CFA Institute’s Post

Vanguard's OCIO clients should be wary of the higher-fee active funds and #alternativeinvestments that are now open to them, urges Mark Higgins, CFA, CFP®. Trustees are often presented with “new opportunities” which are framed in a way that overstates the benefits, understates the risks, discounts the skills required to succeed, and all but ignores incrementally higher costs, he cautions. #EnterprisingInvestor

Vanguard's OCIO clients should be wary of the higher-fee active funds and #alternativeinvestments that are now open to them, urges Mark Higgins, CFA, CFP®. Trustees are often presented with “new opportunities” which are framed in a way that overstates the benefits, understates the risks, discounts the skills required to succeed, and all but ignores incrementally higher costs, he cautions. https://lnkd.in/eZxdNJX3

The benefits of reinvesting your income distributions Owning units in exchange traded funds (ETFs) or managed funds that invest in shares generally gives you exposure to hundreds, and sometimes thousands, of different companies. Spreading your investments across different asset classes can help to reduce investment risk and also to diversify your sources of distributions. One of the key advantages of investing in funds, apart from the potential capital growth, is that you will receive regular income distributions. The total amount of distributions you receive, will depend on the number of fund units you hold at the time. Making a choice When you invest in a fund, you have two options in relation to income distributions, you can your take them as cash, or you can choose to reinvest them to buy additional units in the same fund. Reinvesting your distributions will increase the number of units you hold, which over time can compound both capital growth and income returns. Comparing the options Investors who consistently reinvest their distributions will achieve higher investment returns compared to those who take their distributions as cash. The chart in the link below uses historical data and provides context around the growth achieved from reinvesting distributions over a 10-year period from 31 December 2012 to 31 December 2022. It compares two investors who each invested $10,000 into the Australian Securities Exchange-listed Vanguard Australian Shares Index ETF (ASX code VAS) at the end of 2012. For their outlay, both investors purchased the same number of VAS units. “Investor B”, represented by the brown line on the chart below, opted not to reinvest their regular distributions. “Investor A”, represented by the green line on the chart, opted to automatically reinvest all of their VAS distributions. Source: Vanguard calculations. Total returns are before fees and taxes. After 10 years, Investor B would ended up with a balance of just over $14,700, equal to a growth return of about 46 per cent. They would have received around $5,600 of income distributions. However, Investor A’s $10,000 investment would have grown 127 per cent to over $22,600. However, Investor A would have ended up with almost 100 more fund units than Investor B after 10 years due to reinvestment of their cash distributions. Source: https://lnkd.in/giPySriy This advice has been prepared without taking into account your individual objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If this general advice relates to the acquisition, or possible acquisition of a particular financial product, you should obtain a copy of, and consider, the PDS for that product before making any decision about whether to acquire the product.

Massive challenge ahead for the newly picked Vanguard CEO coming from its main competitor BlackRock. How to remain true to Vanguard corporate culture and ethos while taking it to the next level? There is a blind spot not covered in this article: how much will the new CEO be paid and is this compatible with Vanguard longstanding mutual ownership tradition? When he passed away Jack Bogle was “rich” ( his estate was said to be $150 million) but nothing compared with Wall Street tycoons billions…and not much as well for a guy who had created from scratch and grown a trillions fund business serving retail investors at the lowest possible cost. He was true to his mantra. Vanguard cost structure benefits fully investors but makes it difficult to develop any other type of distribution but direct distribution (B to C) with the help of technology and the need to reach critical mass with a very streamlined offering. 348 funds at Vanguard must be the lowest number for any asset manager in the world! Truly cost efficient and effective while covering adequately investors needs 😉👏 More to come for sure! Salim Ramji BlackRock Vanguard #successionplanning #assetmanagement #corporateculture

🌟 The Game Changer in Private Equity: Wealthy Investors Enter the Fray 🌟 🔍 Dive into the seismic shift where high-net-worth individuals are not just playing the game, but potentially changing the rules for institutional giants. 🔄 These savvy investors are unlocking a new era with semi-liquid funds, providing a fresh infusion of capital directly into deals. But what's the catch? As these funds flourish, they could sideline traditional players from juicy co-investment opportunities. 💡 Stephen R. Brennan of Hamilton Lane warns: more capital means a higher demand for deals. If GPs can't keep up, co-investments could become the first casualty. 🏦 Blackstone's BXPE is just the tip of the iceberg. With $1.3 billion earmarked for the wealthy, the landscape for co-investment and fee structures is shifting beneath our feet. 🔄 This isn't just about more capital; it's about changing dynamics. As evergreen funds grow, the line between them and large institutional investors blurs. 🔮 Early days, yes, but the direction is clear. Will these funds limit co-investment opportunities, or is this the dawn of a new strategy for deal-making? #privateequityfirms #PrivateEquity #InvestmentTrends #HighNetWorthInvestors #CoInvestmentShifts

As highlighted by Gaurav Joshi, Head of EY-Parthenon's US wealth and asset management strategy, the trend seems to be shifting towards a portfolio approach from traditional single-source co-invest opportunities. This shift not only opens doors for ultra-high-net-worth individuals but also offers firms like Avestix the flexibility to undertake larger deals independently. It's a testament to the adaptability and resilience of the industry, reflecting the dynamic nature of investment strategies in response to changing market dynamics. #Investments #WealthManagement #PortfolioApproach #avestix

