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Low-cost index trackers that will save you money

This is our September 2020 update of the cheapest index trackers for British investors. If you’ve checked out this page before then know the main action this time is in the gold, UK gilts, total global bond, developed world, and emerging market equity categories.

Also, I’ve chucked out the UK value and global value categories and replaced them with dividend income picks instead. Sometimes you just have to go with the flow.

ETFs continue to drive down costs. There’s a few categories now where the lead ETF is half as cheap as its nearest rival, or has forced competitors to slash their costs, too.

Amundi has put serious pressure on the developed world and UK mid cap categories by choosing cheaper Solactive indexes rather than the big-name FTSE and MSCI alternatives.

Invesco has forced the pace in the short and intermediate gilt categories, and new entrants have livened up the total global bond category – no doubt anticipating yield-hungry investors sniffing around for any alternative to negative interest rates!

Lower costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.

As Morningstar puts it:

If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.

That’s why I try to leave no penny un-pinched when searching for cheap funds.

High cost funds gobble returns

As a passive investor, I concentrate mostly on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available. However, some asset classes aren’t well served by index trackers, so I’m happy to use low cost active funds to fill the breach.

My picks are based purely on price as measured by the Ongoing Charge Figure (OCF). There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.

Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.

Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.

The UK’s cheapest index trackers

Right, let’s grab some bargains!

Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for accumulation funds variants where available. We don’t include platform exclusive funds – they’re generally not a good deal overall.

UK large cap equity


  • HSBC FTSE All Share Index Fund Institutional (GB0030334345) OCF 0.02%

Next best

  • L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%
  • Fidelity Index UK Fund P (GB00BJS8SF95) OCF 0.06%
  • HSBC FTSE All Share Index Fund C (GB00B80QFX11) OCF 0.06%
  • Vanguard FTSE UK All Share Index Unit Trust (GB00B3X7QG63) OCF 0.06%

The L&G ETF has a socially responsible investing (SRI) remit.

UK mid cap equity


  • Amundi Prime UK Mid and Small Cap ETF (PRUK) OCF 0.05%

Next best

  • Vanguard FTSE 250 ETF (VMID) OCF 0.1%
  • L&G UK MID Cap Index Fund I (GB00BQ1JYX87) OCF 0.14%

UK small cap equity

There are no good tracker options in the UK small cap asset class for DIY investors – the iShares ETF is more of an expensive FTSE 250 tracker. The rest are active funds and shown as a selection of what’s available rather than a comprehensive survey.


  • Schroder Institutional UK Smaller Companies Fund (GB0007893984) OCF 0.51%

Next best

  • JP Morgan UK Smaller Companies Fund (GB0031835001) OCF 0.6%
  • Baillie Gifford British Smaller Companies B Fund (GB0005931356) OCF 0.67%

UK equity income


  • Vanguard FTSE UK Equity Income Index Fund (GB00B59G4H82) OCF 0.14%

Next best

  • WisdomTree UK Equity Income ETF (WUKD) OCF 0.29%
  • SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%

World equity – developed world and emerging markets (total world)


  • HSBC FTSE All-World Index Fund C (GB00BMJJJF91) OCF 0.13%

Next best

  • Vanguard FTSE All-World ETF (VWRL) OCF 0.22%
  • Vanguard LifeStrategy 100% Equity Fund (GB00B41XG308) OCF 0.22%
  • Vanguard FTSE Global All Cap Index Fund (GB00BD3RZ582) OCF 0.23%
  • Fidelity Allocator World Fund W (GB00B9777B62) OCF 0.25%

Vanguard LifeStrategy and Fidelity Allocator invest in other index trackers. Fidelity invests in REITs and small caps.

World equity – developed world only


  • Amundi Prime Global ETF (PRIW) OCF 0.05%

Next best

  • L&G Global Equity ETF (LGGG) OCF 0.1%
  • Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.12%
  • Lyxor Core MSCI World ETF (LCWL) OCF 0.12%
  • Vanguard FTSE Developed World ETF (VHVG) OCF 0.12%
  • SPDR MSCI World ETF (SWLD) OCF 0.12%

The L&G ETF has an SRI remit.

World ex-UK equity


  • L&G International Index Trust I Fund (GB00B2Q6HW61) OCF 0.13%

Next best

  • Vanguard FTSE Dev World ex-UK Equity Index Fund (GB00B59G4Q73) OCF 0.14%
  • Aviva Investors International Index Tracking SC2 Fund (GB00B2NRNX53) OCF 0.25%
  • Xtrackers FTSE All-World ex-UK ETF (XWXU) OCF 0.4%

You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.

