Chief among the reasons why advisers use the LifeStrategy range is the value these funds deliver to their clients. That value essentially boils down to cost and performance – two factors inextricably linked and crucial to the assessment of value.

Using Vanguard index funds as the building blocks for a globally diversified portfolio of equities and bonds, ranging from 20% equities up to 100% equities, LifeStrategy funds aim to track global investment markets as closely as possible. And by keeping costs low, with an ongoing charges figure (OCF) of only 0.22%, investors get to keep more of those market returns.

Performance

Since the funds were launched in the UK, in June 2011, investment markets – global equities in particular – have risen significantly.

As can be seen in the chart below, the 100% equity portfolio delivered strong returns for investors with net cumulative growth of 146% since its UK launch. In-line with expectations, the portfolios with greater exposure to fixed income delivered lower returns over the period but with less risk to investors.

LifeStrategy Funds’ net cumulative growth

Investment growth of 100£ since inception

Past performance is not a reliable indicator of future results.
Source: Vanguard calculations based on Morningstar data between 30 June 2011 and 30 June 2021. Performance figures are in GBP, net of fees. They include the reinvestment of all dividends and any capital gains distributions. Basis of fund performance NAV to NAV with gross income reinvested.

“The performance is in-line with the different risk profiles – it does exactly what it says on the tin,” says Paul Gibson of Granite Financial Planning.

The major downturn over the decade was the ‘Covid crash’, which saw the MSCI All World Country Index (ACWI), which tracks large and medium-sized companies across 23 developed and 27 emerging markets fall about 20% in the first two weeks of March 20201. During periods of heightened market volatility, investor portfolios can benefit from an exposure to high quality, investment grade bonds, which typically help cushion the blow when stock markets tumble.

That was reflected in the way LifeStrategy portfolios behaved, with the 20% equity portfolio needing only four months to fully recover to its maximum value in the two months prior to the Covid crash. The 80% and 100% equity portfolios, on the other hand, required ten months to fully recover, as shown in the table below.

LifeStrategy Funds’ performance during and after Covid-19

  LifeStrategy 20% Equity Fund Lifetrategy 40% Equity Fund LifeStrategy 60% Equity Fund LifeStrategy 80% Equity Fund LifeStrategy 100% Equity Fund
Max value (Jan to Feb 2020) £10,309 £10,302 £10,296 £10,316 £10,365
Min value (March 2020) £9,485 £9,018 £8,558 £8,115 £7,693
Max percentage loss (Jan-Feb 2020 - Mar 2020) -8.0% -12.5% -16.8% -21.3% -25.7%
Cumulative growth from £10,000 (Jan 2020-Mar 2021) £10,602 £10,873 £11,152 £11,405 £11,624
Recovery 4 months 5 months 8 months 10 months 10 months

Past performance is not a reliable indicator of future results.

Source: Morningstar as at 30 April 2021.  Performance is in GBP, net of fees, and figures include the reinvestment of all dividends and any capital gains distributions. Basis of fund performance NAV to NAV.

“The LifeStrategy Funds were brilliant during the Covid crash of March last year – they went down less than the markets and came up faster,” says Dinesh Kumar, owner and Financial Planner at Axle Finance. “During the downturn, I was actively encouraging clients to invest in LifeStrategy and the ones that did are totally ecstatic,” Kumar adds.

LifeStrategy is the benchmark

Although the LifeStrategy Funds don’t use a benchmark, each of the five portfolios outperformed their respective Investment Association (IA) sectors on an annualised basis in the ten years since they were launched, as the chart below demonstrates.

LifeStrategy Funds vs. Investment Association sectors

10-years performance comparison (%)

Past performance is not a reliable indicator of future results.

Source: Morningstar. Data between 1 July 2011 and 30 June 2021. Annualised returns. Performance is in GBP, net of fees, and figures include the reinvestment of all dividends and any capital gains distributions. The performance data does not take account of the commissions and costs incurred in the issue and redemption of shares. Basis of fund performance NAV to NAV with gross income reinvested.

Such is the consistency of the LifeStrategy fund range’s performance, many of the advisers we spoke with said they used LifeStrategy funds as a benchmark when assessing new client model portfolios.

“We’ll do a like-for-like comparison and look at how the client’s existing portfolio performed against an appropriate LifeStrategy portfolio,” says Gibson. “I think fewer than five clients have either outperformed or broadly been close to LifeStrategy – nobody has ever substantially outperformed the funds.”

