The Vanguard LifeStrategy Funds are a cornerstone in the retail and financial advisory sectors. Collectively, these funds offer five passive investment strategies that blend global equity and global bond index funds in varying proportions. The allocations range from 100% equity exposure to 20% equity and 80% bonds, with each fund adjusting its weighting in 20% increments. Their popularity is clear; they provide a cost-effective, well-diversified, and straightforward means of accessing portfolios tailored to different risk tolerances. This popularity is reflected in the fact that the range has surpassed £40bn in assets, roughly one-fifth of the combined market capitalisation of all investment trusts.

However, we thought it would be interesting to look at the investment company space and see if we could identify some funds that could be used as alternatives to the ubiquitous LifeStrategy funds. For the purposes of our analysis, we have not attempted to match the equity-bond splits of the various Life Strategy funds and, instead, our selection is rather based on the risk-return profiles of these trusts, as well as their liquidity and the accessibility of their asset classes.

In each case, our choices are investment companies that have demonstrated five-year NAV returns, standard deviations, beta (relative to the MSCI ACWI index), and Sharpe ratios that surpass those of the corresponding Vanguard fund. The table below presents the various risk and return metrics of the five Vanguard LifeStrategy Funds over the five years to the end of July.

Vanguard LifeStrategy 100% Equity – our suggestion: Caledonia Investments (CLDN)

For the first strategy in the table, the 100% equity, one trust that stands out as a potential alternative is Caledonia Investments (CLDN). While its NAV returns are lower than those of conventional private equity strategies, such as Pantheon International, CLDN offers the distinct advantage of a blend of listed and unlisted equities, with 34% of its assets in listed investments. This reduces valuation risk. CLDN’s reliable returns (and by extension its superior risk/return profile) are likely a result of its ability to take a long-term view given that it is backed by the Cayzer family – it has a formal objective to avoid permanent capital loss.

Vanguard LifeStrategy 80% Equity – our suggestion: RIT Capital Partners (RCP)

For the second strategy, the 80% equity, we have chosen RIT Capital Partners (RCP) that, like Caledonia, is another family trust. RCP is backed by the Rothschilds and also has a strong emphasis on capital preservation. RCP offers a more conventional blend of assets, with its portfolio split between private equity, listed equity, and ‘uncorrelated strategies’, including bonds, absolute return investments, and real assets. With a current 76% equity allocation, it is a natural alternative to the 80% equity LifeStrategy fund. We believe that RIT’s inclusion of lower-risk assets provides an element of volatility dampening and downside protection necessary for an investor with 20% bond exposure.

Vanguard LifeStrategy 60% Equity – our suggestions: Ruffer (RICA) and 3i Infrastructure (3IN)

The 60% equity fund is the most challenging to replace, as there is no trust that offers a superior risk-return profile with a comparable portfolio. However, we believe two trusts are worth mentioning: Ruffer (RICA) and 3i Infrastructure (3IN). Ruffer, managed by the private bank of the same name, has two self-described objectives: “not to lose money in any 12-month period and generate returns meaningfully ahead of the return on cash.” It has handsomely beaten its return objective over the long term, capitalising on trends from bitcoin to the energy rally. While its risk-return profile is clearly superior to the Vanguard fund, its asset blend may not align with the expectations of a typical 60% equity investor, as its portfolio’s diverse range of assets may limit its participation in equity rallies.

Another alternative is 3i Infrastructure (3IN) that, like Ruffer, may not appeal directly to the typical 60% equity investor – its portfolio comprises 12 private infrastructure companies. However, 3IN’s risk-return profile is so attractive that we think it warrants consideration, particularly as it is investing in assets that are inherently long-lived in nature and are important to society and so provide reliable revenue streams, often with s decent degree of inflation protection. 3IN is the best-performing infrastructure trust in NAV and share price terms over the last five years, a testament to the skill of its managers, who have a very strong record of execution, rather than broader market trends.

Vanguard LifeStrategy 40% Equity – our suggestions: BBGI Global Infrastructure (BBGI)

For the 40% equity strategy, we have selected BBGI Global Infrastructure (BBGI) as our alternative because of its superior risk-return profile as well as its well-diversified portfolio, comprising 56 infrastructure assets across various countries and sectors. Although BBGI is entirely invested in private companies, it has a lower risk profile (as evidenced by its NAV volatility) thanks to its stable revenue streams and mature assets. This solid revenue base has also allowed BBGI to deliver a c.7% yield, which may be particularly appealing for investors in a 40% equity fund, as lower risk tolerance can often go hand-in-hand with a desire for income.

Vanguard LifeStrategy 20% Equity – our suggestions: Personal Assets Trust (PNL)

For the 20% equity strategy, we are suggesting Personal Assets Trust (PNL), which has delivered the best risk-return profile over the last five years, due to its positive NAV growth and low volatility. PNL achieves its risk profile by investing solely in publicly traded assets, holding a combination of equities, bonds, and gold. With a current allocation of around 20% to equities, it closely mirrors the Vanguard LifeStrategy 20% Equity Fund’s portfolio. However, thanks to the benefits of active management, PNL has delivered far better returns for its investors. Like Ruffer and Capital Gearing, PNL has a strong emphasis on capital preservation, which can make it attractive to more cautious investors.