Hargreaves questions Vanguard LifeStrategy performance

Discount broker claims low-cost D2C entry will not pose a threat

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Hargreaves Lansdown is encouraging investors to rethink their due diligence on Vanguard’s £5bn LifeStrategy range, arguing its success may not last over future market cycles.

As the giant US fund manager launches its UK platform for direct clients this month, Hargreaves head of investment research Mark Dampier says investors should reconsider how well some of Vanguard’s “clever” passive strategies would do in tough periods.

Dampier says: “Vanguard have done well because they haven’t done anything.

“Their LifeStrategy range is a very good idea and very straight forward but they don’t make any decisions and, because they’re heavily weighted towards the US – a great spot to be in the past five years – that’s helped them…But most active funds have been
underweighting the US, if anything, because it is overpriced.

“So the real question is: is that going to go well in the next five years?”

He adds: “Some of Vanguard’s strategies have just started at the right time and whether that will continue, and whether people will have the conviction to stay with it when it is not working so well, even though the cost is cheap, I don’t know.”

Vanguard’s range was launched in 2011. The Vanguard LifeStrategy 60% Equity fund has returned 34.8 per cent over three years versus the 26.6 per cent of the IA Mixed Investment 40-85% Shares sector. It beat the equivalent BlackRock Consensus 70 fund which returned 29.7 per cent over the same period.

Hargreaves’ share price dropped more than 8 per cent on the day Vanguard announced its UK direct platform.