World income equity


  • Vanguard FTSE All-World High Dividend Yield ETF (VHYL) OCF 0.29%

Next best

  • Xtrackers MSCI World High Dividend Yield ETF ETF (XDWY) OCF 0.29%
  • iShares MSCI World Quality Dividend ETF (WQDS) OCF 0.38%
  • Vanguard Global Equity Income Fund (GB00BZ82ZW98) OCF 0.48%

The Vanguard fund is active but gives you a non-ETF option.

World small cap equity


  • L&G Global Small Cap Index Fund (IE00BG0VVG79) OCF 0.2%

Next best

  • Vanguard Global Small-Cap Index Fund (IE00B3X1NT05) OCF 0.29%
  • iShares MSCI World Small Cap ETF (WSML) OCF 0.35%

Emerging markets equity


  • ComStage MSCI Emerging Markets ETF (E127) OCF 0.14%

Next best

  • HSBC MSCI Emerging Markets Index ETF (HMEF) OCF 0.15%
  • iShares Emerging Markets Equity Index Fund (GB00B84DY642) OCF 0.18%

Socially responsible investing


  • L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%

Next best

  • L&G Global Equity ETF (LGGG) OCF 0.1%
  • HSBC Emerging Market Sustainable Equity ETF (HSEF) OCF 0.18%
  • Vanguard ESG Developed World All Cap Equity Index Fund (IE00B76VTN11) OCF 0.2%

The SRI (or ESG) options above are meant to enable you to build a complete SRI portfolio, as opposed to listing the top three or so funds with the lowest OCF from any old category.



  • JPMorgan Global Equity Multi-Factor ETF (JPLG) OCF 0.19%

Next best

  • Invesco Global ex UK Enhanced Index Fund Y (GB00BZ8GWR50) OCF 0.23%
  • HSBC Multi Factor Worldwide Equity ETF (HWWA) OCF 0.25%
  • Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) OCF 0.4%
  • iShares Edge MSCI World Multifactor ETF (FSWD) OCF 0.5%

All factor based investing is effectively straying into active management territory – you hope that the chosen subset of the market can outperform. The important thing is to choose products underpinned by sound financial theory, a verifiable set of rules, and a commitment to low costs.

Regional ETFs are available but we’ve stuck to global multifactor products for simplicity.

Property – UK


  • iShares UK Property ETF (IUKP) OCF 0.4%
  • iShares MSCI Target UK Real Estate ETF (UKRE) OCF 0.4%

Next best

  • No index fund alternative

Property – global


  • iShares Global Property Securities Equity Index Fund D (GB00B5BFJG71) OCF 0.17% 

Next best

  • L&G Global Real Estate Dividend Index Fund I (GB00BYW7CN38) OCF 0.2
  • Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) OCF 0.24%
  • SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%

The SPDR ETF includes emerging markets exposure.



  • L&G All Commodities ETF (BCOM) OCF 0.15%

Next best

  • Invesco Bloomberg Commodity ETF (CMOD) OCF 0.19%
  • Lyxor Commodities Thomson Reuters/CoreCommodity CRB TR ETF (CRBL) OCF 0.35%



  • Invesco Physical Gold A ETC (SGLP) OCF 0.15%
  • WisdomTree Physical Swiss Gold ETC (SGBX) OCF 0.15%
  • iShares Physical Gold ETC (SGLN) OCF 0.15%

Gold trackers are Exchange Traded Commodities (ETCs).

UK Government bonds – intermediate duration


  • Invesco UK Gilts ETF B (GLTA) OCF 0.06%

Next best

  • Vanguard UK Government Bond ETF (VGOV) OCF 0.07%
  • iShares Core UK Gilts ETF (IGLT) OCF 0.07%
  • Lyxor Core FTSE Actuaries UK Gilts ETF (GILS) OCF 0.07%
  • iShares UK Gilts All Stocks Index Fund (GB00B83HGR24) OCF 0.11%

UK Government bonds – long


  • Vanguard UK Long-Duration Gilt Index fund (GB00B4M89245) OCF 0.12%

Next best

  • SPDR Barclays Capital 15+ Year Gilt ETF (GLTL) OCF 0.15%
  • iShares Over 15 Years Gilts Index Fund (GB00BF338G29) OCF 0.16%

