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Index investing: Mark Evans of Beaumont Financial Planners

Mark Evans is wary of exposure to battered oil and mining giants in FTSE 100 trackers, though he believes passive US investments remain a smart play.

Index investing: Mark Evans of Beaumont Financial Planners

Mark Evans, founder of Shropshire-based Beaumont Financial Planners, believes global markets have been so unpredictable in the past few months it has become increasingly dangerous to use certain tracker funds, particularly outside the US.

‘In this volatile world, certain sectors are doing better than others, so having something that tracks the whole index isn’t necessarily a good idea,’ he said. ‘In such situations we will tend to use several different active managers instead.’

Beware sectoral exposure

The chartered financial planner has used the Vanguard FTSE UK Equity Income Index tracker in more benign times.

But he is concerned about following UK indices in the current climate.

‘Areas such as oil and mining have had a very rough 12 months of bouncing around,’ he said. ‘There are also big companies in these sectors and these weigh quite heavily on an index.’

Investors holding a FTSE 100 tracker, for example, would have taken a kicking due to their exposure to oil and mining groups.

Positive passive plays

Evans believes the US market lends itself to an index tracking approach. ‘It appears to be a market you can track relatively easily and successfully,’ he said.

‘There doesn’t appear to be much upside from using an actively managed fund in this market.’

In such scenarios it makes sense to go for the cheaper option, Evans said. ‘When there’s very little difference in the returns there’s no point paying extra for the managed fund.

‘That’s the situation in the US, whereas in other parts of the world there are quite substantial differences between active and passive.’

HSBC American Index – 3%

The HSBC fund ticks all the boxes for Evans. ‘It’s cheap, and that’s pretty much all you can say about a tracker. And this fund’s returns are as good as, and sometimes even better than, most actively managed funds in this area.’

The tracker seeks to provide long-term capital growth by matching the return of the S&P 500 index. It currently has 89.1% in US equities as well as limited exposure to areas such as property and UK equities. The most prominent sector is financials at 16.7%.

Vanguard US Equity Index – 0%

‘The only index we really track is the S&P over in the US,’ Evans said. ‘We currently use the HSBC American Index, although we have also used Vanguard US Equity Index in the past.’

The fund seeks to track the performance of the S&P Total Market Index.

It has 99.5% of its total assets in US equities, with 0.3% in international equities and 0.2% in the money market. Information technology, meanwhile, is the most prominent sector with a 20% exposure. 

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