High exposure to UK and US equities has played out well for the Vanguard LifeStrategy 80 per cent Equity Fund, returning 42.38 per cent in the past three years, placing it above its sector average.
The primary objective of the £260.9m fund is to achieve income and capital returns through exposure to a diversified notional portfolio through investment in passive index-tracking collective investment schemes. The portfolio’s underlying holdings are Vanguard’s own passive index tracking funds.
Managed by Vanguard’s Europe Equity Index team, the diversified portfolio invests across an array of sectors including healthcare, energy, telecommunications, utilities and IT.
The portfolio has good UK exposure, with a 20 per cent exposure in equities, 2.9 per cent in gilts, 1.8 per cent in corporate bonds and 1.4 per cent in index-linked bonds.
A fettered portfolio, its top three holdings are the £1.6bn US Equity Index fund, at 19.2 per cent; the £1.4bn FTSE Developed World Equity Index Fund, at 19.2 per cent; and the £1.5bn FTSE UK Equity Index Fund, at 15 per cent.
Minimum investment is £100,000, unless through a nominee account, and according to data from Morningstar it sits 17th in the Investment Management Association’s Mixed Investment 40-85 per cent share sector. The ongoing charge is a low 0.29 per cent.
In the same peer group, the Barclays Wealth Global Markets seeks to provide capital growth over the medium to long term.
In contrast, the portfolio has underperformed in its sector in the past three years but has returned a decent 22.6 per cent, placing it 116th in the IMA sector.
The £11.2m fund invests into a range of indexed funds, including ETFs, and will predominantly maintain a spread of investments in equities, bonds, property, commodities and alternative trading strategies.
Fund manager Jamie Arguello has focused on equities, with a 47.5 per cent exposure to developed market equities followed by 14.6 per cent in global emerging market equities. The portfolio’s regional allocation shows a 31.3 per cent exposure to the US.
The portfolio’s top three holdings are: £6.1bn BlackRock Developed World Index fund, at 18 per cent; the £1.2bn Vanguard Global Stock Index, at 17.7 per cent; and the £5.4bn Blackrock Emerging Market Index, at 14.6 per cent.
The minimum investment is £500, and the fund’s ongoing charge is 1.67 per cent.
TOP FIVE HOLDINGS
| Vanguard LifeStrategy | Barclays Wealth Global Markets |
| Vanguard US Equity Fund 19.2% | Blackrock Developed World Index fund 18% |
| Vanguard FTSE Developed World Equity Index Fund 19.2% | Vanguard Global Stock Index 17.7% |
| Vanguard FTSE UK Equity Index Fund 15% | Blackrock Emerging Market Index 14.6% |
| Vangard Global Index Fund 14.1% | DB X-Trackers DB Hedge Index UCITS ETF 11.7% |
| Vangard FTSE Developed Europe Equity Index Fund 7.1% | HSBC ETFS PLC MSCI USA UCITS ETF 11.7% |
ADVISER SAYS…
Gordon Bowden, director of Buckinghamshire-based Quainton Hills Financial Planning, said: “The Vanguard fund is a classic passive solution for those that want a set asset allocation. The costs are low, which has helped to make a successful proposition.
“Since the fund’s launch in 2011, it has outperformed the average of funds in its share sector. Vanguard’s minimum investment of £100,000 is usually circumvented by purchasing through a suitable platform.
“The Barclays fund takes a different strategy. It is an actively managed fund of predominantly passive funds. The charges are significantly higher but platforms might have access to lower-cost units.
“The higher charges are difficult to justify for a fund of passive funds and will be a drag on performance. Since launch in 2010 the fund has underperformed the average of funds in the sector.
“Both funds have approximately 40 per cent exposure to the US, and while the Barclays fund has more discretion in altering its overall asset allocation, the strategy has not worked so far. With high charges and a poor track record it is difficult to see the benefits of the Barclays fund.”
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