UK Government bonds – short


  • Invesco UK Gilt 1-5 Year ETF (GLT5) OCF 0.06%

Next best

  • Lyxor FTSE Actuaries UK Gilts 0-5Y ETF (GIL5) OCF 0.07% 
  • iShares UK Gilts 0-5 ETF (IGLS) OCF 0.07%

UK Government bonds – index-linked


  • Lyxor Core FTSE Actuaries UK Gilts Inflation-Linked ETF (GILI) OCF 0.07

Next best

  • iShares £ Index-Linked Gilts ETF (INXG) OCF 0.10%
  • iShares Index Linked Gilt Index Fund D (GB00B83RVT96) OCF 0.11%
  • Vanguard UK Inflation Linked Gilt Index Fund (GB00B45Q9038) OCF 0.12%

Total global bonds hedged to £ (government and corporate)


  • iShares Core Global Aggregate Bond ETF (AGBP) OCF 0.1% 

Next best

  • SPDR Bloomberg Barclays Global Aggregate Bond ETF (GLAB) OCF 0.1%
  • Vanguard Global Aggregate Bond ETF (VAGS) OCF 0.1%
  • Vanguard Global Short Term Bond Index Fund (IE00BH65QG55) OCF 0.15%
  • Vanguard Global Bond Index Fund (IE00B50W2R13) OCF 0.15% 

All hedged back to Sterling.

Global inflation-linked bonds hedged to £


  • Xtrackers Global Inflation Linked Bond ETF (XGIG) OCF 0.25% 
  • Royal London Short Duration Global Index Linked Fund M (GB00BD050F05) OCF 0.27%

Next best

  • L&G Global Inflation Linked Bond Index Fund I (GB00BBHXNN27) OCF 0.25%
  • Smith & Williamson Global Inflation Linked Bond Fund X (IE00B7RG6563) OCF 0.27%
  • Royal London Global Index Linked Fund Z (GB00B53R4H74) OCF 0.36%
  • ASI Short Duration Global Inflation Linked Bond Fund (GB00BP25RB79) OCF 0.46%

All hedged back to Sterling, short and intermediate options. Royal London, ASI and Smith & Williamson funds are active.

UK corporate bonds


  • Vanguard UK Investment Grade Bond Index Fund (IE00B1S74Q32) OCF 0.12%
  • iShares Corporate Bond Index Fund (GB00B84DSW83) OCF 0.12%

Next best

  • iShares Core £ Corporate Bond ETF (SLXX) OCF 0.2%

Concluding thoughts on low-cost trackers

If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading all that.

This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick shortcut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.

We only update this list periodically. Quoted OCFs may date, as fund groups fight their turf wars by undercutting each other (hurrah!) but this article should still prove an excellent starting point for your research.

If anyone comes across any better index tracker options I’d love to hear about them in the comments below.

Take it steady,

The Accumulator

Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.

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{ 749 comments… add one }
  • 399 theta August 7, 2015, 1:36 pm

    Last update on this:
    The following report http://media.morningstar.com/eu/Events/ETFEU/ETFEU14/ETF_Industry_Report_4Nov.pdf has details for the last 3 years of return enhancement from securities lending for all ETFs. Maybe you can take the average and update (if needed) the league tables?

  • 400 The Accumulator August 7, 2015, 3:59 pm

    Hi Theta, to take into account this factor and all the others that aren’t included in the OCF / TER you need to perform a tracking difference / tracking error check. It’s not easily done and the results are not exact. If you search the site using those those search terms then you’ll discover the best ways I’ve found to do it.

  • 401 Charles1968 August 29, 2015, 2:01 pm

    Can anyone explain to me why HSBC’s funds available through iWeb are split into two groups with what look like very similar funds (but different ISIN numbers): one group with annual management charges of 0.1% and all fund names ending “NAV”; and one with charges of 0.25%.

    Link: https://halifaxiweb.digitallook.com/cgi-bin/fund_browse.cgi?username=&ac=&action=manager

    Clicking HSBC Global Asset Management takes you to funds charging 0.25%. Clicking HSBC Investment Funds take you to the cheaper funds with almost the same names.

    I ask because I’m invested in the more expensive ones and want to transfer to a new fund manager (from HSBC Global Asset Management) to iWeb.