David Garvey, founder and Managing Director of Executive Wealth Services, adds: “When we moved legacy client holdings over to our new business 2 years ago, we conducted a cost and performance analysis of legacy model portfolios against the relevant LifeStrategy offerings for more than 100 clients. Only once did the performance get anywhere near to what LifeStrategy was offering on a like-for-like equity exposure basis. That tells me that there is value in there somewhere.”

Keeping costs low

However a fund performs, investor returns are diminished by the fees paid to the fund’s manager. Such is the importance of fund costs to investor outcomes, our research has shown that low-cost funds have a higher probability of outperforming costlier peers, spanning both active and index strategies2.

“Active or passive – it’s not about that,” says Garvey. “The argument should center around how to deliver the most value to the client. Advisers should be thinking about generating the most positive outcome for the client and their business. You have to approach it from the right angle.”

While advisers can’t control the performance of their clients’ investments, they can control the costs. And with an OCF of only 0.22%, LifeStrategy investors keep more of their returns regardless of how markets behave.

“Cost of the fund is paramount and there are masses of evidence out there to support that view,” says Kumar. “That’s why my filtering process for choosing an investment fund stops at cost.”

Ed Sayers, Financial Planner and owner at Bright Cube Money, says: “With LifeStrategy costs being so low, it reduces the hurdle an investment must clear before clients begin to make a profit.”

Keeping costs low is one of Vanguard’s four principles for investment success (along with goals, balance and discipline) and stems from the research undertaken by Vanguard’s founder and index investing pioneer Jack Bogle.

“The more I’ve studied investment markets, reading Jack Bogle’s book for example, I realised that most managers simply charged too much money,” says Gibson.

“I’m personally invested in the Vanguard LifeStrategy Funds, as are my clients; and we put up all the capital, we take all the investment risk, so it’s only fair that we get a fair share of the market returns,” Gibson adds.

A benefit of Vanguard’s mutual structure in the US, where it is the fund owners who own Vanguard3, is that Vanguard’s interests are aligned with those of our investors globally, for example by keeping costs low. This is core to everything we do and our aim will always be to pass as much as possible back to our investors.

Annual performance

  01 Jul 2016 - 30 Jun 2017 01 Jul 2017 - 30 Jun 2018 01 Jul 2018 - 30 Jun 2019 01 Jul 2019 - 30 Jun 2020 01 Jul 2020 - 30 Jun 2021
"Vanguard LifeStrategy® 20% Equity Fund - GBP Accumulation Shares" 3.68% 2.38% 6.51% 5.87% 3.61%
"Vanguard LifeStrategy® 40% Equity Fund - GBP Accumulation Shares" 8.03% 3.91% 6.60% 4.78% 8.31%
"Vanguard LifeStrategy® 60% Equity Fund - GBP Accumulation Shares" 12.51% 5.74% 6.84% 3.60% 13.44%
"Vanguard LifeStrategy® 80% Equity Fund - GBP Accumulation Shares" 17.04% 7.47% 7.12% 2.26% 18.66%
"Vanguard LifeStrategy® 100% Equity Fund - GBP Accumulation Shares" 21.71% 9.17% 7.39% 0.85% 23.84%

Source: Vanguard. Performance and Data is calculated on closing NAV as at 30 June 2021.

 

1 Source: MSCI. All Country World Index end of day price, data between 28 February 2020 to 30 June 2021. Calculated in GBP. Net of fees.

Source: Plagge, Walker, Hon and Corlett-Roy, 2021. “The case for low-cost index-fund investing”, Vanguard.

3 Vanguard Group, Inc. is owned by Vanguard’s US-domiciled funds and ETFs. Those funds in turn are owned by their investors. While VGI’s ownership structure can’t be replicated outside of the US (due to regulatory restrictions), we believe that this mutual structure aligns Vanguard’s interests with those of our investors globally.

Investment Risk Information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

Investments in smaller companies may be more volatile than investments in well-established blue chip companies.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.

The Vanguard LifeStrategy® Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.

For further information on risks please see the “Risk Factors” section of the prospectus on our website.

Important Information

This document is directed at professional investors and should not be distributed to, or relied upon by retail investors.


This document is designed for use by, and is directed only at persons resident in the UK.

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.

For further information on the fund's investment policy, please refer to the Key Investor Information Document (“KIID”). The KIID for this fund is available, alongside the Prospectus via Vanguard website.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2021 Vanguard Asset Management Limited. All rights reserved.