HEAD-TO-HEAD: Axa vs Vanguard

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Darius McDermott, Chelsea Financial Services and Fund Calibre

Introduction

US equities have enjoyed a decade-long bull market. The benchmark S&P 500 has posted a 229% cumulative return since late March 2009, according to FE Analytics data.  There have been brief interruptions during its otherwise relentless surge – most notably in early 2016 and during the final quarter of last year – but the US stock market has acted both as a safe haven for investors and an opportunity for wealth generation.

The massive $400bn Vanguard S&P 500 exchange traded fund (ETF) has ridden that extended market rise since its launch in 2010. Actively-managed funds with more exclusive investment styles and strategies – such as growth or value – have struggled to match, let alone outperform, passive funds such as Vanguard’s.

Lower fees and an apparently one-way bet on market direction fuelled by an accommodative US Federal Reserve has been highly supportive of index-trackers.

However, sentiment seems to be changing about the prospects for US stock prices and global markets in general. Fears that slower economic growth might turn into a recession has induced greater caution, and less confidence.

FSA asked Darius McDermott, managing director of Chelsea Financial Services and Fund Calibre to compare two US equity products, one an actively-managed fund with a growth style and the other a passive exchange-traded fund:  the Axa World Funds Framlington American Growth Fund and the Vanguard S&P 500 ETF.

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