- All-in-one multi-asset portfolios like LifeStrategy can deliver value to investors and advisers alike.
- Five different equity/bond splits in either fund or model portfolio format offer greater choice for advisers.
- Advisers can save time on portfolio construction and management to focus on adding value elsewhere.
"Investors can attain a level of portfolio diversification that would be much more expensive to achieve by investing in multiple individual funds."
Multi-Asset Product Specialist, Vanguard, Europe
As demand for financial advice grows, delivering value to investors is critical to building and maintaining a successful advice practice.
At Vanguard, we believe that delivering value to investors requires a suitable choice of high-quality investment solutions that cater to a range of client needs and preferences. While there’s no ‘one-size-fits-all’, all-in-one multi-asset portfolios can help most investors achieve long-term financial goals while delivering several key features along the way for advisers and clients.
Vanguard’s LifeStrategy portfolios, for example, are designed to serve as long-term, all-weather investment solutions that deliver clear value to investors and advisers. Our flagship multi-asset range includes five portfolios with different strategic allocations to global equities and bonds, from 20% equity to 100% equity, to support different client goals and risk tolerances. Advisers can choose to use LifeStrategy in either fund or model portfolio formats, both of which are constructed and managed by Vanguard.
Below are six ways that all-in-one multi-asset portfolios like Vanguard’s LifeStrategy range can deliver value to investors and their advisers.
1. Investment expertise
Building globally diversified portfolios is arguably the most important part of the investment process. Vanguard research found that increasing exposure to international stock markets can minimise volatility of equity allocations1, for example. However, without the resources and scale of a global investment manager, it can be easy to miss overlapping investments that might skew a portfolio’s exposure to certain regions, sectors or even individual companies.
By investing in a pre-packaged multi-asset solution like LifeStrategy, investors can lean on Vanguard’s wealth of experience and expertise to invest in highly diversified portfolios that minimise biases and inefficiencies.
2. All-weather portfolios
Well-constructed, globally diversified multi-asset portfolios are designed to deliver value to investors through various economic and market environments. That doesn’t mean investors will always get positive returns, but an appropriate allocation to global bonds and global equities (according to an investor’s goals and attitude towards risk) can smooth returns over the long-term relative to more concentrated investment strategies2.
The chart below shows the annual return of different equity and bond market sub-asset classes over the past 10 years to illustrate why broad diversification across markets is a sensible approach for the vast majority of long-term investors. As the data highlight, it’s difficult to predict exactly which investments within equity and bond markets will perform well from year to year.
Key equity and bond index returns
Past performance is not a reliable indicator of future results.
Source: Vanguard calculations, data from 1 January 2014 to 31 December 2023, using data from Bloomberg, Thomson Reuters Datastream and FactSet. Global equities represented by the FTSE All-World Index, North American equities by the FTSE World North America Index, Emerging market equities by the FTSE All-World Emerging Index, Developed Asia equities by the FTSE All World Developed Asia Pacific Index, European equities by the FTSE All World Europe ex-UK Index, UK equities by the FTSE All-Share Index, UK government bonds by the Bloomberg Sterling Gilt Index, UK index-linked government bonds by the Bloomberg UK Govt Inflation-Linked UK Index, UK investment-grade bonds by the Bloomberg Sterling Aggregate Non-Gilts – Corporate Index, Global bonds (hedged) by the Bloomberg Global Aggregate Index (hedged in GBP). Performance shown is cumulative and denominated in GBP. It includes the reinvestment of all dividends and any capital gains distributions. The performance data does not take account of the commissions and costs incurred in the issue and redemption of shares. Basis of fund performance NAV to NAV.
By investing across global markets, diversified portfolios such as LifeStrategy capture the returns from the best-performing investments in any given year and minimise the impact of the poorest-performing investments on total returns. In 2023, for example, global portfolios benefited from exposure to the ‘magnificent seven’ stocks (Apple, Amazon, Alphabet, Meta, Tesla, NVIDIA and Microsoft) that led US stock market returns. As the chart shows though, there’s no guarantee North American equities will continue to outperform other markets—and our analysis suggests US equity valuations are stretched by historical standards, giving more reason to maintain a diversified exposure to global markets.
3. Cost efficiency
Building a globally diversified portfolio of equities and bonds can be costly. Our research has shown low-cost funds and model portfolios have a higher probability of performing better than costlier ones3. By investing in a low-cost, well-diversified multi-asset solution, investors can attain a level of portfolio diversification that would be much more expensive to achieve by investing in individual funds themselves, given the costs involved.
For example, Vanguard’s LifeStrategy Global 60% Equity model portfolio, which consists of 60% equities and 40% bonds, provides exposure to global markets through as many as 14 different underlying ETFs and index funds, plus more than 20,000 constituent securities. Investors only pay one fee, rather than the multiple fees that would be required to invest in all the underlying investments4.
Not all multi-asset portfolios are created equal, however. Investors should consider whether they will achieve an appropriate level of diversification and that the ongoing costs are sufficiently low before deciding to allocate to a multi-asset solution.
