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  • FIRST POST
    • mgarl10024
    • By mgarl10024 30th Nov 17, 6:01 PM
    • 618Posts
    • 438Thanks
    mgarl10024
    ETF equivalent of LifeStrategy
    • #1
    • 30th Nov 17, 6:01 PM
    ETF equivalent of LifeStrategy 30th Nov 17 at 6:01 PM
    Hi,

    I'm with HL for a SIPP, and have been investing in Vanguard's 100% LifeStrategy and would like to continue.

    However, http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates has an uncapped 0.45% charge on funds, but a 200 cap on ETFs.

    As the value of the SIPP goes over about 44k it occurred to me that I'd be better to swap the 100% LifeStrategy out for a combination of ETFs.

    I cannot leave HL as my employer has chosen them as their pension provider under a group SIPP deal.

    https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/portfolio-data shows what the LifeStrategy is investing in underneath, and I can't just replicate that because even that isn't made up of just ETFs.

    I've been reading up on investment but am still at early stages. Most books I'm reading say that if you don't know what you're doing (me) then passive index and Vanguard, so I'd need a good reason to move away from them. I'm happy with 100% equities as I'm young enough to weather shocks.

    I'm just not sure what combination of ETFs would replicate what I already have, or even if this is a sensible plan.

    Any thoughts?
Page 1
    • bowlhead99
    • By bowlhead99 30th Nov 17, 6:17 PM
    • 7,835 Posts
    • 14,310 Thanks
    bowlhead99
    • #2
    • 30th Nov 17, 6:17 PM
    • #2
    • 30th Nov 17, 6:17 PM
    You could literally just look at the fund factsheet for the vanguard lifestrategy fund you picked and see what index funds it holds in what proportion - eg a FTSE UK all share fund, a US index fund, Japan fund, emerging markets fund, Europe-excluding UK fund etc etc.

    There are individual ETFs from a range of providers - including vanguard themselves - for all those regional market indexes. You could just buy 10 different ETFs and "build your own" portfolio instead of buying an off-the-shelf portfolio fund.

    The practical issue is that each time the US grows a bit compared to emerging markets or Europe grows a bit relative to the UK, you have to decide if you are happy with that new mix, and if not, what are you going to buy and sell to 'replicate' what vanguard would have done in their fund.

    Example, on the last factsheet, the UK equities represent 25% of all the equities in total. However, since October the pound has strengthened against both Euro and dollar. So you might find that at end of November you are over 25% allocated to companies listed on the UK stock exchange, with comparatively less allocated to continental Europe or North America. Are you going to sell a bit of your UK ETF (paying a 12.50 dealing fee) and buy more of the US, Europe, Japanese, Asia-exJap, and EM ETFs and pay all the feeling fees on those? Or just let it ride with a higher concentration in UK listed companies than you started out at?

    Vanguard will rebalance internally to their model for free.
    Last edited by bowlhead99; 30-11-2017 at 6:19 PM.
    • Audaxer
    • By Audaxer 30th Nov 17, 10:42 PM
    • 1,050 Posts
    • 606 Thanks
    Audaxer
    • #3
    • 30th Nov 17, 10:42 PM
    • #3
    • 30th Nov 17, 10:42 PM
    https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/portfolio-data shows what the LifeStrategy is investing in underneath, and I can't just replicate that because even that isn't made up of just ETFs.
    Originally posted by mgarl10024
    I was surprised to see from the link above that the VLS100 includes some ETFs, as I thought all the VLS funds were made up just of index tracker funds.

    As to the question, it would be impractical and very costly to try and replicate the VLS100 with a bunch of ETFs as you would have to rebalance just about every day, or at least on a regular basis, as that happens automatically with the VLS funds.
    • cloud_dog
    • By cloud_dog 1st Dec 17, 12:39 AM
    • 3,695 Posts
    • 2,192 Thanks
    cloud_dog
    • #4
    • 1st Dec 17, 12:39 AM
    • #4
    • 1st Dec 17, 12:39 AM
    But surely the OP could buy two ETFs; all world equity and all world bond (or similar).

    It is highly unlikely that the OP would be able to mirror the breakdown percentages exactly for the VLS XX but in all likelihood it would be similar.

    I think the main question that would need to be considered is that VLS XX holds a far higher proportion in the UK than any 'all world' fund is likely to hold, i.e. VLS XX 25% (ish) and a all world ETF 6% (ish). For me that's not a deal breaker but it may be for the OP/others.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • bostonerimus
    • By bostonerimus 1st Dec 17, 1:14 AM
    • 1,826 Posts
    • 1,171 Thanks
    bostonerimus
    • #5
    • 1st Dec 17, 1:14 AM
    • #5
    • 1st Dec 17, 1:14 AM
    I was surprised to see from the link above that the VLS100 includes some ETFs, as I thought all the VLS funds were made up just of index tracker funds.

    As to the question, it would be impractical and very costly to try and replicate the VLS100 with a bunch of ETFs as you would have to rebalance just about every day, or at least on a regular basis, as that happens automatically with the VLS funds.
    Originally posted by Audaxer
    The ETF structure can be used for index tracker funds too.
    Misanthrope in search of similar for mutual loathing
    • dales1
    • By dales1 1st Dec 17, 7:13 PM
    • 45 Posts
    • 33 Thanks
    dales1
    • #6
    • 1st Dec 17, 7:13 PM
    • #6
    • 1st Dec 17, 7:13 PM
    cloud_dog mentions that all-world ETF (ie VWRL).
    Looking at it on HL, the last trade of the day (today) was a buy of 1m at a price 33% above the going rate.
    Somebody's employer isn't going to be too pleased.

