the manager employs for his asset allocation mix. The manager will do stuff behind the scenes as necesssary to keep the mix in line with whatever he or his advisers see fit at a point in time. It can be a fluid mix that changes somewhat over the course of an economic cycle in an attempt to target a particular level of rik or volatility. From your perspective you give the money to the manager and forget it.

With Lifestrategy they don't attempt to target a particular level of risk or annualised volatility, They just promise you the result of x% equity (of which y% is domestic stockmarket rather than international stockmarkets), and y% bonds.

As such, Mallygirl and Dunstonh above would describes the Lifestrategy product as 'performance targeted' rather than 'risk targeted'. The former builds a portfolio to targets the performance of whatever you'll get from taking exposure to x% equity and z% bonds, while the latter would target a particular level of risk appetite and more dynamically change the holdings to keep you in that 'risk band' over time based on what their consultants say is an asset mix that qualifies as being in that risk band from time to time..

With the Vanguard product you can clearly 'go up and down the risk scale' by choosing the greater or lesser equity versions, so some people would say the distinction is just semantics. However, over the course of an economic cycle the probable risk or volatility being presented by a given mix of a% b% c% d% in different domestic and international regions and e% in domestic bonds, f% index linked bonds, g% international corporate bonds hedged to sterling, etc.. can change.

So perhaps you pick VLS40 and someone reviews its contents and grades it 4 out of 10 risk one year and 5 out of 10 risk another year even though its contents didn't really change. Whereas if you picked L&G Multi Index 5 it would always expect to be rated 5 out of 10 every year because they design it to be able to efficiently change its composition to remain within that risk profile.

Are there any specific situations in which you'd be looking at the others in preference to LifeStrategy?

As a general rule it makes sense to look at all the options although depending on the amounts involved it may not be worth spending incremental extra time trying to finesse a solution from the very best thing you could possibly find - instead, just stopping when you have found something 'good enough'.

So if you had five fund brands to look at and you were considering a couple from each range (e.g. HSBC Conservative and Balanced, L&G MI 4 and 5, etc) you have ten funds to look at. Maybe the third one you look at is good enough for your needs, in terms of 'putting some money away' at a reasonable cost with reasonable prospects and not excessive risk, so you don't bother to painstakingly evaluate the other seven which you haven't even looked at yet. So depending where you start on that list of ten funds and what your objectives are, you might never get to Vanguard. Or if you start at Vanguard you might never move past it. The more money you are investing, the more it is worth your while considering what choices are available and how they all operate.


A number of years ago I used Blackrock Consensus 70 or 85 as filler in my parents ISA portfolios which I was trying to sort out for them and cut down the number of holdings. At the time, their platform (HL) had a discounted management fee on the fund so the effective OCF came down to around 0.1% which was welcome given the HL platform fee is a pretty high percentage.

Fast forward to a couple of years ago after the portfolios became larger and we wanted to reduce the risk profile (and would be changing platforms to save costs, so the fee incentive on Blackrock wasn't relevant), they started to move over to L&G MI 5 instead (http://www.lgim.com/files/_document-library/adviser/multi-index-income-consumer-guide.pdf) which is a reasonable mix with dedicated property / listed infrastructure allocation.

I say 'started to'; my mum moved her Consensus allocation over to the Multi Index, but my dad is always reluctant to sell things that have been having a good run (for something that might not go up as much in the good times, even though he doesn't like the idea of losses...) so he still has about 5% left in Consensus which won't really change the portfolio outcome too much compared to being something lower risk from another provider.

With hindsight, Vanguard's greater US index allocation would have given it a better result than Blackrock for the same level of equities over the last five years, but that's not a feature which will endure from one period to the next as the US won't aways be the best place to be invested.