Vanguard reevaluating their UK risk rating?

[Phooey]

Has Vanguard increased their own 'Risk' rating (from 5 to 6) of the UK recently?

[emicen]

Is it just the UK funds that have increased?

[Phooey]

emicen said:

Is it just the UK funds that have increased?

Not 100% sure, but certainly the funds (like the FTSE trackers) in the pic have very recently been reevaluated as higher risk. I've been paying a little attention to the UK recently only for the reason some of my funds are UK heavy, and therefore are the ones which have held my entire portfolio back a tad.

I have some FTSE 100 in my Vanguard ISA but have stopped buying anymore in favour of VWRL (world) and LS80 (still a fair bit of UK in it but recently readjusted.. apparently). I also have a fair chunk of Optimum (Intelligent Money) in another portfolio which is very UK heavy which I need to switch asap but was hoping on a bit of a UK bounceback as local restrictions ease..

I could do with a good inspection of all mine and the missus's portfolios and try and adjust the UK weightings nearer to 5% global

Edited by Phooey on Friday 17th July 22:24

[journeymanpro]

seems like they have, i am invested in FTSE U.K. All Share Index Unit Trust - Accumulation, that was a risk 5 when i bought in, now showing as risk 6. the 80% and 100% life strategy are still a 5 though.

[chip*]

The KIID for the Active fund show it was last updated 10 July 2020, so the revised rating may have been introduced then.

[rdjohn]

Given what is likely to be happening over the next 24-months, it would be more surprising if they had not increased their risk assessment.

But it’s not really sufficient to change anything at all if you have, say, a 5-year horizon for your investments.

[Phooey]

journeymanpro said:

the 80% and 100% life strategy are still a 5 though.

I *think* VG has reduced the UK weighting of the LS portfolios - hence why I like the active part of these. I'm tempted though to switch my monthly purchase of LS80 to VWRL.

[JulianPH]

Phooey said:

I *think* VG has reduced the UK weighting of the LS portfolios - hence why I like the active part of these. I'm tempted though to switch my monthly purchase of LS80 to VWRL.

I know they certainly wanted to, but am not sure whether they have started yet.

We are wanting to do the same with some of the Optimum portfolios, but there is a risk of missing a UK bounce back that the US has already seen.

Vanguard may be facing the same concerns.

I'll post more on this on the IM sticky as I don't want to break any rules here.

[Phooey]

JulianPH said:

I know they certainly wanted to, but am not sure whether they have started yet.

We are wanting to do the same with some of the Optimum portfolios, but there is a risk of missing a UK bounce back that the US has already seen.

Vanguard may be facing the same concerns.

I'll post more on this on the IM sticky as I don't want to break any rules here.

Hi mate, It's a good point on the US vs UK bounce back hence why I haven't done anything yet. I'm not waiting for a full on bounce, but if we can get just enough to feel comfortable I'll then look at evening things out a bit in favour of the typical global split of VWRL or IM Index for example

[JulianPH]

Phooey said:

Hi mate, It's a good point on the US vs UK bounce back hence why I haven't done anything yet. I'm not waiting for a full on bounce, but if we can get just enough to feel comfortable I'll then look at evening things out a bit in favour of the typical global split of VWRL or IM Index for example

Hi mate, we might be starting this process with Optimum next week after our investment committee conference on Tuesday.

My concern is the dominance of oil and gas companies in the FTSE. Royal Dutch Shell makes up c. 10% of the FTSE 100 on its own.

Add to this the UK/China tensions (China being one or the largest consumers of natural recourses) and the cut in dividends which helped support the case for over exposure to the UK, but no longer does, and the historical logic of being overweight in the UK starts to go out of the window.

The are very many other factors in play that we want to discuss before making any dealing moves (such as a potential fall in the pound after Brexit, which should provide a boost to the FTSE 100 (70% of its revenue comes from overseas), as obviously we are dealing with long term investments here, but right now I can see a start in reducing our very overweight exposure here.

Though a major consideration is that it may not be wise to heavily exit a low market to go into a high one!

Tuesday is going to be an interesting and hard day!

[anonymous-user]

JulianPH said:

The are very many other factors in play that we want to discuss before making any dealing moves (such as a potential fall in the pound after Brexit, which should provide a boost to the FTSE 100 (70% of its revenue comes from overseas), as obviously we are dealing with long term investments here, but right now I can see a start in reducing our very overweight exposure here.

I'm no student of the IM portfolios and have tended to think you lean towards North America in your selections, so I'm interested to hear you consider yourselves overweight UK.

Insofar as I've rebalanced over the past couple of years I've principally been exiting UK equity funds and buying global bond funds, which has worked well enough to date. I believe there has been and remains significant risk in UK, mainly because Boris is big on rhetoric and thin on delivery. Yes, he'll try to blame "the virus" to cover the impact of Brexit but unfortunately the statistics show he and his crew have made a complete mess of the pandemic. For ongoing equities I remain full committed in North America.

There's been some recent debate around the possibility of a bounce-back for Europe (ex-UK) if they ever get this new EU financial package agreed - the principal obstacle being whether Club Med countries are capable of accepting and implementing common sense reforms.

[JulianPH]

rockin said:

I'm no student of the IM portfolios and have tended to think you lean towards North America in your selections, so I'm interested to hear you consider yourselves overweight UK.

Insofar as I've rebalanced over the past couple of years I've principally been exiting UK equity funds and buying global bond funds, which has worked well enough to date. I believe there has been and remains significant risk in UK, mainly because Boris is big on rhetoric and thin on delivery. Yes, he'll try to blame "the virus" to cover the impact of Brexit but unfortunately the statistics show he and his crew have made a complete mess of the pandemic. For ongoing equities I remain full committed in North America.

There's been some recent debate around the possibility of a bounce-back for Europe (ex-UK) if they ever get this new EU financial package agreed - the principal obstacle being whether Club Med countries are capable of accepting and implementing common sense reforms.

Hi Steve

Most of our portfolios are very much US focused, but IM Optimum has a UK bias (as does PH Recovery).

It is IM Optimum that I was talking about above.

Leaving politics to one side, I have outlined my concerns with the UK markets, but I equally consider that the EU (rather than Europe) is in a very pernicious situation.

With no trade deal in place with the UK the EU is set to be more highly damaged than the UK (though it will hit both very hard).

The Club Med countries have already been hit very hard, but UK tourism is quite vital for them and whilst the UK may stop buying EU goods (to a degree) it will not stop holidaying in the EU Club Med Member States.

So a no trade deal could have a much greater impact on countries like Germany (that export a great deal to the UK), rather than the Club Med countries that export little but benefit from UK tourism (sorry, I should have said Member States, not countries).

To compound matters there is the little reported point that Germany is taking the EU to court over the creation of what is effectively a EU Bond.

The EU is the only place in the world (that I am aware of) that has one central currency and one central bank setting EU wide interest rates, yet had no central bond rate and expects each individual Member State to borrow at their own domestic rate.

This does not and can not work.

I have therefore gone underweight on EU stocks, and I am also looking at reducing my exposure to UK stocks.

There is also the small mater of the c. £70bn trade deficit the EU has with the UK.

BTW, this post is purely a matter of economics, not politics!

[bitchstewie]

JulianPH said:

I have therefore gone underweight on EU stocks, and I am also looking at reducing my exposure to UK stocks.

What do you make of the likes of Blackrock overweighting Europe to the US for returns?

https://www.blackrock.com/corporate/literature/whi...

I know the US has been where the money is but it's weird watching US stock markets v what seems to be happening.

I know the markets aren't the economy etc.

[JulianPH]

bhstewie said:

What do you make of the likes of Blackrock overweighting Europe to the US for returns?

https://www.blackrock.com/corporate/literature/whi...

I know the US has been where the money is but it's weird watching US stock markets v what seems to be happening.

I know the markets aren't the economy etc.

An interesting read, some things that support my position and some that baffle me!

I think there is a trend to over analyse things.

I am a simple man and (after much research) I come to simple decisions. This has worked well for me (though I don't always get it right!).

You hit the nail firmly on the head when you said you know that markets are not the economy.

Most of that report was either historic data or current economy related. Whilst this can give us indicators of behaviour, it is also absolutely useless at predicting the very changing world we are now living in.

China (and Asia as a region) will overtake the US by simple virtue of its huge population size, consuption and domestic output.

This is not an if, it is a when.

That does not, however, equate to FE stock markets outperforming western ones.

Increased consumption in China (and Asia in general) is to the benefit of western markets, and its domestic output (which has got this in position) is not yet ready to shift this balance.

I would diversify in each for the long term.

[anonymous-user]

JulianPH said:

The EU is the only place in the world (that I am aware of) that has one central currency and one central bank setting EU wide interest rates, yet had no central bond rate and expects each individual Member State to borrow at their own domestic rate.

More often I hear people say "the Euro can't work" and I think that's wrong - just look at the US dollar and its success in their federal system. Your point is much more coherent, that the Euro can work if everyone's playing to the same rules. They don't all have to be in the same game but must be playing to the same rules.

I'm particularly cautious about UK investing at the moment so anticipate keeping my fingers away from the controls until at least the end of August!

[JulianPH]

rockin said:

JulianPH said:

The EU is the only place in the world (that I am aware of) that has one central currency and one central bank setting EU wide interest rates, yet had no central bond rate and expects each individual Member State to borrow at their own domestic rate.

More often I hear people say "the Euro can't work" and I think that's wrong - just look at the US dollar and its success in their federal system. Your point is much more coherent, that the Euro can work if everyone's playing to the same rules. They don't all have to be in the same game but must be playing to the same rules.

I'm particularly cautious about UK investing at the moment so anticipate keeping my fingers away from the controls until at least the end of August!

Thank you, you are right.

The dollar works because it is homogenised with US Federal Bonds. The Euro won’t ever reach this level until the EU does the same.

Had it done this when the Euro was introduced than it would now, possibly, be well past the Dollar as the worlds strongest default currency.

As I said, my reply was economic, rather than political, but my absolute love of Europe has seriously hindered my feelings for the EU.

BTW, I was at my (previous) home in Portugal for a few months during the Brexit vote, so never voted.

[xeny]

JulianPH said:

The are very many other factors in play that we want to discuss before making any dealing moves (such as a potential fall in the pound after Brexit, which should provide a boost to the FTSE 100 (70% of its revenue comes from overseas),

If you move to hold unhedged ex-UK assets, don't you get that potential benefit anyway?