Around the world, the standard of investment advice is finally improving, and so too are investor outcomes, as portfolios become simpler, cheaper and more efficient. But progress is often of the “two-steps-forward-one-step-back” variety, especially when good firms get taken over by less enlightened businesses that still recommend complex, costly, active strategies. It happens all the time in the retail space when small advice firms are bought by large consolidators. But institutional clients are affected too. In the U.S., for instance, Vanguard’s outsourced chief investment officer (OCIO) business was recently acquired by Mercer, a division of Marsh McLennan, and very much an old-style investment consultancy firm. Vanguard's former OCIO clients wisely adhered to the advice of David Swensen and Warren Buffett and primarily invested in low-cost index funds. The danger now, as my Index Fund Advisors, Inc. colleague Mark Higgins, CFA, CFP® explains, is that Mercer will try to tempt trustees with expensive funds of funds and alternative investments like private equity, venture capital, private credit and infrastructure. That would mean higher fees for consultants and other intermediaries but, almost certainly, lower net returns for clients in the long run. Trustees need to stand their ground. #Investing #EvidenceInvesting #IndexFunds #ActiveManagement #Trustees

Introducing the inaugural Great Investments Programme Dinner: Wealth and Wisdom Last evening, I had the privilege of hosting an exclusive dinner for the esteemed members of our Great Investments Program and a handpicked selection of VIP guests. Our program, designed for those who are not just seeking to enhance their portfolios but also to make a significant impact on their financial futures, has always been about more than just numbers. Yes everyone want to improve their pension portfolios. That’s where I come in. But it’s more than that. The dinner was a testament to the vibrant ecosystem we've cultivated, where like-minded investors come together to share insights, strategies, and success stories. This unique assembly of individuals, all on a quest for financial excellence, provides an unparalleled opportunity for learning and growth. Our commitment to providing an exclusive platform for our members to thrive is unwavering. We believe that by bringing together individuals who are not only passionate about growing their wealth but also about contributing to a community of informed investors, we can change the landscape of investing. Take it out of the hands of ill informed IFAs, wealth managers with conflicts of interest, and no interest in their clients only lining their own pockets. The knowledge shared, the networks built, and the strategies developed within this community are designed to empower each member to navigate the complexities of the financial world with confidence and sophistication. As we look to the future, we are excited about the possibilities that lie ahead for our members. Our program is more than just a gateway to financial growth; it's a journey towards becoming more astute, more connected, and ultimately more successful investors. The benefits of such a community are immeasurable, not just in terms of financial gains but in the collective wisdom and strength that comes from being part of a network of peers who share a common goal. To our esteemed members and guests, we extend our heartfelt thanks for making this event a resounding success. Big thanks to Paresh Kiri bringing additional hedge fund and floor trading insights. Your engagement and enthusiasm are what make our community truly exceptional. Together, we are not just building portfolios; we are building futures. The next one is at my Inn: The Honourable Society of Lincoln’s Inn, black tie and gourmet dinner. Nish Kotecha - discovered he’s doing the floatation and anything short of a billion will be, well, too short! Derek Goodwin thank you - who’s already brought over a billion into the UK through global tech working with Number 10 and founding the Global Entrepreneur Programme. And thank you Param S. MBE for organising the business event in Parliament beforehand and joining us. Want to be part of it? www.alpeshpatel.com/shares or speak to Paresh Kiri

🔥 Are investors finally waking up to St James's Place Wealth Management Group? 👀 Year on Year Revenue (Dec 22) dropped 36.1% and the the latest share price fell 15.49% in the last 5 days ✅ I commented on St James's Place (also linked to Select Investors here in Singapore) over a year ago 👉 Nothing has notably changed from the 2022 Yodelar report I referenced on my post to the 2023 Yodelar report The headlines from the 2023 report: ❌ 80% of St James’s Place unit trust funds rated as poor performing ❌High charges and poor performance across their entire range of funds ❌80% of SJP funds performed worse than half of same sector over 10 years ❌15% of all St. James’s Place funds returned losses over 10 years ❌75% of SJP funds yielded returns below the sector average over 5 years  ❌St James’s Place initial fee more than twice the industry average ❌£100 billion managed by St James’s Place is held in poor funds ❌Restricted advice with no onus to provide comparative performance 🎯 If this isn't an eye opener to investors, I don't know what is! ✅ For those that missed the 2023 report, the link is in the comments #femvestorsglobal #financialliteracy #sjp #awakening #money #education #retirement #vision #payingtomakeothersrich #financiallyfabulous

The MO to financial services has been to react. Nick Leeson in 1990, to the run on banks in 2008 and recent bond crisis due ot high inflation. Whilst 99% of fund managers focus on these outlier events, there is a very small percentage of souls that seem to have this Super-Power of ignoring the noise and be acutely receptive to what moves a stock. Alpesh B Patel OBE has this Super-Power, and he has publicly beaten so called professionals in Financial Markets for at least 3 decades since he has prolifically published his works. The MO of financial regulators being asked to tighten what a "fund manager" can and can't do undermines the very fabric of doing what is best for the client. 2022 being a recent example. Where those on the Great Investment Program were able to go in to cash, and just sit on their hands until the market continued its bull market. These skills are imparted and anyone wishing to tackle poor performance should maybe listen to those who are NOT tied to any agenda to just obtain Assets Under Management so fees can be earned. Time to take charge of your financial future. Thank you Alpesh B Patel OBE for the shoutout.