Vanguard index Funds added to Baxter Fensham portfolio’s to improve efficiency
April 29th, 2010 Company News, Investments, NewsThe US fund management company Vanguard has come to the UK and this is a notable arrival. You will be aware of our ‘passive’ positioning for our core investment portfolios and this has been a successful strategy for us all for a number of years now.
Vanguard’s entry into the UK market is significant. It launched the first tracker managed fund in the USA in 1976. The firm was set up by John ‘Jack’ Bogle, who was influenced by the works of Modern Portfolio theorists, and the evidence based investment community of the day. He himself is deemed to be something of an investment guru now, and is often a source of commentary in the media globally.
Vanguard now oversees $1.1 trillion (£760 billion) of assets in the US, and a recent survey in America found that Vanguard had overtaken Fidelity in the rankings for reputation and company loyalty. Click Here to find out more.
We have banged on about ‘performance drag’ and the impact of active trading for some time now, and Vanguard comes to the UK with the simple message of keeping costs down, because charges can have a dent on performance.
The active versus passive debate has exercised many minds since index funds appeared three decades ago and institutional investors have grabbed the opportunity to access these funds. Unfortunately, the funds have not been widely available due to economies of scale.
Most retail investors will be aware of the Virgin UK Index Tracker, which opened in 1995, and possibly because of the public’s love affair with Richard Branson, it’s message was a good one and consequently very popular. However, whilst it’s 1% annual charge was initially very competitive in the index tracking world, it is now significantly more expensive than most, and therefore has undermined the tracking message, by impacting on returns.
Vanguard comes in at 0.15% in it’s UK Equity Index Fund, and given that it replicates the index in the same way as the Virgin UK Index Tracker, the cost saving offered by Vanguard confirms that Vanguard’s arrival is a timely one.
Received wisdom in America today is that it is a case of passive and active strategies, as opposed to those who venture passive versus active, but even the latter who strongly believe in active management realise the need for diversification with index funds at the core. Click Here to read more about the Active-v-Passive debate
You can find out more about the Vanguard proposition by clicking here .
