Fund fo­cus

‘All-in-one’ port­fo­lios

The Daily Telegraph - Your Money - - FRONT PAGE -

Many peo­ple will not have heard of Van­guard’s LifeS­trat­egy fund range, but if you have a pen­sion or use a fi­nan­cial ad­viser the chances are that you hold it or a fund like it.

The funds are low-cost, one-stop-shop port­fo­lios that aim to give ex­po­sure to a range of as­sets at low cost. They use “pas­sive” funds, which are cheap and track a stock mar­ket, as op­posed to “ac­tively man­aged” al­ter­na­tives.

“Pas­sive” funds have boomed re­cently as ac­tive man­agers of­ten fail to out­per­form and as in­vestors have be­come more cost con­scious.

Port­fo­lios as­sem­bled from pas­sive funds have be­come the de­fault op­tions for many in­di­vid­u­als’ com­pany pen­sion schemes and are fre­quently used by ad­vis­ers.

Van­guard’s £5bn LifeS­trat­egy range has be­come highly pop­u­lar and is of­ten tipped by the ad­vis­ers who con­trib­ute to our Money Makeover se­ries. Only this week AJ Bell, the in­vest­ment shop, launched a ri­val range.

The funds are avail­able for an “on­go­ing” charge of 0.22pc a year. There are five in to­tal: the least risky has 20pc in shares and 80pc in bonds, while the most risky has 100pc in shares.

But Van­guard is not the only as­set man­ager to of­fer a cheap one-stop-shop in­vest­ment op­tion. Tele­graph Money looks at its main com­peti­tors.

Black­Rock Con­sen­sus

The Black­Rock range is sim­i­lar to Van­guard’s. The five funds, which col­lec­tively have £8.9bn in­vested in them, also of­fer mixes of shares and bonds and are in­tended to be ready-made port­fo­lios.

Un­like Van­guard, which aims to stick to a par­tic­u­lar share al­lo­ca­tion for each of the five funds, the Black­Rock funds are more flex­i­ble, and the share al­lo­ca­tion must only sit within a range.

For in­stance, the Black­Rock Con­sen­sus 85 fund can be be­tween 40pc and 85pc in­vested in shares.

The Black­Rock funds typ­i­cally cost 0.23pc, al­though dis­counts may be avail­able via cer­tain fund shops. Har­g­reaves Lans­down, for in­stance, of­fers the Black­Rock Con­sen­sus 85 fund for just 0.09pc.

Pa­trick Con­nolly, a fi­nan­cial plan­ner at Chase de Vere, the ad­vi­sory firm, said: “Van­guard’s split be­tween shares and bonds is fixed, and ex­po­sure is heav­ily fo­cused on the US and in­ter­na­tional mar­kets.

“The Black­Rock funds de­cide weight­ings de­pend­ing on the aver­age in the rel­e­vant sec­tor, and are more heav­ily fo­cused on the UK.”

This means the Black­Rock funds change ac­cord­ing to what ac­tive fund man­agers who in­vest in the same area are do­ing.

Mr Con­nolly said there was no right or wrong style, al­though Van­guard’s more in­ter­na­tional ap­proach had re­cently de­liv­ered stronger re­turns thanks to the weak­ness of the pound and strength of the Amer­i­can stock mar­ket.

L&G Multi-In­dex

L&G has a £1.8bn range of eight “Multi-In­dex” funds that serve a sim­i­lar pur­pose.

There are five for growth and three for in­come, cater­ing for in­vestors with dif­fer­ent risk ap­petites. The growth funds have an on­go­ing charge of 0.31pc, while the in­come funds range in cost from 0.36pc to 0.39pc. Again, some fund shops may of­fer dis­counts.

Un­like the Van­guard funds, which stick to their as­set weight­ings, and the Black­Rock funds, which sway with sec­tor moves, the as­set al­lo­ca­tion of the L&G funds is “ac­tive”.

This means that L&G de­cides which as­sets look most promis­ing to in­vest in at any one time.

It will keep th­ese choices ap­pro­pri­ate to the fund’s risk level, but will make a de­ci­sion, for ex­am­ple, about whether Bri­tish or Amer­i­can com­pa­nies look more at­trac­tive.

Stan­dard Life MyFo­lio

The MyFo­lio Mar­ket range from Stan­dard Life In­vest­ments has five low­cost port­fo­lios that in­vest in pas­sive funds.

This £2.9bn range is the most ex­pen­sive, at be­tween 0.45pc and 0.52pc if bought through a fund shop. Charges are higher if you buy di­rectly from Stan­dard Life.

The funds range from in­vest­ing in safer as­sets, such as MyFo­lio Mar­ket I, which in­vests more in cash and bonds, to riskier op­tions, such as MyFo­lio Mar­ket V, which in­vests more in shares. Mar­ket V typ­i­cally has around 90pc of the fund in­vested in stocks.

The man­agers look at the as­set split ev­ery three months and may de­cide to change the in­vest­ments. The port­fo­lios also use some “ac­tive” funds, but only for prop­erty.

Op­tions: Black­Rock, which is head­quar­tered in the City of Lon­don’s Wal­brook Build­ing, of­fers funds to ri­val Van­guard’s LifeS­trat­egy

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