I'm aware that some discretionary wealth management and advisor types use the WMA private investor indices as a benchmark and as a guideline for asset allocation. (Update: that link is now broken/locked up; however there's a wayback machine scrape of it from shortly before I posted this question here).
I'm interested in what the simplest, lowest cost way of reproducing the "income index" of that group is. At time of writing, the allocation and sub-indices comprising it are:
* UK Equities 35.0% - FTSE All-Share Index * International Equities 17.5% - FTSE All World Ex-UK Index * Bonds 27.5% - FTSE Gilts All Stocks index * Cash 5.0% - 7-Day LIBOR –1% (London Interbank Offer Rate) * Commercial Property 5.0% - FTSE All UK Property Index * Hedge funds/Alternatives 10.0% - WMA Custom Hedge Index
Therefore what I think I'm looking for is something like:
- A single fund or trust (or ETF even) - presumably some sort of multi-asset/multi-strategy type thing - which explicitly claims this index as a benchmark.
- A combination of a few such things achieving the same overall allocation.
- No more than 6 (ideally passive, in the interest of costs) investments which reproduce it directly.
I'm aiming for low cost and simplicity. Anything which helps the portfolio "self rebalance" is good (for example I quite like Vanguards' Lifestrategy funds, although they're not obviously a good fit to what I'm trying to do here). Basically the idea is to come up with something which might be called "off the shelf discretionary wealth management" or even "passive discretionary wealth management" achieving much the same exposure and returns but without the additional fees normally associated with DWM.
A slight complicating factor is the information on the page linked above that the "WMA Custom Hedge Index" has been obsoleted and temporarily replaced with a somewhat unsatisfactory 50/50 UK equities/gilts split (in other words... "more of the same"). I'd actually rather substitute that with some absolute-return/private equity type component to the overall portfolio as presumably more in keeping with what this allocation is trying to achieve.
Asset Class Asset Class Proxy Index International Equities 22.5% MSCI All Country World (ACWI) ex-UK UK Equities 30.0% MSCI United Kingdom IMI Government Bonds 5.0% Markit iboxx GBP Gilts Corporate Bonds 17.5% Markit iboxx GBP Corporates Inflation-Linked Bonds 2.5% Markit iboxx UK Gilt Infl-Linked Cash 5.0% Cash Equivalent (GBP 1W Libor-1%) Real Estate 5.0% MSCI UK IMI Liquid Real Estate Alternatives 12.5% MSCI World Diversified Multi-Factor 50% + 1w LIBOR (GBP) 50%
I note the move to include corporate bonds explicitly may well make it more directly comparable with multi-asset funds (for example Vanguard's Lifestrategy/L&G's multi-index/Blackrock Concensus), but haven't yet looked into how well it matches in any more detail myself.