  • 402 eagleuk August 30, 2015, 7:49 am

    selftrade is offering HSBC FTSE All share fund @ocf 0.02% to sipp accounts.
    Similarly,Fidelity index world is @ocf 0.09% at iweb.

  • 403 Snowman September 23, 2015, 1:32 pm

    Fidelity are shaving a small amount off their UK(-0.01%), US(-0.01%), emerging markets (-0.02%) and World inc UK (-0.05%) tracker charges (from 1st October I think).

    The new charges for super clean funds on their own platform are shown on the following page


    But if you click through to the relevant funds it shows the old charges still.

    There are corresponding reductions on their clean trackers

    Tracking difference (that is not reflected in the OCF) remains a concern for me for Fidelity trackers based on their UK tracker’s high historical additional tracking difference.

  • 404 @algernond September 28, 2015, 7:48 pm

    Hi – Anyone got thoughts about FTSE 100 equal value ETF? db-X trackers have recently launched one (XFEW). Again wondering if the higher TER (0.25%) is worth it.

  • 405 The Accumulator September 28, 2015, 8:48 pm

    Equal value = a slight skew to small cap. But seeing as the power of small cap resides in the micro rather than the mega caps of the FTSE 100 this has a potent niff of gimmick to me. That’s not to say it won’t do slightly better than the FTSE 100. It might. It might not. No one knows in advance. But that’s quite a cost differential for it to overcome versus the cheapest FTSE 100 trackers.

  • 406 Snowman October 12, 2015, 6:05 pm

    HSBC are cutting their tracker charges from 16th November 2015

    HSBC European Index Fund C: 0.1%pa (was 0.2%)
    HSBC American Index Fund C: 0.08%pa (was 0.18%)
    HSBC FTSE all share C: 0.07%pa (was 0.17%)


  • 407 The Accumulator October 13, 2015, 8:27 pm

    Thanks, Snowman! As ever.

  • 408 MQM October 25, 2015, 11:53 pm

    Maybe a silly question, but what is the difference between “Domestic Equity” and “Domestic Value Equity”? I can’t seem to understand the difference, and Google is not helping much…

  • 409 The Accumulator October 26, 2015, 11:23 am

    Hi MQM,

    Not a silly question at all. Here’s a couple of posts that explain more:


  • 410 TT November 12, 2015, 5:30 pm

    Blackrock FTSE all share tracker drops from 0.16 to 0.07%

  • 411 PHB November 16, 2015, 11:44 am

    In general I am a fan of trackers, but I have to say that for Emerging Markets they are rubbish. I have held VFEM and other low cost trackers before that and over the years they have all fared much worse than carefully chosen active funds. I have just sold the last of my VFEM and won’t be going back in a hurry.

  • 412 The Investor November 16, 2015, 2:57 pm

    @PHB — There’s no evidence at all that over the medium to long-term average emerging market active funds beat passive funds, let alone for the latter to “fare much worse”.

    For instance, Morningstar research found:

    …the average surviving [emerging market active fund] returned 8.5 percent annually in the 15-year period over which these funds were ranked.

    [Various passive ETFs such as] VEIEX returned 9.0 percent, DFEMX returned 8.9 percent, DEMSX returned 11.7 percent and DFEVX returned 11.0 percent.

    The average return of the four passively managed funds was 10.2 percent, or 1.7 percentage points higher than for the average fund.

    Believing in the active management myth has been expensive indeed.

    Of course some active funds have done better, which allows your “carefully chosen funds” comment some air space — the trouble is they have to be carefully chosen *before* the time period, not afterwards. Some active funds will always beat tracker funds.

    I think it’s particular tricky to be clear-minded in the EM space, because it’s so easy for active funds to take very divergent bets by underweighting different currencies/countries, compared to say UK large cap trackers. This means we’ll likely see a wider dispersal of returns. It’s important to look at the losers, too, which self-evidently were “carefully chosen” by their investors, too, and remember all the active funds that shut down due to poor performance altogether.

    Finally, active investing in the emerging markets is a zero sum game for exactly the same reason as it is in the developed markets, so it is literally mathematically impossible for passives as a group to do worse than actives as a group. (I appreciate you weren’t saying this, just for wider readers interest).

    I think people always question strategies most heavily after poor returns, and the emerging markets have been through the ringer for years.

    All that said I’ve got nothing against anyone using active funds if they want / feel lucky / believe they can pick superior funds, and understand the higher costs and the high probability of underperformance. Each to their own, I am overwhelmingly an active investor myself.

