Transforming personal finance since 2011

#49 — Just. Plain. Wrong.

August 21st, 2019

By Andrew Craig

Reading time: ~ 12 minutes

A couple of years ago one of my mentors introduced me to the excellent maxim: “Never complain, never explain.” Whether you’re thinking about your spouse, family-members, friends, possible customers or pretty much anyone else in your life – other people find moaning pretty off-putting as a general rule.

As a result – when it comes to business or any other area of life, it is a good idea to avoid complaining or seeking to justify yourself whenever possible. People generally respond better to positive messages than negative, particularly in business.

I have found this idea very useful since first hearing it. There have been plenty of times since then that I have felt like writing something in anger but that little phrase has stopped me from doing so. I’m reasonably sure that this has been helpful – for my relationships and for business and progress more generally.
That having been said – today I have decided to make an exception and break the rule. I have done so because I think there comes a point when you are combating people who are JUST. PLAIN. WRONG. There comes a point that you need to stand up and say something.

I believe in the merit of "never explain, never complain" and this is my preference as a default setting. Set against this, however, there are times where being a doormat and grinning and bearing it is quite possibly not the right option after all. Sometimes it IS important that we stand up for ourselves. Particularly when it concerns something that we passionately believe in and even more so when the people criticising you or criticising that thing that you so passionately believe in are night and day, black and white, 180o completely and utterly wrong.

...and this is why I am writing today.

I have been prompted to do so by a recent review of my book posted on Amazon. The review reads as follows:

“This book is very informative and taught me lots about investing. However, I was very disappointed to discover at the end that the entire book was geared around selling you his own multi-asset fund. Which has high annual costs and has performed poorly in the years since its launch, despite the authors claims that this would be almost impossible…”

My, my.

Everyone is entitled to their opinion but, as I say above, I think there comes a point where it is important to pull people up on statements that are entirely factually untrue. This is particularly the case when you are trying to build a business and when you believe that what are building is, truly, a social good.

I feel that addressing / rebutting the statements made in this review is important. Let’s look at them in turn:

“This book is very informative and taught me lots about investing…”
Clearly I can’t and don’t take issue with this opening sentence. Many thanks for that to the reviewer ( 😉 ).

…but then. Goodness me...

“… However, I was very disappointed to discover at the end that the entire book was geared around selling you his own multi-asset fund. Which has high annual costs and has performed poorly in the years since its launch, despite the authors [sic] claims that this would be almost impossible…”

…and this is where I believe sufficiently strongly that I need to call out such factual incorrectness. Left unchecked – these sorts of misleading statements can be genuinely damaging.

Looking at each in turn:

“The entire book was geared around selling you his own multi-asset fund…”
This is so breathtakingly wrong as to verge on defamatory. First – as a statement of fact, we don’t even mention our fund anywhere in the book. There is a heading on page 244 of the book “One fund to own the world…” where I do advocate owning “…one fund or a small number of funds – which gives you as much exposure as possible…” I concede that I do then go on to say: “Thankfully, in the relatively recent past it has been possible to find just the sort of products you might use to do this…”

Someone incredibly cynical (our dear reviewer) might then argue that I didn’t need to explicitly mention our fund here – and I’m being purposely disingenuous by not doing so. The problem with this stance is that I wrote the passage above more than five years before our fund even existed or, indeed, before I even knew that it had any chance of ever existing.

I have been advocating global, multi-asset investment, and doing it myself with my own finances, for more than ten years. The fund has only existed since September 2017. Even as recently as four years ago – the idea that we would ever be in a position to be running our own fund implementing this strategy was a ludicrous and wildly unrealistic dream to me.

How we then got there was a combination of some amazing luck and an unfeasible amount of hard work from a group of wonderfully committed individuals. I would also highlight that there were plenty of points along the way where it seemed more than likely we would fail to get the fund launched for one reason or another than it would ever see the light of day.

The idea that my “entire book” is geared around selling you a fund that I had no idea could or would ever exist several years after I wrote that book is just 100% factually, utterly incorrect and nothing short of laughable to anyone who has followed me for any period of time. This corrosive and ill-informed cynicism must be challenged lest it become accepted as an accurate representation of reality.

I would also take issue with use of the word “entire” in this context. Even if you park my comments about the utter impossibility of me writing something in 2010/2011 that was geared to selling a fund that I had no idea would ever exist more than five years later (not being in possession of a time machine of course), the idea that the entire book is geared into doing that is also an egregious misrepresentation of the facts.

I have already pointed out that we don’t actually mention our fund anywhere in the book. I feel pretty strongly that a less cynical reader might also concede that the vast majority of the information in the book is actually entirely unrelated to “selling you a fund”. Most of the book is given over to topics such as the nuts and bolts of financial markets, a commentary on the state of financial advice in the UK, explaining the important role played by property in people’s personal finances, the types of investment accounts that exist in the UK market, the history of money, the role played by gold in finance and a great deal else besides.

As such – I find it utterly bewildering that someone could even vaguely suggest the “entire” book is geared around selling a fund. I’m sorry to say it – but this is just pure, unmitigated, unthinking baloney (great word ‘baloney’ 😉 ). There is no other way to put it.

