The Vanguard FTSE UK All Share Unit Trust (ISIN: GB00BPN5P782) is a passive British equity fund. As its name implies, the goal of the fund is the capture the equity returns from the broadest part of the London stock market. FTSE All Share Index is the key index that the Trust tracks. Vanguard, the US fund giant, administers the Trust.
Formed just over a decade ago (2009), the stock fund has grown to be one of the largest passive funds in the market. As of August 2023, assets under management totalled £12.2 billion – which, by comparison, is about the size of another popular Trust, the Scottish Mortgage Trust (ticker: SMT, AUM £12 billion).
Size does not make much of a difference to performance as the Trust tracks the All-Share Index. But is this Index a good one? Well, the FTSE All-Share Index is a broad representative of stocks in the London market.
There are 570 stocks and securities in this Trust, just four less than the benchmark. The median market capitalisation of these securities exceeds £33 billion. Undoubtedly, this is a (quasi) large-cap UCITS fund, whereby larger stocks impact the Trust’s performance more than smaller ones.
The top five holdings in the Trust are: Shell (RSDA), AstraZeneca (AZN), HSBC (HSBA), Unilever (ULVR) and BP (BP) – all the usual mega-caps in the LSE.
The Vanguard All Share Trust is a good options for those that want to trade the FTSE all share index for two reasons:
- Charges are fairly low. The Trust’s ongoing charges (OCF), for example, is only 0.06%. And according to its factsheet, there is no performance fee. The fund is cheap to hold and investors wouldn’t worry about high charges eroding long-term returns.
- The tracking error of the fund is fairly good. You can see how correlated it is to the benchmark in the performance graph below.
Income & accumulation
Another benefit is that investors can choose whether they buy the Trust’s
a) Accumulating unit or the
b) Distribution unit.
The latter gives out dividends regularly; while the former rolls up these payments and re-invest.
Underperforming or undervalued?
Should you, however, buy the fund for your portfolio? There are a few other factors to consider. The first point is about the Trust’s performance. While it fluctuates according to the underlying stock index, the index itself did not move much. Four of the last five years saw sub-5 percent returns. Given this mediocre run, prospective investors should think twice about holding the fund.
If you think the UK market is undervalued compared to other international markets such as the US and emerging markets, then it is worth considering.
There are other competing equity Trusts out there that perhaps give a ‘bigger bang for the buck’, so to speak.
If you wish just to track certain sections of the UK market, like the large-capitalisation companies, perhaps just stick to the FTSE 100 fund like iShares Core FTSE 100 UCITS ETF (ticker: ISF). This way, you avoid the smaller stocks.
- Related guide: How to invest in the FTSE 100?
The last point is about asset allocation. Do you need to invest in equity? If yes, why UK? As you can see, the FTSE All Share Index is dominated by financials, oil & gas, and a few semi-British large-caps (like BHP, Unilever). There are no technology or major industrial heavyweights. Unless you’re bullish on these sectors, it certainly makes more sense to invest in other indices with faster-growing companies.