    But I believe one should do so with your eyes wide open knowing the odds are against you, and most will fail to beat the equivalent trackers. 🙂

  • 413 PHB November 16, 2015, 3:05 pm

    As I say, I am a fan of trackers and particularly like Vanguard.

    However, my personal experience over some years of passive versus active for Emerging Markets in my SIPP is that my active investments have done much better, and I really wanted that not to be the case.

  • 414 The Investor November 16, 2015, 3:42 pm

    @PHB — Yes, I understood you said that. I was just pointing out that your anecdotal evidence was at odds with the average returns data for emerging markets — in case you were not aware of it with respect to EM, and also for the benefit of any readers who read your comment and thought it meant anything at all statistically that should maybe influence their own investing, which it doesn’t.

    It’s one person’s tiny data set, over a fairly short run, and they are not you anyway, with access to your fund picks and so forth.

    Perhaps you are a very rare individual who can consistently pick the handful of active emerging market funds that beat passive emerging market funds, after all costs, over all market cycles. If you believe that to be the case and are prepared to take the risk of being wrong, and you’re interested in spending the time researching and following active EM funds, then it certainly makes sense for you personally to pursue an active strategy when it comes to emerging markets.

  • 415 eagleuk November 16, 2015, 3:42 pm

    Some EM active funds invest in emerging market segments of develop countries.If they are investing in UK & USA small company sector then they are bound to have higher growth.First State EM fund was removed from EM list by IMA.


  • 416 ivanopinion November 16, 2015, 6:00 pm

    @PHB, I assume you accept that (as TI says) for any given sector “it is literally mathematically impossible for passives as a group to do worse than actives as a group”. If so, then logically either:
    a) You are unusually good at picking EM active funds that will outperform, which seems unlikely, given that any such skills would surely mean you could also pick outperformers in other sectors;
    b) There’s something about EM sector that means it is easier to spot winning funds than in other sectors. But that seems unlikely, because if this were true, we would all spot the winning funds and they would have all the money, and so they would “be” the market.
    c) This sector for some reason experiences a greater proportion of investors who don’t bother to “carefully choose” their active funds. I can’t see why this would be the case.
    d) The EM sector is very heterogeneous, so you could get very different performance depending on whether the fund in question invests in, say China. So perhaps you are just favouring some active EM funds that happen to have a portfolio mix that has outperformed over the last few years and is different from the indexes. So, inadvertently, you are not comparing like-for-like.
    e) You have just been very lucky. Humans are very good at being fooled by randomness.

  • 417 PK November 16, 2015, 6:18 pm

    re ivanopinion & PHB

    In my opinion it can often be traced back to the power of confirmation bias. 95% of us know that we are better than average drivers – just look at how well I drive!

  • 418 Geo November 16, 2015, 6:43 pm

    I don’t have much faith in EM active funds, Templeton Investment trust ‘was’ an amazing performer so if you picked this using some clever active management past performance test/great manager insight/ etc, you wouldn’t be happy now.

  • 419 PHB November 16, 2015, 7:08 pm

    The majority of my holdings are passive trackers, I am a big fan of Vanguard and I really dislike high fund charges.

    I am much more comfortable with investing in passive trackers and letting them get on with it but, exceptionally in my experience, it simply hasn’t worked out with EM, I have had two goes at it over the last 5 years investing half in passive and half in active and in both cases passive flopped compared with active.

    Including trading costs, VFEM has lost me about 14% over the last 3 years, perhaps I chose the wrong passive tracker (twice).

    The active fund managers may well have varied the mix and may have even crossed IMA boundaries but the result was gains from EM exposure rather than losses.

    I am not an expert but I am capable of using Trustnet and Morningstar and passive investing is not a religion for me.

  • 420 ivanopinion November 16, 2015, 7:10 pm

    @PK, perhaps, but I don’t think PHB is claiming to be a better than average picker of active EM funds. The apparent outperformance of his/her EM funds is contrary to his/her expectations, rather than being a confirmation.

  • 421 ivanopinion November 16, 2015, 7:36 pm

    @PHB, I accept that this is empirically what you have experienced. I don’t accept the conclusions you draw. You need far more than just a couple of goes in order to draw any conclusions that are statistically valid.

    You may well have heard the anecdote about Apple having to “fix” the shuffle function on iTunes, because it was originally genuinely random and this sometimes meant that it would play several tracks from the same album or artist, back to back. Humans like to see patterns in things, so they assume that such coincidences cannot be just coincidences and thus the randomising must be faulty. Apple therefore had to add an override to the randomised results in order give more variety than might arise from true randomisation.

