Watch on demand as we analyse the funds’ performance over the last decade and take a look ahead to the next ten years. In addition, we will offer a fresh update on the present macro environment, including our thoughts on the latest data regarding inflation, interest rates and the Covid-19 pandemic.
The foundation underpinning every successful advisory business is trust. Investors must trust their adviser to make sound investment decisions on their behalf, according to their goals and objectives. Advisers must trust the investment manager to manage their client’s savings effectively in-line with expectations.
With more than £32bn of investor savings entrusted to Vanguard’s LifeStrategy range in the UK1, we asked some of our adviser partners in the UK to tell us why they use the funds for their clients.
We noted some recurring themes such as the funds’ asset allocation policy, the automatic rebalancing feature and Vanguard’s scale and reputation, which in combination deliver a peace of mind that client assets are well-managed in LifeStrategy Funds. In this blog, we share some of the responses we received in relation to the trust advisers have in LifeStrategy.
LifeStrategy funds are designed to ensure diversification across global equity and bond markets to give investors the best chance of reaching their objectives. The 60% equity fund, for example, offers exposure to more than 40 countries, 11 equity sectors and high-quality corporate bonds ranging from AAA to BBB, all within more than 27,600 unique holdings across equities and fixed income2.
“I just knew that LifeStrategy would be fine [during the Covid-19 crisis] because the fixed income portfolio – however large or small – was in high quality bonds, so it was never going to collapse,” says Minesh Patel, Director and Financial Planner at EA Financial Solutions in Hertfordshire. In fact, it took the 60% equity fund only eight months to recover to its maximum value between the beginning of January 2020 and the end of February 20213. Over the same period, the 80% equity fund took 10 months to fully recover while the 20% equity portfolio recovered in just four months.
The LifeStrategy range offers five different mixes of equities and bonds, intended to offer appropriate blends for different risk tolerances and investment goals.
For clients with longer investment horizons that can afford to take a little more risk, the 100% equity fund offers sensible access to global equities, says Alexander Hollinshead of London-based Acuity Professional. “I like the fact there is a punchier option out there that still controls its risk,” he says. “I often use the 100% equity portfolio for clients that have a longer investment horizon because you still get that diversification, Vanguard’s knowhow and importantly it stays within its risk mandate.”
Whether a client is invested in the 80% equity portfolio or the 20% equity portfolio, maintaining the target asset mix is crucial to avoiding portfolio drift and taking unintended risks. To keep clients within their predetermined asset mix consistently through time and market events, the LifeStrategy Funds employ periodic rebalancing, based on cashflows with some flexibility during periods of heightened market volatility. As well as preserving a portfolio’s risk profile, the process ensures both advisers and clients know what their portfolio is invested in at any time.
“A moderate investor can go into the 60% equity fund and they will know that in six months’ time or a year from now, they will still be invested 60% in equities. Things won’t have gotten skewed, overpriced or baggy in another area, which is something I really emphasise with clients,” says Ed Sayers, Financial Planner and owner at Bright Cube Money, based in London.
Vanguard’s scale and reputation as a leader in multi-asset index solutions offers a sense of security to advisers recommending LifeStrategy funds to clients. This was of particular importance in the early years, according to Sayers, whose clients are predominantly freelancers and self-employed individuals.
“If I go back to when I first began recommending LifeStrategy to clients about six or seven years ago, it was me, a small adviser business, recommending a relatively new fund to another small-business owner or self-employed client,” he says. “It helped that I could say: ‘Vanguard is one of the largest managers in the world and this is their flagship fund range in the UK’ – it gives everyone a bit of confidence.”
Ultimately, LifeStrategy Funds represent an easy investment decision for the advisers we spoke to.
For clients with a moderate amount to invest, allocating 100% to the appropriate LifeStrategy portfolio is a “no-brainer”, says Dinesh Kumar, owner and Financial Planner at London-based Axle Finance. “I have no issues with putting the whole sum in a single LifeStrategy fund based on the client’s risk profile.” he says.
With annual ongoing charges of only 0.22%4, LifeStrategy Funds offer access to global markets through a broadly diversified, risk-controlled portfolio at a low cost, enabling clients to keep more of their returns.
Paul Gibson, founder and Financial Planner at Aberdeenshire-based Granite Financial Planning says: “With Vanguard, you know what you’re getting. It may not be the cheapest across every single fund-range, but you’re getting good value.”
In the next edition of our three-part series of adviser stories, in celebration of LifeStrategy’s 10-year anniversary, we explore the ways in which the fund range has helped advisers grow and improve their businesses. In particular, we look at how using LifeStrategy Funds has afforded advisers more time to focus on delivering value to clients.
1,2 Vanguard, 30 June 2021.
3 Morningstar. Data correct as at 30 April 2021. Performance calculated in GBP, net of fees, including the reinvestment of all dividends and any capital gains distributions. Basis of fund performance NAV to NAV. Past performance is not a reliable indicator of future returns.
4 Source Vanguard. Data as of 14 December, 2020. The Ongoing Charges Figure (OCF) covers the fund manager’s costs of managing the fund. It does not include dealing costs or additional costs such as audit fees.
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.
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 information 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 is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of [units/shares], and the receipt of distribution from any investment.
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 KIIDs for these funds are 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.
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