Posted inHead To Head, News, Research

HEAD-TO-HEAD: HSBC vs Vanguard

FSA compares two UK passive funds: the HSBC FTSE 100 Index Fund and the Vanguard FTSE UK All Share Index Unit Trust Accumulation Fund.
by Francis Nikolai Acosta
UK passive funds

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Pictured above: Hortense Bioy, Morningstar

It has been 18 months since the Brexit vote shook global markets and hit the British pound. But Brexit did not stop the local market from joining the equities rally that most global investors enjoyed in 2017.

The MSCI UK All Cap Index returned 23.89% last year, which is higher than the S&P 500’s 21.83%, according to FE data.

In addition, small cap stocks in the UK were performing nearly as well as Asia’s equity markets. The MSCI UK Small Cap Index returned 32.5% while the MSCI AC Asia Index returned 33.7%.

UK stocks are also cheaper than global counterparts. The forward P/E is 14x, which is the same as Japan’s, and lower than the US (19x) and Europe (15x), according to a research report by Schroders.

However, the UK’s trailing P/E remains high at 20 and is heavily reliant on the oil price recovery holding out, due to oil companies making up a large chunk of the market, Duncan Lamont, head of research and analytics at Schroders, noted in the report.

“Brexit, of course, cannot be forgotten, although any weakness in sterling should benefit overseas earners and may provide a counterbalance to domestic weakness,” he added.

Against this backdrop, FSA looks at two UK passive equity funds: the HSBC FTSE 100 Index Fund and the Vanguard FTSE UK All Share Index Unit Trust Accumulation Fund.

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