- The Vanguard LifeStrategy 80% Equity Fund has been the top-performing fund within its sector, delivering the highest returns over the past 1, 3, and 5 years.
- Five of Vanguard’s Target Retirement Funds have consistently ranked among the very best-performing funds in their respective sectors.
- Out of the 212 Vanguard funds analysed in this report, only a select few delivered consistent outperformance across the 1, 3, and 5-year periods. Just 43 funds were awarded a top 4 or 5-star Yodelar performance rating.
- 53% of Vanguard funds received a 1 or 2-star rating, reflecting underperformance relative to their sector average across multiple timeframes.
Founded in 1975, Vanguard has grown into one of the most influential names in global asset management. With nearly £8 trillion under management and over 50 million clients worldwide, its investor-owned model and emphasis on low-cost investing continue to shape its appeal among long-term investors.
In the UK, Vanguard funds are widely used by a broad range of investors, including retail, professional, advised, and self-directed clients. Its LifeStrategy and Target Retirement fund ranges, in particular, are positioned as all-in-one solutions, offering broad diversification through a single holding. While both ranges aim to provide a complete portfolio within one fund, their underlying investment strategies differ - and so too have their performance results.
In this 2025 review, we analyse the performance of each fund in the LifeStrategy and Target Retirement ranges, assessing their returns over 1, 3, and 5 years relative to their sector averages. We also examine how consistently each fund has delivered for investors and what the data reveals about their comparative strengths and weaknesses.
Additionally, we assess the broader Vanguard range - covering 212 funds in total - and rank their performance against all other funds within their respective Investment Association sectors. Each fund is given a performance rating from 1 to 5 stars, based on how it compares with sector peers across multiple timeframes.
Vanguard Fund Performance Review
We conducted a detailed review of 212 Vanguard funds, assessing their performance and sector rankings over 1, 3, and 5 years. Each fund was evaluated and given an overall Yodelar rating based on its returns compared to sector peers.
Only 43 Vanguard funds achieved a 4 or 5-star rating, showing a consistent ability to outperform their peers across all timeframes.
At the other end of the spectrum, 103 funds - more than 53% of those analysed - received a low 1 or 2-star rating due to persistently below-average returns.
Vanguard – The Pioneer of Passive Investing
Founded by Jack Bogle in the 1970s, Vanguard is widely credited with revolutionising the investment industry by introducing the world’s first index fund. Bogle’s core belief was simple but powerful: rather than trying to beat the market, investors would achieve better long-term results by owning it - and doing so at the lowest possible cost.
This philosophy laid the foundation for what would become the Vanguard 500 Index Fund in 1976 - a fund designed to mirror the performance of the S&P 500, rather than attempt to outperform it through active stock picking. Just a year later, Vanguard began selling its funds directly to investors, reinforcing its commitment to transparency, simplicity, and low costs.
Bogle’s approach reshaped the fund industry and remains central to Vanguard’s identity. Today, Vanguard manages over £8 trillion globally, with more than 160 funds available to UK investors. While its range includes both active and multi-asset strategies, the majority of its funds continue to follow a low-cost, index-tracking model built on the principles Bogle championed throughout his career.
Vanguard LifeStrategy Funds
Vanguard introduced its well-known range of five LifeStrategy funds to make investing straightforward. These funds serve as complete, ready-made portfolios, each offering a different balance of risk and potential return.
LifeStrategy Range: A Quick Overview
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Each fund contains between 6,000 and 20,000 underlying holdings
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Globally diversified across equities and bonds to help spread risk
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Exposure to a wide range of sectors, including technology, media, and energy
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Each of the five LifeStrategy funds provides a different mix of equities and bonds, composed of Vanguard’s own index funds and ETFs.
Each LifeStrategy fund offers broad market exposure and features a low-cost structure. The ongoing charges figure (OCF) is just 0.22% annually, with no entry or exit fees.
Like the BlackRock Consensus range, each LifeStrategy fund is assigned a risk profile from 3 to 7. The LifeStrategy 20% Equity Fund carries the lowest risk rating (3), holding 80% bonds and 20% equities, while the LifeStrategy 100% Equity Fund sits at the highest risk level, investing fully in equities.
Together, the five LifeStrategy funds manage nearly £45 billion in client assets, with the Vanguard LifeStrategy 60% Equity Fund proving the most popular choice among UK investors.
