The five LifeStrategy funds are marketed by Vanguard as a low-cost all-in-one solution providing professional portfolio construction, management and risk control in a transparent way. The LifeStrategy fundsare built using a preset broadly diversified asset allocation and automatic rebalancing to avoid drifting away from this and ensure the portfolio stays in line with the investor’s objectives. The funds comprise amix of global equities, ranging from 20 per cent to 100 per cent, with the remainder in UK bonds using existing Vanguard index funds.
Vanguard believes that using index funds as the underlying building blocks reduces volatility relative to using active funds, while also providing a low-cost, transparent and broadly diversified portfolio.It is well known for its passive investment strategies, but not all IFAs are fans of passive only portfolio. Some advisers may also prefer passive portfolios with active asset allocation offered by companies such as Evercore Pan Asset and 7IM.
Defaqto insight analyst for funds Fraser Donaldson says: “The five funds are also categorised into three distinct investment periods and risk profiles – short term at three to five years, medium at longer term of five plus years and longer term investing of 10 years plus.
These asset managed funds combine the attractions of low-cost passive investment with the increasingly popular risk banding, which will be popular with many IFAs looking for simple outsourcing options.
Advisers requiring passive investment will no doubt be excited by the cost of these funds. They are extremely competitive in a market where charges are under more scrutiny than ever before. However, access to these funds via Vanguard is restricted with a minimum investment of £100,000. Advisers with clients with less than £100,000 to invest should check the terms with their platform, where minimums are likely to be considerably less.”