Junior ISA which funds to consider?
Discussion
MikeKite said:
I'm not clear what you mean by alpha.
"Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index"
I expect the additional of a small cap index to result in a better overall portfolio performance over a long time period than simply holding the global index. "Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index"
Though it will of course add volatility too.
Adding additional small cap IS an active allocation versus simply buying Fidelity Index World P.
si
800 said:
800 said:MikeKite said:
"It's been one of the best performing global funds available since launch"
The timescales are too short to identify whether it is luck or genuine skill, unfortunately. The chances of persistent (more than the last decade, which has been a one-way bet for his style of investing) long-term outperferformance is pretty remote, and his returns are explainable by the tailwinds he has received to date.
"with some of the lowest volatility on offer"
Volatility is just one measure of risk - there are at least three others that apply in this case.
"Why would it NOT be popular?"
See above
"Odd comment. "
It's no really odd once you start to dig down beyond just the headline numbers.
But worth noting it has outperformed all other quality funds with a 5+ year track record who have had the exact same market environment, stylistic tailwinds, low interest rate environment, etc. Perhaps trying charting it against Morgan Stanley Global Brands, Ninety One Global Franchise, Trojan Global Equity etc (who all focus on high ROIC/ROCE, high intangible assets etc type firms). Clearly TS has had a very favourable environment (which many holders of it totally overlook), but so have the others which is where manager skill comes into it (or he just got lucky for a decade whilst they didn't). It's also worth considering his career and successful track record started a long time before Fundsmith started. Personally I only have 10% of my portfolio in it as the investment universe he has is too narrow for me to commit more. The timescales are too short to identify whether it is luck or genuine skill, unfortunately. The chances of persistent (more than the last decade, which has been a one-way bet for his style of investing) long-term outperferformance is pretty remote, and his returns are explainable by the tailwinds he has received to date.
"with some of the lowest volatility on offer"
Volatility is just one measure of risk - there are at least three others that apply in this case.
"Why would it NOT be popular?"
See above
"Odd comment. "
It's no really odd once you start to dig down beyond just the headline numbers.
I'd be surprised if the tilts towards these were identical for the funds in question. Charting doesn't really tell you much.
"but so have the others which is where manager skill comes into it"
I've not seen analysis that suggests skill - the excess returns were explainable by the styles chosen.
If anyone has a genuine edge and can deploy this at scale (which large cap would give you the opportunity to do so to a large degree), why on earth would you give this away for relative peanuts? You could easily charge 3 and 30 for this.
si800 said:
800 said:MikeKite said:
I'm not clear what you mean by alpha.
"Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index"
I expect the additional of a small cap index to result in a better overall portfolio performance over a long time period than simply holding the global index. "Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index"
Though it will of course add volatility too.
Adding additional small cap IS an active allocation versus simply buying Fidelity Index World P.
The debate as to whether a raw tilt towards small cap (rather than incorporating value and potentially quality) is ongoing (and I'm sure will be forever
)MikeKite said:
"stylistic tailwinds"
I'd be surprised if the tilts towards these were identical for the funds in question. Charting doesn't really tell you much.
Why? I'd be surprised if the tilts towards these were identical for the funds in question. Charting doesn't really tell you much.
They have a stated investable universe of quality businesses only, which they define in the same way, and have a concentrated 30 odd stock developed world bias.
Why would you not think they'd all benefit (or suffer from) factor or style exposure if they are all exposed to the same factor/style?
si800 said:
800 said:MikeKite said:
"stylistic tailwinds"
I'd be surprised if the tilts towards these were identical for the funds in question. Charting doesn't really tell you much.
Why? I'd be surprised if the tilts towards these were identical for the funds in question. Charting doesn't really tell you much.
They have a stated investable universe of quality businesses only, which they define in the same way, and have a concentrated 30 odd stock developed world bias.
Why would you not think they'd all benefit (or suffer from) factor or style exposure if they are all exposed to the same factor/style?
MikeKite said:
Because the amount that they tilt towards the styles will most likely differ
So you don't feel a peer group of funds with the same stated objectives (and a stated Quality factor approach) is a fair comparison for Fundsmith?If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?
si800 said:
800 said:MikeKite said:
Because the amount that they tilt towards the styles will most likely differ
So you don't feel a peer group of funds with the same stated objectives (and a stated Quality factor approach) is a fair comparison for Fundsmith?If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?
Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong
). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.It's important to understand that the last decade has been an anomaly.
Edited by MikeKite on Friday 23 July 16:31
blindspot said:
I went with the vanguard lifestrategy 100% equities for my boy's JISA. He's been in since Nov 2018, and vanguard are claiming a 'personal rate of return' of 47.something %. Of course there's been good and bad months, but he'll be invested for 18 years (and hopefully longer, if I can convince him not to spend it on being a knob when he's 18) so plenty of time to see out volatility. Maybe will adjust equities down in a decade or so.
This is why I’ve made my daughters investment in my own name so I can give her money as and when she needs it MikeKite said:
"So you don't feel a peer group of funds with the same stated objectives (and a stated Quality factor approach) is a fair comparison for Fundsmith?"
Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.
It's important to understand that the last decade has been an anomaly.
Just to add I'm not sure that Fundsmith can be classed truly global as from a quick glance it excludes emerging markets and a number of other countries (7 countries total vs 50 in ACWI)Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong
). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.It's important to understand that the last decade has been an anomaly.
Edited by MikeKite on Friday 23 July 16:31
https://www.msci.com/acwi
I assume this EM is covered by the other fund (which doesn't seem quite as popular with investors).
https://www.feetplc.co.uk/
MikeKite said:
"So you don't feel a peer group of funds with the same stated objectives (and a stated Quality factor approach) is a fair comparison for Fundsmith?"
Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.