Vanguard LifeStrategy 100% Equity Fund
The most adventurous fund in the LifeStrategy range is the 100% Equity option. It suits long-term investors looking for growth and willing to accept higher risk. This fund has a risk rating of 7 out of 10 and sits within the IA Global sector, one of the most competitive sectors in the market.
The fund’s investment objective is to grow in value and provide income through a portfolio made up of around 100% shares. It invests more than 90% of its assets in index-tracking funds, all managed by Vanguard or its associates.
Over the past year, the fund returned 7.26%, ahead of the sector average of 3.71%, and placed in the top quartile. Its three-year return was 38.39%, while its five-year return reached 70.45%, beating the sector average of 55.56%.
While the fund has outperformed the sector average, its returns were still considerably lower than the sector’s top performers. It currently holds around £9.24 billion in assets.
Vanguard LifeStrategy 20% Equity A Shared Gross
The 20% Equity Fund is the most cautious option in Vanguard’s LifeStrategy range. It carries the lowest risk profile, with a risk rating of 3 out of 10, and is classified within the IA Mixed Investment 0–35% Shares sector. As the name suggests, the fund holds 20% in equities, with the remaining 80% invested in lower-risk bonds. It currently manages around £1.05 billion in assets.
Over the past year, the fund returned 4.54%, slightly below the sector average of 4.94%, and ranked 44th out of 72 funds. Its three-year return was 8.96%, placing it 53rd out of 69. Over five years, the fund returned just 0.85%, well below the sector average of 12.2%, ranking 56th out of 59 - making it one of the weakest performers in the sector.
While it offers low risk, the fund’s performance has been consistently disappointing compared to sector peers, especially over 3 & 5 years.
Vanguard LifeStrategy 40% Equity Fund A Shares
The Vanguard LifeStrategy 40% Equity Fund sits within the IA Mixed Investment 20–60% Shares sector. With a risk rating of 4 out of 10, it carries a higher equity allocation, making it slightly more sensitive to market movements than the lower-risk options in the range.
With assets under management of £5.63 billion, the fund invests 40% in equities, primarily from the US and UK, and 60% in bonds. Over 90% of its assets are allocated to Vanguard index-tracking funds, offering global exposure across sectors and regions.
Like the 20% Equity Fund, this option has struggled to deliver competitive performance. Despite broad diversification, its returns have consistently lagged behind sector averages, particularly over the longer term.
Over the past year, it returned 5.06%, slightly under the sector average of 5.36%, and ranked 107th out of 192. Its three-year return was 14.98%, ranking 110th out of 174, while the five-year return reached 14.13%, placing it 136th out of 156 and trailing the sector average of 23.77%.
Vanguard LifeStrategy 60% Equity Fund A Shares
The 60% Equity Fund is the largest and most popular option in the LifeStrategy range, currently managing £16.50 billion in assets. With a risk rating of 5 out of 10, it appeals to balanced investors willing to accept moderate risk in pursuit of stronger long-term growth.
The fund aims to deliver income and capital growth through a diversified portfolio composed of approximately 60% equities and 40% bonds.
The fund has generally delivered better results than other LifeStrategy options and many funds within its sector. Over the past year, it posted a return of 6.07%, ahead of the sector average of 5.22%. Its three-year return of 22.64% also slightly outpaced the sector average of 21.54%. However, over five years, the fund returned 30.86%, which was somewhat behind the sector average of 35.15%.
It is worth noting that the fund maintains a lower equity exposure than many others in its sector, resulting in one of the lowest risk ratings in the category. While not a top performer, it has delivered reliable results and remained largely in line with sector norms. For many, it serves as a core holding that offers a steady balance of risk and reward.
Vanguard LifeStrategy 80% Equity Fund
The Vanguard LifeStrategy 80% Equity Fund is composed of approximately 80% equities and 20% fixed income securities. It aims to achieve long-term growth by investing primarily in passive, index-tracking collective investment schemes.
Like the 60% Equity Fund, it is classified within the IA Mixed Investment 40–85% Shares sector. However, by adopting a more adventurous approach with a higher equity weighting, the fund has been able to deliver stronger returns. It currently manages 14.4 billion of client money.
Among the LifeStrategy range, the 80% Equity Fund stands out as the only fund to consistently rank as a top performer in its sector in recent years.
