Vanguard vs. Client: The Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is (1) well diversified (60% global stocks and 40% bonds), (2) inexpensive (0.15% per year), (3) has a long and successful 20-year track record, and (4) is really big ($15b). How does your client’s moderately allocated portfolio with a similar risk and return profile compare to this off-the-shelf retail product? (If your client is more conservative than the 60% stock and 40% bond Vanguard fund, you can use the more conservative Vanguard LifeStrategy Conservative Growth Fund (VSCGX), which is allocated 40% stock and 60% bonds.)
But is comparing an off-the-shelf retail mutual fund that is made for “little investors” an appropriate comparison to the sophisticated, big firm, best thinking solution your client is currently using? Like all benchmarks, this comparison is probably not a perfect fit, but it is in the right zip code.
A prudent business manager will use a series of reasonable benchmarks, including a Peer Group Benchmark, to test whether the claims made by their clients’ investment managers are supported by objective measurement and not subjective platitudes.
At Anodos, we help fiduciaries answer the question, “Is my investment advisor doing a good job?” Many of our clients are individual trustees, business managers, ERISA trustees and endowment board members who are obligated to independently monitor the activities of the agents to whom investment duties have been delegated. What makes us unique is this is all we do. We don’t manage money, sell insurance, or accept referral fees. We don’t have a horse in the race.