4. More time back
Multi-asset funds and model portfolios can free up time for advisers to focus on adding value through the range of services they offer beyond portfolio construction. Using an all-in-one investment solution like LifeStrategy means that advisers needn’t spend significant amounts of their time choosing individual funds or managing client portfolios – or undertaking the administrative tasks that go with it.
Whether it’s behavioural coaching to improve client outcomes and strengthen relationships or focusing on more specific client needs like estate planning, advisers who use appropriate multi-asset solutions get the value of having more time back to dedicate to their clients’ financial planning needs.
For example, some multi-asset managers rebalance portfolios based on the asset allocation strategy to maintain a predetermined equity-bond mix or achieve a target return. LifeStrategy funds and model portfolios are rebalanced regularly to the target equity allocation to ensure advisers and clients are clear on how their capital is invested at any given time.
Investing in multi-asset portfolios that are rebalanced by the investment manager means there is no need for advisers to manually rebalance portfolios. By taking on the rebalancing function, investment managers relieve advisers from the burden and associated complexity of consulting investors before changes can be made.
5. Peace of mind
By using a multi-asset solution constructed and overseen by a global investment manager with with deep expertise – as well as a strong track record in delivering effective multi-asset strategies – investors benefit from the peace of mind that comes from knowing their investments are in capable hands. That doesn’t eliminate the risks associated with investing in global equity and bond markets as the value of investments, and income from them, may fall or rise and no investor is guaranteed to make a profit.
The risks associated with investing are part of the reason why asset managers like Vanguard often employ large teams of investment professionals dedicated to the ongoing management of multi-asset portfolios. By choosing a multi-asset fund or model portfolio that benefits from depth of expertise, advisers and clients are provided a layer of comfort amid the complexities and risks of participating in investment markets.
6. Support
Effective communication also promotes trust among clients. This is why some multi-asset managers regularly provide advisers with materials to aid client conversations by keeping them informed and helping to instil confidence.
Advisers that use LifeStrategy are supported through quarterly fund performance updates, including interactive adviser webinars and regular macroeconomic insights to help provide clarity and context for their clients. Vanguard’s behavioural coaching tips and aids can also support effective conversations with clients during difficult and even sanguine market conditions.
Find out more by visiting our Vanguard 365 portal now.
Delivering value to clients
In today’s fast-paced market and economic environment, more and more advisers are outsourcing their investment proposition and entrusting their clients’ capital to a robust multi-asset solution.
In doing so, advisers can leverage the portfolio construction expertise of multi-asset managers like Vanguard to provide clients with an all-weather portfolio at a low cost without having to spend a significant amount of time on building and maintaining the portfolio.
At the same time, advisers can get more time back by using an all-in-one multi-asset solution like LifeStrategy to spend on higher-value tasks and achieve the peace of mind that comes from the knowledge that client capital is in reliable hands, while using the materials and guidance made available by their chosen multi-asset manager to deliver more value to clients.
1 S.J. Donaldson; H. Ahluwalia; G. Renzi-Ricci; V. Zhu; A. Aleksandrovich, 2021. ‘Global equity investing: The benefits of sizing your allocation’.
2 Source: Vanguard Research: “How to increase the odds of owning the few stocks that drive returns”, February 2019, C. Tidmore, F. M. Kinniry, G. Renzi-Ricci; E. Cilla. Data between 1 January 1987 to 31 December 2017. Based on quarterly Russell 3000 Index constituents’ return data from Thomson Reuters Market QA.
3 Source: Morningstar and Vanguard. In a 2010 analysis across the universe of funds, researchers found that, regardless of fund type, low expense ratios were the best predictors of future relative outperformance (Kinnel, 2010).
4 Ongoing costs include the ongoing charges figure (OCF) which is paid to Vanguard for managing the fund and associated costs. Transaction costs are the charges incurred within the fund for buying and selling the underlying investments, including dealing costs and taxes. Vanguard’s exchange-traded funds (ETFs) incur one-off costs in the form of a bid-offer spread on any trades made. For more information, see our costs and charges information.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.Investments in smaller companies may be more volatile than investments in well-established blue chip companies.
The Vanguard LifeStrategy® Funds may invest in Exchange Traded Fund (ETF) shares.ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.
Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.
The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.
Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.
For further information on risks please see the “Risk Factors” section of the prospectus on our website.
For further information on the model portfolio risks please see the “Risk Factors” section for the prospectus of the underlying funds on our website.
Important information
This is a marketing communication.
This is directed at professional investors and should not be distributed to, or relied upon by retail investors.
For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website.
For further information on the investment policies and risks of the model portfolio(s), please refer to the prospectus and KIID of the underlying funds before making any final investment decisions. The KIID for each fund is available, alongside the prospectus via Vanguard’s website.
This is designed for use by, and is directed only at persons resident in the UK.The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.
The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.
For investors in UK domiciled funds, a summary of investor rights is available in English.
For investors in Ireland domiciled funds, a summary of investor rights is available in English, German, French, Spanish, Dutch and Italian.
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