    Just as a true random selection of music from one’s iPod might give rise to two consecutive tracks by, say, Adele, so might two random choices of EM active funds outperform the index. It doesn’t mean they will continue to do so, any more than you can conclude that the third track will also be Adele. But our instinct (wrongly) tells us that both these things are likely.

  • 422 PK November 16, 2015, 7:51 pm

    @ivanopinion, as you say perhaps, but here’s a thought; why would you choose to purchase an active fund in the first place? The expectation could not be considered to be purely that it would perform less well than the sector trackers to which it would be compared. Perhaps there was just be a small portion of hope that a choice has been made that would do better than the tracker. Based on what PHB wrote he more than one….
    It’s a very difficult thing to be a truly rational evidence based investor speaking as one who has failed.The workings our psyche and mechanisms such as confirmation bias I suspect are rather more complicated than your comment suggests??

  • 423 PHB November 17, 2015, 1:51 am

    This is my pension here, not an academic exercise.

    My starting point is that passive=good, active=bad but it simply doesn’t stack up for EM.

    Fidelity EM and FS (Stewart) Global EM Leaders and others trump VFEM (and the other low cost tracker that I used). My starting point was that I wanted (some) exposure to EM in my SIPP, do I care if the fund managers strayed outside the boundaries? Not if they made me more money.

    I still have most of my investments with low cost trackers, but I also have Woodford and it is doing very well, thank you, God willing.

  • 424 ivanopinion November 17, 2015, 10:01 am


    Yes, I realise this is not just an academic question. Which is precisely why it is important not to draw unjustified (and improbable) conclusions that just because A has made you more money than B for a few years it will continue to do so.

    But that’s not to say it definitely won’t. 🙂

  • 425 The Investor November 17, 2015, 10:12 am

    @PHB — Your experiences are perfectly valid, as is your conclusion for *you*, if you trust your judgement to the appropriate extent.

    As I say perhaps you have some rare ability to discern which active fund managers will outperform in the emerging market space. I don’t know you or your returns over the long-term, so I will suspend judgement. 🙂

    I hope you can see therefore that I’m not dismissing your personal conclusions out of hand.

    Where the disagreement comes is that you keep extrapolating from the fact that you’ve identified (and invested in) a couple of outperforming active EM funds to say that the case for using trackers doesn’t “stack up for EM” because “for EM they are rubbish”.

    As I’ve shown you with evidence, rather than anecdote about a couple of funds someone happens to have owned, this is not true.

    EM trackers beat on average active EM funds.

    If the fact that a minority of active funds beat trackers is enough to make *you* believe that the case does “not stack up” then *you* should probably reconsider your tracker investments in other areas of the market, too.

    That is because in pretty much all sectors there are a handful of active funds that have a long-term record of out-performance, whether through luck or skill.

    You, presumably, have happened not to invest in those ones in those sectors, so you still believe trackers are appropriate there.

    It’s this logical fallacy that is at the heart of this spirited (but happily good natured 🙂 ) disagreement.

    Your surprise at (apparent, but statistically meaningless) EM tracker underperformance might be novel to you but it is an everyday observation for me.

    Every few days a comment will pop up on an old post or in an email to me saying: “Hey, I read that you said active funds can’t beat trackers, but I read the literature for XYZ fund and it did over however many years.”

    We’ve never said some small number of active funds can’t/won’t beat trackers. They do. Even my dedicated passive co-blogger The Accumulator notes this, although he sees only luck / benchmarking sleights of hand whereas I’ll even allow for skill.

    The issue has always been that most people demonstrably can’t identify such rare outperformers in advance. Therefore most people are better off playing the probabilities, and accepting average performance via trackers.

    You’ve either got skill at selecting EM funds or you’ve spun the roulette wheel and won. 🙂

    Either way, you’ve not upended the reality of historical performance or the certainty of active investing being a zero-sum game in EMs, like everywhere else.

  • 426 PHB November 17, 2015, 10:49 am

    Some folk deduce for the blatantly obvious reasons that most of the time passive investing is better than active for most folk most of the time, but may occasionally under certain circumstances select an active fund.

    Some folk believe that 100% passive investing is the right religion.

    No one can see the future, zero sum game, passive beats average of active.

    Time to move on.