    Dales.
    • mgarl10024
    • By mgarl10024 12th Dec 17, 2:07 PM
    • 618 Posts
    • 438 Thanks
    mgarl10024
    • #7
    • 12th Dec 17, 2:07 PM
    • #7
    • 12th Dec 17, 2:07 PM
    Thanks for the replies.

    I'd considered that I'd rebalance every month with new contributions, but what I'd not thought of (and thanks for pointing it out) is the transaction costs of 12.50 a hit. You wouldn't need many of those to clock up more than the HL fund charge.

    My employer is set on HL. I don't mind them, but I feel that their fees are paying for a service which I don't need if buying simple index trackers. It also just seems wrong that with an OCF of 0.22% from Vanguard, HL are charging double (0.45%) for just holding it while Vanguard are doing all the work!

    - I wonder if I could find my own SIPP provider that was cheaper and periodically transfer the funds out without closing the HL SIPP. E.g. once a year transfer to cheapSIPPCo while leaving the HL SIPP open ready for the next contributions. That way, I'd not build up a large balance with HL which would attract fees; would not incur transfer out fees (as a Group SIPP doesn't have them); and could keep it simple for the employer.

    - Alternatively, acknowledging the home bias of the Vanguard fund, I wonder if there's something more suitable that HL offer. I've always been confused why there is such a bias with the LifeStrategy, and logic says to go for something more representative of the global picture. I just don't have the skills here, and am reluctant to switch from Vanguard as it is so recommended (on here, MMM, jlcollinsnh, et al.).

    - Perhaps there's some 'regular investing' type deal for SIPPs where I can buy ETFs similar to what I'm after at a discount when clubbing together with others?

    More research required I think. Thanks again.
    • A_T
    • By A_T 12th Dec 17, 2:43 PM
    • 420 Posts
    • 273 Thanks
    A_T
    • #8
    • 12th Dec 17, 2:43 PM
    • #8
    • 12th Dec 17, 2:43 PM

    My employer is set on HL. I don't mind them, but I feel that their fees are paying for a service which I don't need if buying simple index trackers. It also just seems wrong that with an OCF of 0.22% from Vanguard, HL are charging double (0.45%) for just holding it while Vanguard are doing all the work!
    Originally posted by mgarl10024


    0.22% is the fee for the fund whoever the platform is. HL then charge an additional 0.45% on top. Vanguard's platform fee is 0.15% but only for ISA and regular account they don't have SIPP yet.
    • Alexland
    • By Alexland 12th Dec 17, 11:07 PM
    • 2,389 Posts
    • 1,790 Thanks
    Alexland
    • #9
    • 12th Dec 17, 11:07 PM
    • #9
    • 12th Dec 17, 11:07 PM
    I transferred a lump sum from my employer's chosen scheme (which offered limited choice) into a fixed price SIPP and I intend to do it again next year (once the balance has grown again). I leave a bit invested to keep the account open for new payroll contributions. It is sufficient hassle not to be worth doing too frequently.

    However I will be in a similar position to you with my LISA as the account balance grows in a few years as none of the LISA providers do fixed price platform unless you hold ETFs, Shares or ITs. I will probably just but a whole world shares ETF and change the fund mix in another account to compensate.
    Last edited by Alexland; 12-12-2017 at 11:14 PM.
    • AnotherJoe
    • By AnotherJoe 13th Dec 17, 8:29 AM
    • 9,426 Posts
    • 10,424 Thanks
    AnotherJoe
    You could look at it another way. The LF makeup is arbitrary. There!!!8217;s nothing scientific and sacrosanct about the 25% UK allocation (and much if that is in effect international companies anyway)

    So, an allocation of your own ETFs to a similar % level would be fine and there is absolutely no need to rebalance it every day or even every month to mirror LF simply because whose to say LF is the best or must be followed? There!!!8217;s an IFA here who posts that their allocations beat LF for example and why shouldn!!!8217;t they, because the LF makeup follows no scientific or even statistical method to work out what will provide best performance. Obvious if you think about it since 25% UK is far too neat a number.

    So, pick your own similar allocation and over time it will track LF roughly the same with an equal probability of being slightly better or slightly worse, but biased towards better since every year you have the advantage of saving the otherwise increasing fee
    • edinburgher
    • By edinburgher 13th Dec 17, 8:34 AM
    • 11,124 Posts
    • 59,707 Thanks
    edinburgher
    0.22% is the fee for the fund whoever the platform is. HL then charge an additional 0.45% on top. Vanguard's platform fee is 0.15% but only for ISA and regular account they don't have SIPP yet.
    Originally posted by A_T
    Vanguard have previously stated that this should be arriving in 2018. I have transferred a couple of old work pensions to an interim SIPP with no transfer out fees in preparation
    • Alexland
    • By Alexland 13th Dec 17, 8:07 PM
    • 2,389 Posts
    • 1,790 Thanks
    Alexland
    Vanguard have not confirmed pricing for their SIPP yet (it may not be the same as the ISA) and you might have to wait a bit longer as they said late 2018.
    • aberlyfid_2000
    • By aberlyfid_2000 24th Dec 17, 5:20 PM
    • 52 Posts
    • 13 Thanks
    aberlyfid_2000
    hl offer quite a lot of data on funds that's not easily accessible elsewhere. That's a part of the cost, as is the admin involved in holding funds (i.e. free switches, payments, statements, corporate actions etc).

    if you want to hold and forget something like the vanguard fund, then it might make sense to switch to a cheaper provider (there's plenty of choice).

    however, for momentarily rebalancing, its a great platform, and there are benefits to having all your funds in the same place.
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