It's important to understand that the last decade has been an anomaly.
At this point I wonder if you are just trolling, but will humour you anyway....Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong
). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.It's important to understand that the last decade has been an anomaly.
Edited by MikeKite on Friday 23 July 16:31
Can I ask why you don't think a peer group of funds with the same stated objectives and style bias as Fundsmith make for a good comparison with Fundsmith?
Can I also ask why you don't think an investor would want low volatility global quality exposure?
And finally can I please repeat the question about which funds with a similar style you feel have been better over the same period?
Many thanks
MikeKite said:
Just to add I'm not sure that Fundsmith can be classed truly global as from a quick glance it excludes emerging markets and a number of other countries (7 countries total vs 50 in ACWI)
Their perspective seems to be that they don't consider themselves restricted by geography in selecting companies, rather than letting accidents of geography constrain company selection.MikeKite said:
I assume this EM is covered by the other fund (which doesn't seem quite as popular with investors).
https://www.feetplc.co.uk/
Performance of FEET is disappointing. Customers making their own investment decisions care about past performance, for good or ill.https://www.feetplc.co.uk/
Edited by xeny on Friday 23 July 19:04
si800 said:
800 said:MikeKite said:
"So you don't feel a peer group of funds with the same stated objectives (and a stated Quality factor approach) is a fair comparison for Fundsmith?"
Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.
It's important to understand that the last decade has been an anomaly.
At this point I wonder if you are just trolling, but will humour you anyway....Not really.
"If a UK investor wanted low volatility global quality exposure over the last 5-10 years, which funds do you think have been better?"
I'm not sure that many people would have this as a genuine objective (could be wrong
). If instead the objective was to have exposure to factors that have histrocially produced excess returns (arguably), Fundsmith's approach would be (almost) completely opposite.It's important to understand that the last decade has been an anomaly.
Edited by MikeKite on Friday 23 July 16:31
Can I ask why you don't think a peer group of funds with the same stated objectives and style bias as Fundsmith make for a good comparison with Fundsmith?
Can I also ask why you don't think an investor would want low volatility global quality exposure?
And finally can I please repeat the question about which funds with a similar style you feel have been better over the same period?
Many thanks
Because the stated objectives can be very different from actual implementation. Style drift is a very real risk as we have seen in recent years.
Furthermore, it really depends on what type of comparison you want to do, how thorough you want to make it and what you are looking to get out of it.
I would suggest some form of performance attribution would be necessary if you want to get something meaningful from it.
https://www.cfainstitute.org/-/media/documents/boo...
xeny said:
MikeKite said:
Just to add I'm not sure that Fundsmith can be classed truly global as from a quick glance it excludes emerging markets and a number of other countries (7 countries total vs 50 in ACWI)
Their perspective seems to be that they don't consider themselves restricted by geography in selecting companies, rather than letting accidents of geography constrain company selection.MikeKite said:
I assume this EM is covered by the other fund (which doesn't seem quite as popular with investors).
https://www.feetplc.co.uk/
Performance of FEET is disappointing. Customers making their own investment decisions care about past performance, for good or ill.https://www.feetplc.co.uk/
Edited by xeny on Friday 23 July 19:04
From their website
"Fundsmith Emerging Equities Trust, or FEET as we like to call it, is invested using the same strategy as the Fundsmith Equity Fund"
I wonder why, given that in theory, the only difference is geography.
"Customers making their own investment decisions care about past performance,"
Yep
MikeKite said:
If we start with your first question.....
Because the stated objectives can be very different from actual implementation. Style drift is a very real risk as we have seen in recent years.
Furthermore, it really depends on what type of comparison you want to do, how thorough you want to make it and what you are looking to get out of it.
I would suggest some form of performance attribution would be necessary if you want to get something meaningful from it.
https://www.cfainstitute.org/-/media/documents/boo...
Mike, you seem to be following a familiar pattern that financial types often do which is essentially "you're doing something terribly wrong but I'm not going to tell you what you should be doing".Because the stated objectives can be very different from actual implementation. Style drift is a very real risk as we have seen in recent years.
Furthermore, it really depends on what type of comparison you want to do, how thorough you want to make it and what you are looking to get out of it.
I would suggest some form of performance attribution would be necessary if you want to get something meaningful from it.
https://www.cfainstitute.org/-/media/documents/boo...
We've had lots of "you're doing it wrong" which isn't very helpful to Mikee19 but not much of what you think he should be doing.
What would you suggest he do?
I think simply saying "put it all into a global tracker or a multi-asset fund appropriate to your appetite for risk/volatility" would be more helpful than what you've said so far.
bhstewie said:
hstewie said: Mike, you seem to be following a familiar pattern that financial types often do which is essentially "you're doing something terribly wrong but I'm not going to tell you what you should be doing".
We've had lots of "you're doing it wrong" which isn't very helpful to Mikee19 but not much of what you think he should be doing.
What would you suggest he do?
I think simply saying "put it all into a global tracker or a multi-asset fund appropriate to your appetite for risk/volatility" would be more helpful than what you've said so far.
Couldn't of said it better myself. MikeKite is indeed an IFA, which I don't have a problem with, and I'm sure he is more passionate and professional about his industry than many of the standard IFA's we come across, but as bitstewie says - don't bore us with IFA waffle and links, tell us/him where YOU think he should be putting his money. Tell us WHO is better than Terry Smith - for a similar risk appetite. IMO I don't think your posts do IFA's any favours if you are just telling half the story. Tell us the bits WE want to know We've had lots of "you're doing it wrong" which isn't very helpful to Mikee19 but not much of what you think he should be doing.
What would you suggest he do?
I think simply saying "put it all into a global tracker or a multi-asset fund appropriate to your appetite for risk/volatility" would be more helpful than what you've said so far.
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