  • 427 MrL November 17, 2015, 11:13 am
  • 428 PK November 17, 2015, 11:16 am

    @PHB – Passive investing a religion? It’s logical, rational and based on good, well tested evidence – not quite the same as most other religions I can think of.
    We all make choices; based on the best evidence, on average, your approach will more often do less well than a truly passive approach.
    No one is arguing with your right to choose whatever approach you wish, just unhappy with your conclusions.
    May the force be with your active fund selection!

  • 429 Stuart November 17, 2015, 11:48 am

    I too am a fan of passive investing in tracker funds.
    And they have done me very well financially over the years.
    It is clear (to me) that trackers beat active funds on average for large well researched markets like UK and US equities.
    Nevertheless, I have read that for less well researched markets like Emerging Markets, there should be scope for good active fund managers to beat the market.
    As others have commented above, of course you have to find these good managers who don’t have just a short term flash in the pan because of good luck.

  • 430 The Investor November 17, 2015, 11:57 am

    @Stuart — It’s a myth, which is directly tackled by the Larry Swedroe article I linked to in my original reply to @PHB.

    Alternatively, look at the SPIVA data link just posted. It shows that over the past 10 years, benchmarks beat EM funds 86% of the time.

    Of course, some of those who bought into the small minority of EM funds that beat the benchmarks will decide they have uncovered some superior way of investing in EM as a result, regardless of the overall data.

    They may start to look for or even talk about “reasons” (“EM is less researched, EM is dominated by large state-backed companies you can avoid, EM is dominated by commodities you can add to / reduce, EM includes several basket case countries a skilled manager can sidestep”) and you can be sure EM fund managers with successful funds will use such narratives in their marketing! 🙂

    Remember, that data shows the majority of EM funds underperform.

    But the financial services industry has never let the facts get in the way of a good story.

    We shouldn’t do the same. 🙂

  • 431 ivanopinion November 17, 2015, 12:14 pm

    I must admit I had always believed/assumed that there is more scope to beat the index in the EM sector. However, those SPIVA figures seem to show the opposite. Whereas only 14% of active EM funds beat the index over ten years, nearly 30% of active UK or European funds manage this.

    So, if you are going to try to pick, in advance, the fund managers who will outperform, your chances are much better in the UK large-cap sector or Europe.

    That’s for sterling denominated funds. For euro denominated, active managers are even less successful, but again they struggle more in the EM sector.

  • 432 ivanopinion November 17, 2015, 12:17 pm

    I wonder why there’s such a difference in whether the fund is denominated in euros or pounds? Do active funds tend to hedge FX movements, and this happens to have paid off more for sterling denominated funds?

  • 433 The Investor November 17, 2015, 12:26 pm

    @ivanopinion — As I understand it it’s just short run data (yes, 10 years is short run! 🙂 )

    Many UK active funds that supposedly invest in large caps hold a greater proportion of smaller cap shares than the indices. These have outperformed in the past 10 years, especially since the financial crisis.

    Also, small caps will tend to outperform over the long-term. A purist would say in that case these funds are taking on more risk for their extra returns, versus a “pure” tracker that actually follows the benchmark.

  • 434 PHB November 17, 2015, 12:30 pm

    In my portfolio, I have found that only one active manager consistently performs poorly.

    Why did I feel the need to invest in Russian Oil, Portuguese Telephones, Gold Mines, or UK Fracking? They all seemed like jolly good ideas at the time, but fortunately I restrict myself to comparitively small sums when overcome by the need to have a dabble on the side.

  • 435 MrL November 17, 2015, 1:38 pm

    The full set of reports can be found here (including USD/US data): https://us.spindices.com/search/?ContentType=SPIVA

    US Emerging Market active funds are even less successful then their GBP and EUR cousins.

  • 436 TFW November 30, 2015, 9:49 pm

    SPDR Barclays Capital Sterling Aggregate Bond ETF is no more, I’m afraid; cancelled due to lack of interest

  • 437 Julio December 3, 2015, 2:17 pm

    first of all, thank you for this post! I am a fan of jCollins series so I was very pleased to find this blog in Europe too! I’m planning to invest in a tracker fund in the UK so I needed some info on where to get the index funds like Vanguard, Amundi, Pictet? Do you buy them directly or a third party, i.e. banks?

