Vanguard Global Aggregate Bond (Hedged) rating

[tradez]

I noticed this has a 2* rating on Morningstar whilst 'Vanguard Global Bond Index Fund GBP Hedged' receives 3*. Could anyone let me know the main difference?

https://www.morningstar.co.uk/uk/etf/sn ... 0P0001HSBK
https://www.morningstar.co.uk/uk/funds/ ... F000003VEC

I also note that the Lifestrategy Products do not simply use one of these funds but also add a number of smaller bond funds to the portfolio. Is there a particular reason why? The fund that forms the bulk of the bonds is the 2* Aggregate fund though.

[glorat]

Worth referencing you are the author of this thread viewtopic.php?t=395381 comparing private funds with Bogleheads. So I guess we are now comparing what Bogleheads thinks of funds vs Morningstar ratings

What is a Morningstar rating?

From: https://awgmain.morningstar.com/webhelp ... ating.html

The Morningstar Rating for funds, commonly called the star rating, is a measure of a fund's risk-adjusted return, relative to similar funds. Funds are rated from one to five stars, with the best performers receiving five stars and the worst performers receiving as single star.

The star rating is best used as an initial screen to identify funds worthy of further research, those that have performed well on a risk-adjusted basis relative to their peers. It's a strictly quantitative measure—a high rating doesn't imply the approval or endorsement of a fund by a Morningstar analyst. Keep in mind that the rating is based on the fund's historical performance, hence a highly rated fund may no longer have the portfolio manager responsible for that performance

I have bolded that the rating is all about historic performance only.

So pretty much by Boglehead philosophy, you should expect all Boglehead recommended funds to be around 3*. Why? Boglehead funds aim to track their passive index as closely as possible by minimizing costs. All the marketing from private banks and even Morningstar cater to people trying to beat the market so present lots of information on *historic performance* as if that historic performance is a guide for future performance (even though all the small print says it should not be such a guide)

Conclusion: Ignore the Morningstar rating. Higher is definitely not better for the future - only for the past. Instead, Morningstar is great for looking up things like 1) diversification of the portfolio 2) TER or other expense ratios to get the cheapest funds

[tradez]

Got it. I am still trying to understand the difference between the two Vanguard bond funds, especially as they have different TER.

[tre3sori]

Got it. I am still trying to understand the difference between the two Vanguard bond funds, especially as they have different TER.

The main difference is
that Vanguard Global Bond Index Fund GBP Hedged Acc is an index fund
with fund benchmark: Bloomberg Barclays Global Aggregate Float Adjusted & Scaled TR USD
and inception date 23/06/2009

and Vanguard Global Aggregate Bond UCITS ETF GBP Hedged Accumulation is an ETF
with the same benchmark: Bloomberg Barclays Global Aggregate Float Adjusted & Scaled TR USD
and inception Date 18/06/2019

Here is more about the difference between ETFs and index funds: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds