I don’t know about you but I like it when things are made easy for me. Hand me a magic wand with the promise that all my problems are over, and I’ll give it an experimental wave.
And hey presto! BlackRock – the fund giant behind the popular iShares ETFs – has come along with an investing magic wand in the shape of its new MyMap range of funds – here to solve your asset allocation worries.
Each MyMap fund is an off-the-shelf solution known as a fund-of-funds. Essentially it’s a hamper full of index trackers that amount to a ready-made portfolio.
With a fund-of-funds there’s no more fretting about how much emerging markets is too much, or whether to be big in Japan. Such diversification decisions are taken care of by the portfolio manager/fairy.
There are already lots of other fund-of-funds on the market. The gold standard up until now for passive purists has been the Vanguard LifeStrategy range.
And with MyMap on the scene… it looks like Vanguard LifeStrategy is still the gold standard, for our passive purposes at least.
Look into my eyes
As passive investors, we want products that are:
- Low-cost
- Simple
- Transparent
- Aligned with sound financial theory (for example, we will achieve market returns through long-term asset allocation decisions rather than market timing).
MyMap scores well on the low-cost front, but on the latter three points it distracts with a lot of wand waving.
Here’s a summary of what MyMap is touting:
Source: Blackrock
Now those Ongoing Charge Figures (OCF) (rightmost column) are low. MyMap’s 0.17% annual fee compares very well with the 0.22% you pay with a Vanguard LifeStrategy fund. To put that into real money, MyMap would set you back £170 per year on a £100,000 portfolio versus £220 for LifeStrategy.
The table also shows us the asset allocations on offer across the MyMap range where, as always, the critical investing decision is how your money is split between equities and bonds.
We can see the MyMap 3 fund ranks as low-ish risk with only 34% in equities. The range then steps up through the gears to the high-octane MyMap 6, which has 82% in equities.
Ala Peanut Butter Sandwiches
From here on things get cloudy, not to mention smoke and mirror-y.
The MyMap portfolio is actively managed. It’s built from iShares index funds and ETFs, but the Key Investor Information Documents (KIIDs) say:
The Fund is actively managed without reference to a benchmark meaning that the investment manager has absolute discretion to choose the Fund’s investments and is not constrained by any target, comparator or performance benchmark.
You can choose your allocation today but the manager is free to move it all over the map tomorrow. So how concrete are the asset allocations we saw in the table?
BlackRock notes:
Expected asset allocations as of Day 1. For illustrative purposes only and subject to change – there is no guarantee that the above asset allocations will be met. Allocations may change over time.
And this is the nub of our concern.
The reason why billions has flowed from active funds to passive funds in recent decades is because the word is out: asset allocation is what determines most of your results, and active managers – as a group – don’t add value by timing the market.
This means that as a passive investor persuaded by the evidence, I want a reliable asset allocation that is maintained by clear rules.
BlackRock is playing yesterday’s game: We’ve got a secret sauce that can zhuzh up your results!
The volatility targets in the table look flighty, too. From BlackRock again:
There is no guarantee that the Fund will perform as expected and remain within the stated volatility tolerances. The fact the Fund remains within the stated volatility tolerances does not guarantee positive performance.
The volatility management process may reduce the effect of falls in market prices but may equally moderate the effect of rises in market prices.
When markets are volatile, managing volatility within tolerances will [r]equire the asset allocation of the Fund to be changed more frequently than normal. The cost of the transactions required to effect these changes will be met by the Fund and may affect returns.
In other words, the tight ranges listed in the table are marketing. And should the volatility targets corset the manager, your costs could increase because higher investment turnover will incur more trading fees.
One of the advantages of passive investing is that turnover is low relative to active management. A proper cost comparison includes fund trading costs as well as the OCF.
And for my next trick…
BlackRock has been here before with its Consensus funds. This too is a range of fund-of-funds, constructed from index trackers with an active management overlay.
MyMap reboots the Consensus concept with a slicker marketing campaign, a cheaper price tag, and a different coloured wig.
The most intriguing thing about MyMap is the allocation to alternatives, listed as precious metals and real estate in the KIID. The 2% allocation to alternatives cited in the table above would be near pointless, but the small print says the manager can invest up to 15% in alternatives.
I like the idea of extra diversification. However the uncertainty baked in to the arrangement makes me think it’d be simpler to just add a REIT tracker and/or a precious metals ETC to an existing portfolio rather than having to keep checking in on what the MyMap managers are up to.
All hat no rabbit
You may be sensing that I don’t see MyMap as a massive breakthrough for passive investors. True, but even if I was as excited as a koala discovering eucalyptus ice-cream, I’d counsel caution. That’s because BlackRock hasn’t yet published data on the fund holdings.
There’s nothing suspicious about that – the funds only launched on 28 May 2019. But it does mean we don’t yet know anything about the split between global vs domestic securities, say, or how the fixed income side will be diversified across government, corporate, index-linked, and junk bonds.
Once BlackRock shows its hand, we’ll be left with a conundrum. Because these funds do appear to be cheap.
The main argument against active management is it’s not worth the cost. But where does that leave us if MyMaps’ active management is cheaper than a pure passive alternative?
MyMap is marginally cheaper than Vanguard LifeStrategy at the OCF level. Only time will tell whether it can maintain that advantage once transaction costs are tallied and the total cost of ownership is known.
Yet even with that said, control remains a key factor. Is a slim saving worth it when active management decisions could be leading you towards an inappropriate asset allocation?
Personally I think that’s a poor trade-off.
A fund-of-funds is meant to make life simpler and more convenient. For my money, MyMaps introduces unnecessary complexity.
Take it steady,
The Accumulator
Comments on this entry are closed.
Thanks @TA, that’s a persuasive case against. Have you done (/can you do) a similar dissection of HSBC’s Global Strategy funds by any chance please? I am toying with using these for this year’s ISA allowance, as I’d like some diversification away from Vanguard, and can’t be bothered to rebalance between multiple passive funds myself…
@TA
With these fund of funds, are we not also paying the individual components’ OCF’s as well?
For instance, Lifestrategy 40% is made up of 17 different funds, with individual OCF’s ranging from 0.08% for the Vanguard FTSE U.K. All Share Index Unit Trust GBP Accumulation Shares to 0.27% for the Vanguard Emerging Markets Stock Index Fund Accumulation Shares.
I make out that the LF40 has a total fee of 0.17% weighted average for all the funds. So either Vanguard are charging 0.05% to rebalance to get to 0.22% or, the actual cost is 0.39% (0.17% + 0.22%).
Any idea which it is?
Aaaaaargh!
I was really hoping this might offer a sound way to diversify away from Vanguard LS holdings.
Are there any alternatives to Vanguard LS that you do rate?
@Fremantle Vanguard LS funds OCF of 0.22% includes the blending of the underlying funds and a charge for rebalancing.
I think it is a terrible marketing fail to grade by volatility rather than risk, because “risk” brings with it at a conscious or subconscious level the expression “risk/reward” whereas “volatility” has no equivalent counterpart.
@Genghis I wonder if MyMap’s 0.17% does the same – that is very cheap for active management and rebalancing funds
I don’t really understand why no one brings out a true competitor to Vanguard – ie just a straightforward portfolio of index trackers with a fixed asset allocation. That would be really simple to do and would actually add genuine competition to the market.
Am I missing something?
Thanks an interesting and informative read. I am not sure if you have done it already – but is a comparison of different fund-of-funds feasible?
@Jonny
What’s the problem with Vanguard LS?
Very timely post, thanks. I’d been wondering if this could be the way to diversify away from Vanguard (@ J.D. – nothing at all wrong with Vanguard in my view, I just have quite a lot with them already and want to be diversified between investment co.s as well as asset classes. And platforms). Given all the caveats and obscurity I’ll hold off from MyMap for the time being.
Hi all — we have done more on fund of funds in the past, though the comparisons are now a few (gulp!) years old:
https://monevator.com/tag/fund-of-funds/
I wish someone would offer an “ETF of ETFs”. I’d like to simplify my holdings, but being an HL customer, funds are pretty much out of bounds for me.
@J.D.
There’s no problem with the Vanguard LS, other than I want to have some money invested elsewhere for diversification purposes.
I’m betting this will have the usual multi-asset fund overweight to the FTSE All Share – making it an easier sell to timid UK investors who’ve never heard of Monevator.
Fidelity Multi Asset Allocator are the best multi asset funds I’m aware of – correct market weight for equities, property, small cap and a good mixture of hedged and unhedged bonds.
Hi all, was thinking of taking the plunge into lifestrategy. However, one of my key concerns is the large home bias.
Was just wondering whether anyone knew whether Vanguard have indicated that this will reduce in the future? I read an article from about 3 years ago indicating this, but so far nothing has really changed as far as I can see. I think it is currently 25% of the equity component, and 35% of the bond component. Thanks!
@ F&F, Jonny, Notbob – I did this fund-of-funds comparison a while ago: https://monevator.com/passive-fund-of-funds-the-rivals/
I’m planning an update soon and will include HSBC’s Global Strategy range in that.
@ Vanguardfan – I couldn’t agree more. If they could just stop bolting on marketing gimmicks for a minute…
@ Boardgamer – google multi-asset ETFs. Though it may be simpler to just buy a Total World ETF and a Global Bond ETF and leave it at that.
@ Flying Scotsman – I don’t see that changing. They know that home bias sells. They’ve got other products to cater for the more discerning customer:
FTSE Global All Cap Index Fund
Global Bond Index Fund
Granted, that’s two funds not one. The world is a twisted place.
@ The Accumulator – thanks for the response, I feared that may be the case, irrational as it sounds.
Nevertheless, I have sent Vanguard a quick query so we will know for absolute certain. I will post again if they respond as it may be of interest to a many who use this site.
Agreed about the Global All Cap fund as well. Although I am very slightly put off by the higher cost, perhaps due to the fact that it is relatively new/small compared to the other funds, and also contains more expensive small cap exposure.
It must be a good thing for there to be more balanced funds based on low cost trackers, particularly if they follow slightly different strategies allowing us to follow our preferences (e.g. amount of UK bias, proportions of corporate versus government bonds, possibility including a property-based component). The concern about this new one is that the informed investor (= Monevator reader) can’t yet look under the bonnet.
However the problem for us, having recognised the good advice here and elsewhere to choose a low cost platform and simple tracker-based strategies, is that we can’t access the various alternatives to LifeStrategy on iWeb. While Vanguard has a strong following here, it would feel reassuring to know our eggs were in more than that one basket. Does anyone know whether some of these LifeStrategy alternatives might become more generally available?
@Jonathan – iWeb does have some of the Fidelity Multi Asset range. e.g.
https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/detail/GB00B9C3GS90
@Adrian – do you know if the Fidelity funds have a fixed asset allocation? I can’t tell from the KIID. That to me seems to be the basic issue. All the multi asset funds I’ve found, even if they claim to be composed of index trackers, seem to be essentially tactical asset allocation approaches. In my view this is too much like active fund management.
@TA
Disappointing! But thanks for a really good forensic article.
Thanks TCA.
I don’t think I noticed it last time I looked, not sure whether that was my poor search or it has only appeared recently. It seems to be the only one of that range, similarly there is just one (the 100%) of Blackrock Consensus and nothing from L&G or HSBC.
But we were going to add a bit to our investments in the next week or so, at least there is a choice of alternative provider and different strategy (looks to be fairly strictly global by market cap without home bias) to consider.
Looking forward to TA updating the survey on Monevator.
Jonathan, there are several different funds. Set the search filter for fund provider to Fidelity (FIL Investment SVCS (UK) Ltd) and you’ll see different versions of Multi Asset plus Fidelity Open World and Fidelity Allocator World:
https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/detail/GB00BC7GXN87
https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/detail/GB00B9777B62
This is something I have been thinking about recently. Will active investing ever start to get cheaper, either through competition or innovation, so it makes sense to invest actively again.
Another idea I have toying with is whether, as index investing gets larger transaction volumes, will we see a reduction in returns from these funds (they work to subdue the index growth) which will start to make active investment more viable from a risk / reward point of view. I.e the end result will naturally be some sort of equilibrium as investors chase returns.
Vanguard Lifestrategy is very heavily weighted towards US stocks, which are overvalued in terms of PE / CAPE ratio.
Interesting comments on this post here
https://forums.moneysavingexpert.com/showthread.php?t=6006982#20
Having read these comments, I think a number of you guys should check out the AJ Bell range of passive, multi-asset funds. Simple, transparent & low-cost is the mantra…Stocks, Bonds, Property and Cash are underlying asset classes. Ran with a long term strategic asset allocation, with a medium term tactical overlay (since launch used very sparingly, but useful to have the facility e.g. to be able to play short duration on fixed income allocation if rates threaten to rise). Completely unfettered, so can choose best underlying instruments in the marketplace, not just their own products (which is how Vanguard and Blackrock are offering such low headline OCFs) with the funds being capped at 0.35%, so don’t pay more than that, full stop (obv. will have to pay your platform’s fees on top). The 0.35% OCF is made up of a fixed investment management fee of 0.15%, the fees on the underlying funds and the OEICs admin costs. With the admin costs being fixed, the OCF will fall as the AUM increases, with all economies of scale being passed back to investors. Funds are risk target managed, not just profiled, so won’t drift into different risk profiles. Check them out and maybe the Accumulator can do an analysis and post his opinion?
Can any Fund company compete at the end of the day where one is a a Mutual with all profits going to the fund holders and the other which has to pay the Fund company owners first with the rest /what’s left over -going to the fund holders
One has to pay one master the other has to pay two masters
“No Fund can serve two masters”
xxd09
I’ve been waiting for an article on this since i saw them launched, can’t trust many places to give a fair write up.
I’ve been reassessing my commitment to maintaining my own passive portfolios so have been starting to consider a switch over to a fund of funds. This led me to the vanguard retirement target funds, could these be included in any posts on funds of funds?
I think diversifying fund providers is a good idea — and the lack of fund of fund options isn’t a killer blow to this ambition, even for simplicity-first passive investors.
Sure, it’d be ideal to have two similarly comprised fund-of-funds from say Vanguard and Blackrock. You could pick (say) 60/40 portfolios for both, maintain your overall asset allocation for neglible effort, and diversify away the (very low but non-zero) risk of having *all* your eggs in one fund manager basket.
An alternative approach that comes to mind might be to go with say 80/20 with Vanguard Life Strategy with 70% of your portfolio, and a 30% allocation to a suitable Blackrock (/whoever) fixed income fund (with numbers picked for ease of maths/maintenance, not mathematical precision). This would start you at nearly the same allocation (56/44 equities/bonds).
The Vanguard fund would take care of holding itself at 80/20. You could then rebalance to/from away from it to the (likely not too volatile) bond fund — say once a year — to keep your overall allocation in check.
Granted you could also achieve a similar thing by holding say your 60% equities in (say) a Vanguard global market tracker and your bonds in (e.g.) a Blackrock fixed income fund, but I think this solution would be more volatile without the frequent rebalancing of LifeStrategy.
On the other hand, going from no-fiddling required to even one-fiddle a year is a state change, even if a low magnitude one (like being a virgin or not being a virgin, in the famous literary metaphor!)
Anyway, just a thought. 🙂
Interesting that the BlackRock approach is an active selection of passive funds but isn’t this the same as Nutmeg etc ..but cheaper ?
Great food for thought there TI, thanks.
@TI theres a germ of an article in that comment for sure – how to diversify for one fund wonders
I reckon a lot of people are in that boat and are looking to buy at least one or two other boats but aren’t sure exactly what boat to get as they like their current boat so much.
One thing that peeves me about these types of funds is the large ‘ tail’ of low percentage stakes. I think LS60 has 6 holdings at 2% or less. Why bother, other than to look sophisticated?
@MrOptimistic- ‘why bother except to look sophisticated?’
Totally agree. The reason I like the Lars approach. HSBC FTSE All share and a diversified bond fund. Job done. Add in different brands of the same product in equal amounts if you want fund manager diversification.
It seems to me that too many investors (and investment companies) sweat the small stuff – minor allocations, a few extra charges here etc in an attempt be clever or anticipate future outcomes.
Doesn’t this all miss the point though? You can’t predict the future so why worry about the edges? Far too little time in life to focus on these, especially when you can’t forecast what contribution, if any they, will make down the road.
If I am allowed to ask this sort of question here –
I hold Sequoia – SEQI – in a SIPP and have been oferred the chance to buy 5990 new shares for £6500 odd at 108 per share (current mid price 111.70). I have about 1500 cash in the SIPP and can’t put any more in, and about the same in my current ISA (not same provider as SIPP, but have enough unshielded cash to take up the offer. My questions are can I partially take up the offer to use up the cash in the SIPP? Is it actually worth doing anything at all given the sums involved ( a £220 saving if I take up the lot, I think), and if I do nothing will I be credited with the value of the rights as some internet sources suggest?
Hopefully not asking a daft questions here, but can I check re the fund sizes of the LifeStrategy funds as they seem quite small, for example Target Retirement 2045 Fund – Accumulation (GBP) Total assets : £11.6 M. Are they likely to be easy to sell when it comes to cash them in?
@Bsdb3 Vanguard’s site claims Lifestrategy 60 Accumulation is £5.1 Billion, with another £478.6 Million in Income units. The Target Retirement funds are 4 years younger and not nearly as well known, and it’s not clear to me how broad their appeal is likely to be so it’s not surprising they haven’t accumulated so much investment yet. (Their “lifestyling” approach seems to make a lot of sense if you expect to buy an annuity on retirement, but less so if you expect/need to live off drawdown from your portfolio for decades beyond it). I can’t imagine why there’d be any problems withdrawing funds from any of them except in exceptional circumstances.
@ Bsdb3 – it’s the underlying assets that count. Let’s say the fund only invested in FTSE 100 shares. As long as fund management can sell them when your withdrawal request comes in then you’re fine. FTSE 100 shares are highly liquid, so shouldn’t be a problem except under extreme / catastrophic circumstances e.g. stock exchange is closed due to World War III. Obvs, I’m simplifying to an extent, but when trying to assess fund liquidity, look through to its underlying assets.
@ Nick H – hopefully this will help: https://monevator.com/vanguard-target-retirement-funds/
now available to buy on Hargreaves L – however still no details on what’s under the hood
Some detail here on MyMap4 holdings:
https://www.sharesmagazine.co.uk/funds/fund/QD4K/holdings
MyMap 6 X Acc:
https://www.sharesmagazine.co.uk/funds/fund/QD4A/holdings
MyMap 3 D Inc:
https://www.sharesmagazine.co.uk/funds/fund/QD4E/holdings
BlackRock MyMap 5 D Inc:
https://www.sharesmagazine.co.uk/funds/fund/QD4M/holdings
MyMap 3 (64% bonds, 34% equity, 2% alternative): https://www.sharesmagazine.co.uk/funds/fund/QD4E/holdings
MyMap 4 (46% bonds, 52% equity, 2% alternative): https://www.sharesmagazine.co.uk/funds/fund/QD4K/holdings
MyMap 5 (33% bonds, 67% equity): https://www.sharesmagazine.co.uk/funds/fund/QD4M/holdings
MyMap 6 (18% bonds, 82% equity): https://www.sharesmagazine.co.uk/funds/fund/QD4A/holdings
Very interesting article and comments.
I learned on Monevator that active management isn’t inherently bad, it’s just not worth the cost. However MyMap seems to be providing some level of active management at basically no extra cost.
I wonder if the management element might help soften the blow in volatile times and therefore be of interest to people with an eye on retirement.
Comparing the performance of MyMap 6 (82% equity) with my LS80 (80% equity) since June 2019 when the former came into existence MyMap 6 is doing marginally better.
Using June 2019 as the baseline, MyMap 6 rose 14% to LS80’s 12% by Feb 2020. Then they both fell to -14% in March 2020. Right now on April 9 LS80 has recovered to -4% while MyMap6 has bounced back to -2%.
Seems the extra flexibility of MyMap managers is not hurting it so far. Definitely interested in further articles on these kinds of products as they are make up my primary investments.
Any more research or updated thoughts on Mymaps 6. Considering making it a direct debit contribution in my ISA.
Reason I dont use VLS 80 is im already using this in my SIPP
The other approach I was thinking was buying an all share equity eft and bond and splitting the allocation 80/20.
Any feedback on Mymaps or the latter approach would be appreciated. Thanks
+1 to the above.