    Thank you

  • 438 The Accumulator December 3, 2015, 7:03 pm

    Hi Julio,

    This series is made for you:

    Note, we write from a UK perspective

  • 439 Simon December 8, 2015, 2:39 pm

    Hi Accumulator,
    I’ve heard (http://www.morningstar.co.uk/uk/news/69342/Taxes-and-ETFs-A-Guide-for-British-Investors.aspx) that 25% of ETFs in the UK have gains that are liable for income tax rather than CGT! I’ve tried looking at the KIID but am struggling to check whether ETFs have ‘distributor’ or ‘reporting’ tax status. Please can you help me workout where to look for this information for ETFs (e.g. Vanguard LifeStrategy).

  • 440 Lydgate December 8, 2015, 4:30 pm

    I was given a free copy of the FT this morning with a large cover advertising iShares by BlackRock. They focused on the 0.07% OCF/TER for the FTSE100/500 funds and thought they looked potentially interesting:

    Anyone have any thoughts on these? Looks like TER varies from 0.03% to 0.12%.

  • 441 The Accumulator December 8, 2015, 5:42 pm

    Hi Lydgate,

    You’ve linked to ETFs available to US investors. Here’s the UK equivalent:

    Between iShares and Vanguard you should be able to find pretty much everything you need.

  • 442 The Accumulator December 8, 2015, 7:07 pm

    @ Simon – that should show up on the product factsheet rather than the KIID. Also, there’s a link to a list of non-reporting funds maintained by HMRC. You can find it in this piece:

  • 443 Simon December 9, 2015, 9:25 am

    I thought there must be something about this here, but hadn’t spotted that article. Thanks Accumulator!

  • 444 Snowman December 10, 2015, 3:54 pm

    Vanguard are launching 4 new ETF funds based on (global) factor investing based on value, momentum, liquidity and volatility criteria


  • 445 The Investor December 10, 2015, 7:05 pm

    Cheers @Snowman, I’ve popped up some deets as the youngsters say:


  • 446 AP December 13, 2015, 12:58 pm

    Hi all,

    My first post here, but I have been lurking for a while.
    I have recently began reading this blog, because now I have a pension scheme through my employer (in the UK) and I want to save the best I can. By default, they put me on BlackRock Aquila 50:50 Global Equity Index (B1G5113). Since I’m so new to this, I don’t know if this is a good choice or I should be looking to change.

    On the tin, this has an annual charge of 1%. But throught my employer, this is effectively reduced to 0.20%. There seem to be no other charges. But I can’t tell if this is passively or actively managed. It looks like a passive tracker, holding 5 other funds:
    BlackRock Aquila (BRA) UK Equity Index (49.8%);
    BRA US Equity Index (17%)
    BRA European Equity Index (16.6%)
    BRA Pacific Rim Eq Idx (8.3%)
    BRA Japanese Eq Idx. (8.3%)

    In theory, this is close to what I want: a diversified global passive tracker, although I’d maybe change the weights a bit to give more US and less UK.

    But is this a good fund or can I find better?

    Thanks all.

  • 447 The Accumulator December 13, 2015, 6:27 pm

    Hi AP,

    Main observations are that the fund puts you 100% in equity. Not many people can handle this much volatility. So may want to consider an allocation to UK government bonds.

    Here’s a couple of pieces on that:



    As a globally diversified portfolio, the main thing it’s missing is emerging markets and, as you mention, it’s massively overweighted to the UK. You’d only really want that if you’re close to retirement or wear Union Jack underpants.

    Here’s a good piece on the strategy that underpins global portfolios:


    Here are some alternative choices.


    A 0.8% annual charge isn’t too shabby if this is all you’re paying including the platform fee and there aren’t any dealing fees. Make sure there’s not a bigger OCF or TER figure lurking beneath the water line.

    If you were investing into your own SIPP then you wouldn’t do much better than 0.35% for the platform and 0.25 for the fund.


    Either way, you certainly want to put enough in to get the maximum employer match and if you are contributing through salary sacrifice then so much the better as you’ll be saving on national insurance too.

  • 448 AP December 14, 2015, 9:04 pm

    @The Accumulator

    Much appreciated for your answer. Thank you!

    It’s good to know it is ok in charges. I usually am very distrustful of Emerging Markets so I was not too bothered for missing on them. But is this a bad idea? Is it better to have a full world exposure instead of, for example, just the UK, US and Europe?

    I’m going to look into asset diversification. Do cash ISAs count for diversification, or are they too much of wimpy in returns?

    Thanks a bunch.

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