Global Equity trackers vs other passive 100% equity funds

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quanta
quanta Posts: 7 Forumite
in Savings & investments
What are your opinions on the merits of 'true' global equity trackers (e.g. Fidelity Index World, HSBC FTSE All World Index etc) compared to the other 100% funds (e.g. VLS 100, Blackrock Consensus 100 etc)?

After I had initially decided on Blackrock Consensus 100 as my main holding in my LISA, I have been doing some more research before committing my funds and have found that the trackers have outperformed.

VLS 100 in particular is very popular and recommended often, yet Fidelity Index World has outperformed it and has a lower OCF.

I have read the "Cheapest Way Into Global Tracker Funds" thread with interest (sorry I can't post links yet), which compares the difference between the two main world indices and the costs of the various funds.
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  • londoninvestor
    londoninvestor Posts: 1,350 Forumite
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    The first thing that springs to mind is that the Vanguard and Blackrock funds both underweight the US relative to its share of global market cap. In Vanguard's case, I think they're pretty explicit that VLS is aimed at UK investors and will always intentionally overweight the UK. With Blackrock, not so clear (to me) whether they expect to systemically overweight the UK, or whether their current allocations are more driven by valuation.

    So they're not trying to do quite the same thing as the pure tracker funds, and it probably doesn't make sense to think of one type of fund as more or less "competent" than the other.

    Your choice then probably depends more on your investment philosophy, and this brings in questions like:
    • Is your "home" market a better investment to meet your expected future spending?
    • Do CAPE and other valuation metrics enable you to predict that some country markets will perform better than others?
    • Can one be smarter than the way the global market has ended up investing capital?

    I'll try not to express an opinion on those - others may well do so ;)
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    VLS 100 in particular is very popular and recommended often, yet Fidelity Index World has outperformed it and has a lower OCF.

    VLS100 is not that popular. Only VLS20 has less money in it from the VLS range. And Fidelity World Index almost has the same amount invested in it as VLS100.

    Fidelity has heavier weightings to the US. So, from 2012, it has understandably outperformed VLS100. If you took the decade earlier, the one with less US allocation would have outperformed.

    These are management decisions. Even if you buy into the passive way of thinking, you still have management decisions involved.

    Also, VLS is not actually a tracker. It is a fettered fund of funds with a management decision on the weightings in each sector.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • A_T
    A_T Posts: 959 Forumite
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    I can't see any good reason for using VLS100 instead of Vanguard's FTSE Global All Cap Index Fund.
  • pinkllama
    pinkllama Posts: 119 Forumite
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    +1 for FTSE Global All-Cap Fund
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    edited 24 June 2018 at 3:28PM
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    It's all about asset allocation or maybe not at this level. Whether you overweight slightly in a particular area like the UK with VLS100 or go with something closer to some cap weighted world index might be a fun and informative discussion, but 30 or 40 years from now it probably won't make that much difference to your success or failure. Eliminating debt and Investing enough early enough is far more important. If you have a solid foundation it doesn't matter if it's concrete or granite.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    If, as some writers suggest, international equity markets are likely to show closer and closer correlation, then you could be pretty relaxed about being overweight in the UK, especially as it's probably more tax efficient because of withholding tax on dividends received by the ETF.
    Free the dunston one next time too.
  • jsinc
    jsinc Posts: 306 Forumite
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    As dunstonh says VLS = fund of funds.

    Fidelity Index World doesn't include emerging markets, whereas Vanguard FTSE Global and HSBC FTSE All-World do. From memory Vanguard and HSBC have similar global allocations but Vanguard has considerably more constituent holdings and higher weight of small vs large companies, but all 3 funds consist of ~3000+ holdings.

    There's more data available for HSBC and Fidelity as Vanguard fund only started late 2016. Fund charges slightly lower on HSBC vs Vanguard, and both higher than Fidelity.

    My LISA's in the HSBC but have a VLS 60 holding in a SIPP. The choice depends on what you're after, taking into account your own general outlook and allocations.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    londoninvestor wrote: »
    The first thing that springs to mind is that the Vanguard and Blackrock funds both underweight the US relative to its share of global market cap.

    Market capitalisation alone is misleading. As there's a lot stock which isn't actively traded or free to trade. .
  • londoninvestor
    londoninvestor Posts: 1,350 Forumite
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    Thrugelmir wrote: »
    Market capitalisation alone is misleading. As there's a lot stock which isn't actively traded or free to trade. .

    My feeling too, and it leads me to personally overweight EM... but opinions differ.

    GDP-weighted indices do exist, both from FTSE and MSCI - but from a quick search I can't see funds or ETF that track them.
  • A_T
    A_T Posts: 959 Forumite
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    londoninvestor wrote: »
    My feeling too, and it leads me to personally overweight EM... but opinions differ.

    GDP-weighted indices do exist, both from FTSE and MSCI - but from a quick search I can't see funds or ETF that track them.

    it doesn't track a FTSE or MSCI Index but HSBC have HEWA (HSBC Economic Scale Worldwide Equity UCITS ETF)
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