…and so to the part of the reviewers statement. That our fund “…has high annual costs and has performed poorly in the years since its launch, despite the authors claims that this would be almost impossible…”

It is hard to even know where to start with this.

On the cost question. Here I concede that the person has an entirely valid point. We charge a 0.9% Annual Management Charge (AMC) for our fund. I happen to think this is entirely competitive given the strength of the strategy, the job we do for our investors and the fact that there are a tonne of other funds out there who charge considerably more for strategies that I don’t think are anywhere near as good. Some of these also charge entry, exit and performance fees – none of which we do.

That said - there is currently another 0.51% of cost in the fund which takes the cost of ownership of the fund to 1.41% at the moment – per our most recently audited numbers. I have explained many times why this is and that we very much expect this number to come down over time and I will do so again because this stuff is so important for our investors to understand.

A note on costs (again)

A fund has pretty significant fixed costs. To keep the maths easy – imagine these amount to £50,000.

This means that when a fund is £10 million in size – those costs comprise 0.5% of the fund. When the fund is £100 million in size, however, those costs will comprise 0.05% of the fund. In the former scenario – our OCF (Ongoing Charges Figure - the cost of ownership of a fund) will be c. 1.4% (0.9% of AMC + 0.5% of costs - as it is now). In the latter, it will be 0.95% (0.9% of AMC + 0.05% of costs - what we are aiming for). I hope this makes sense.

To be clear: We and our partners (the professors) are charging 0.9% for our service (the AMC). At present the fund is just over £11 million in size. This means that those circa £50,000 of fixed costs are adding 0.51% to the costs of owning the fund at the moment. This brings the formal “OCF” number to 1.41%.

I am not happy about this and I have been very public on this subject. We want the cost of ownership of the fund to be around or, ideally, just below 1%. We think this will be excellent value and I am confident we will get there. The current level is just an unavoidable consequence of being a small, young fund and I have always been 100% open and transparent on this subject (please see the section “A note on costs” in the Appendix of our Fund Overview document for example).

So the fund is currently slightly expensive (although there are plenty of other products which I don’t think are as good, which are even more so). This will improve over time - hopefully in the very near future. Crucially, however, please do also remember that our performance numbers are AFTER costs - which brings us on to the reviewer's statements about our performance.


You will hopefully have seen from our new Factsheet that the fund was up 8.8% from January the 1st to July the 31st of this year. This number is AFTER the 1.41% of costs, as I say. I would, of course, rather our investors were up 9.2% and the OCF was 1% (not least given that I’m one of those investors of course) - and this will hopefully be the case in future as we grow but this just goes with the territory of our being a small fund at the moment, I’m afraid.

…but to specifically answer the reviewer’s contention that the fund: “…performed poorly in the years since its launch, despite the authors claims that this would be almost impossible…”

Anyone who has followed it, will hopefully be aware that the fund was minus 6.4% in 2018 against many markets that were down very significantly more than that in the most difficult year for financial markets in a decade. The FTSE All Share – i.e. the UK stock market - was down 12.55% for e.g. The DAX in Germany was minus 18%, Shanghai was minus 25.5% and Bitcoin was minus 72.5% for all those crypto fans out there. You can see more detail about how we did vs. no less than 13 financial markets - if you want a reminder of how relatively well the strategy did in 2018 – in our 2018 Performance Review piece.

As per the Factsheet that we just published. So far this year to the end of July, the fund is now up 8.8% (AFTER costs, as I say). The FTSE All Share is up 12.3% over the same time period. So have we ‘performed poorly’ as this reviewer suggests?
Well let’s compare money in our fund to money in the FTSE All Share over the same time period.

£100k invested in our fund from the 1st of January 2018 up to the 31st of July 2019, would now be worth £101,830 (this is after costs). That same money invested in the UK stock market over the same time frame would be worth £98,206. I don’t think this constitutes ‘performing poorly’ - particularly through the most difficult time for financial markets in a decade. I would also highlight that our returns have come with far less volatility than the UK stock market - something that is essentially the holy grail of investment (i.e. risk or volatility-adjusted returns).

I also confess that I’m at something at a loss to understand what this person feels I said was “almost impossible”. Try as I might, I can’t find any language in my book that describes anything to do with investment as “impossible”. In fact, I’m pretty regularly on record repeating the idea that there are “no guarantees in investment”.

What I do say, however, and what I fervently believe is that the combination of diversification and trend following has a very good chance of protecting you against big falls in crash years whilst also giving you a chance of achieving decent upside over time.

It is early days yet – in the life of a fund product at least - but signs so far seem to me to be reasonably good in that our fund has demonstrated an ability to protect the downside and to capture upside. Long may this continue.

As I say – everyone is entitled to their opinion but I thought it was time I took something of a stand against people saying things that are demonstrably JUST PLAIN WRONG, in my opinion. I hope that readers won’t mind my having done so. Normal, sunnier service will be resumed in my next email...

Before I sign off today, I wanted to acknowledge that we have had a large number of emails on two specific subjects. First – on the costs of using Hargreaves Lansdown and, secondly, on what people who don’t live in the UK should do about trying to “own the world”. I wanted to reassure those of you interested in these two topics that I will address them both in the very near future in one of my next few articles. Please watch this space.

That’s it for today.