Active v Passive - thoughts?

[DibblyDobbler]

Hi All. Any words of wisdom appreciated - I have a decent amount of money in a SIPP with HL for which I am choosing the funds.

I've been in various managed funds over the last 5 years or so and have done ok but I read recently that only 25% of managed funds will beat a tracker... so am I being an arse?

Thanks for any replies

Edited by DibblyDobbler on Sunday 12th February 22:21

[ellroy]

There's no right or wrong answer to the question.

A passive fund will be cheaper, but ultimately will underperform the index it replicates. Whilst an active fund will cost more and offers the chance of outperformance. There are some 'active' passive funds, ETFs out there which are quite interesting as well, just to muddy the waters.

I would suggest it depends on what assets/index you are wanting exposure to that should guide you. For example, it's very hard to outperform the S&P 500 on any consistent longer term basis so a passive approach may make most sense, but on the flip side with the huge amount of Sovereign debt in Fixed Interest Indices I'd not want a passive fund in that area at present.

[DibblyDobbler]

Thanks. I'm currently in the HL multi manager funds - i.e. a 'fund of funds' - to try and get some diversification and in the hope that they will deselect any duff fund managers. But the fees are pretty high so, as usual, I'm not sure if I'm doing the right thing! If I do go for a tracker I wouldn't know which index to go for so it's tricky ...

[Countdown]

With a "fund of funds" don't you end up paying charges twice over?

I prefer trackers personally.

[DibblyDobbler]

Countdown said:

With a "fund of funds" don't you end up paying charges twice over?

I prefer trackers personally.

Well I don't know about twice over but the fees are pretty high - yes.

What trackers are you in?

[CarlosFandango11]

DibblyDobbler said:

Countdown said:

With a "fund of funds" don't you end up paying charges twice over?

I prefer trackers personally.

Well I don't know about twice over but the fees are pretty high - yes.

What trackers are you in?

How's about something like Vanguard LifeStrategy?
Also HL's fee are expensive if you have a large amount in unit trusts, you could save a bit by using another provider.

[Ginge R]

I'd say it would depend on your strategy and your objectives.

If you took a high conviction position on, say, US - health maybe - small caps under Trump, South America in light of Argentinian tax repatriation, taking advantage of a dividend allowance or very, very low volatility, then you'd possibly be advised to look at actives and seeing how it merges with your own position.

Multi asset/Multi manager funds aren't all the same - again, if you're taking a strong view about the UK's chance of success in light of Brexit, some funds are more punchy than others, and have been more successful since June. Having said that, passives are great for the vast majority of people.

[sidicks]

DibblyDobbler said:

Hi All. Any words of wisdom appreciated - I have a decent amount of money in a SIPP with HL for which I am choosing the funds.

I've been in various managed funds over the last 5 years or so and have done ok but I read recently that only 25% of managed funds will beat a tracker... so am I being an arse?

Thanks for any replies

Just to clarify, when you say 'managed', are you referring to funds where the lead manager can actively allocate between different asset classes e.g. Equities, bonds, property, cash etc to try and manage risk/return or are you trying to differentiate between funds where the manager is trying to match a benchmark (passive) and those where the manager can deliberately mis-match the benchmark in the aim of achieving higher returns (active)?

The strategies are quite different!

[DibblyDobbler]

CarlosFandango11 said:

How's about something like Vanguard LifeStrategy?
Also HL's fee are expensive if you have a large amount in unit trusts, you could save a bit by using another provider.

Thanks Carlos - I will have a look at that

[rsbmw]

Vanguard Lifestrategy is my answer, otherwise I would simply be guessing (much like the fund managers).

[DibblyDobbler]

Ginge R said:

I'd say it would depend on your strategy and your objectives.

If you took a high conviction position on, say, US - health maybe - small caps under Trump, South America in light of Argentinian tax repatriation, taking advantage of a dividend allowance or very, very low volatility, then you'd possibly be advised to look at actives and seeing how it merges with your own position.

Multi asset/Multi manager funds aren't all the same - again, if you're taking a strong view about the UK's chance of success in light of Brexit, some funds are more punchy than others, and have been more successful since June. Having said that, passives are great for the vast majority of people.

Thanks Al. Trouble is I don't really know what I'm doing! But at least I know I don't know IYSWIM. I need someone else making the decisions hence the multi manager approach - the funds I'm in have a good record FWIIW not that the past is that good a predictor but it's all we have!

[DibblyDobbler]

sidicks said:

Just to clarify, when you say 'managed', are you referring to funds where the lead manager can actively allocate between different asset classes e.g. Equities, bonds, property, cash etc to try and manage risk/return or are you trying to differentiate between funds where the manager is trying to match a benchmark (passive) and those where the manager can deliberately mis-match the benchmark in the aim of achieving higher returns (active)?

The strategies are quite different!

Umm - the first one I think! I really just meant simplistically tracker v somebody deciding where to put the loot and charging a bigger fee

[sidicks]

rsbmw said:

Vanguard Lifestrategy is my answer, otherwise I would simply be guessing (much like the fund managers.

Eh?

[DibblyDobbler]

Ginge R said:

I'd say it would depend on your strategy and your objectives.

If you took a high conviction position on, say, US - health maybe - small caps under Trump, South America in light of Argentinian tax repatriation, taking advantage of a dividend allowance or very, very low volatility, then you'd possibly be advised to look at actives and seeing how it merges with your own position.

Multi asset/Multi manager funds aren't all the same - again, if you're taking a strong view about the UK's chance of success in light of Brexit, some funds are more punchy than others, and have been more successful since June. Having said that, passives are great for the vast majority of people.

Thanks for the PM Al, very thoughtful of you

I'll try that link once I'm home (away for a day or two at the moment so just have the phone).

[ringram]

rsbmw said:

Vanguard Lifestrategy is my answer, otherwise I would simply be guessing (much like the fund managers).

+1 Or VRWL ETF to avoid the 0.45% fund levy on H&L.

Personally I use ETF's to keep costs down.

I would say you are definitely better off going low cost passive.

http://www.thisismoney.co.uk/money/diyinvesting/ar...

[Ginge R]

DibblyDobbler said:

Thanks for the PM Al, very thoughtful of you

I'll try that link once I'm home (away for a day or two at the moment so just have the phone).

My pleasure.

For anyone else looking to understand the impact of costs on your investments:

http://trueandfaircalculator.com/calculator

[DibblyDobbler]

ringram said:

rsbmw said:

Vanguard Lifestrategy is my answer, otherwise I would simply be guessing (much like the fund managers).

+1 Or VRWL ETF to avoid the 0.45% fund levy on H&L.

Personally I use ETF's to keep costs down.

I would say you are definitely better off going low cost passive.

http://www.thisismoney.co.uk/money/diyinvesting/ar...

Hmm - I must admit these Vanguard Lifestrategy funds look good. Comparing the HL Multi manager fund I am in against the equivalent Vanguard fund gives something like the below. I presume that's all net of charges so like for like?