This 5-star rated fund returned 6.71% over the past year, ahead of the sector average of 5.26%. Its three-year return of 30.35% placed it 15th out of 212 sector peers. Over five years, it returned 49.51%, again outperforming the sector average of 35.15%.
Vanguard Target Retirement Funds
Vanguard introduced its Target Retirement Funds to address what it saw as a gap in the market. The aim was to offer a straightforward, balanced approach to help investors reach their retirement goals.
A Target Retirement Fund works as a ready-made, diversified portfolio that automatically adjusts its asset mix as investors approach their retirement year.
These funds have become especially popular among financial advisers, as their structure removes much of the complexity involved in retirement planning. There are 11 Target Retirement Funds in the range, covering retirement dates from 2015 through to 2065.
Each fund in the target-date series shares similar underlying components, built from a selection of Vanguard index funds. The key difference between them lies in how the mix of equities and bonds is adjusted based on the time remaining until retirement. Consistent with Vanguard’s passive approach, these funds carry low fees, with expense ratios ranging between 0.16% and 0.18%.
Vanguard highlights three core features that make these funds particularly suitable for investors with a specific retirement year in mind.
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Diversification: Each fund holds a broad mix of U.S. and international stocks and bonds, offering you access to thousands of securities across global markets.
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Managed Asset Allocation: The fund managers gradually adjust the allocation, moving to fewer stocks and more bonds so the fund becomes more conservative as you approach retirement.
Low Cost: The average expense ratio across the Target Retirement range is 78% lower than the industry average. This helps investors keep more of their returns.
As passive investments, fees for the Target Retirement Funds remain highly competitive.
5 Top Performing Vanguard Target Retirement Funds
The table below lists 5 of the top-performing Vanguard Target Retirement funds within the IA Mixed Investment 40-85% shares sector. These funds have delivered competitive returns across 1, 3, & 5 years, consistently outperforming many of their sector peers.
Each of these funds has been awarded a top 5-star rating based on its performance relative to sector peers.
1. Vanguard Target Retirement 2040 A Acc
The Vanguard Target Retirement 2040 A Acc fund is designed for investors planning to retire around the year 2040. The fund gradually shifts its asset allocation from higher-growth investments like equities to more conservative holdings such as bonds as the retirement date approaches. This approach, known as a glide path strategy, helps reduce risk as the target retirement year draws closer. The fund currently manages £435 million in assets.
More than 90% of its holdings are invested in passive, index-tracking funds operated by Vanguard. While the underlying investments are passive, the fund is actively managed through scheduled rebalancing to ensure alignment with its evolving asset allocation.
Performance-wise, it has consistently delivered stronger results than its sector peers. Over the past year, it returned 6.55%, ahead of the sector average of 5.26%. Its three-year return of 27.76% and five-year return of 43.72% also outperformed the sector averages of 21.54% and 35.15% respectively - placing it comfortably in the top quartile of its peer group.
2. Vanguard Target Retirement 2045 A Acc
The 2045 A Acc fund is built for investors aiming to retire around 2045. Like other funds in the series, it begins with a higher exposure to equities and gradually shifts toward bonds as the retirement date approaches. This transition helps reduce overall portfolio risk over time.
The fund oversees £407.5 million and allocates more than 90% of its assets to Vanguard-managed passive index funds.
It has consistently delivered solid returns and remains one of the top-performing funds within the Target Retirement range. Over the last 1, 3, and 5 years, it has delivered returns of 6.73%, 29.60%, and 48.35%, all comfortably above the sector averages.
Its portfolio spans major markets including the US, Japan, and the UK, with a notable emphasis on technology stocks. This global and sector positioning has been a key driver of its strong performance.
3. Vanguard Target Retirement 2050 A Acc
The Vanguard Target Retirement 2050 A Acc fund is crafted for investors expecting to retire around 2050. It starts with a higher allocation to equities and gradually shifts toward bonds and cash as the target date approaches, following Vanguard’s structured glide path.
Over the past year, the fund posted a return of 6.86%, the strongest among the top-performing Vanguard Target date funds, and well ahead of the sector average of 5.26%. Its three-year gain of 30.74% placed it 13th out of 212 sector peers, while its five-year return of 50.01% also stood out, outperforming the sector average of 35.15% by a wide margin.
The portfolio holds a globally diversified mix of stocks and bonds, with allocations adjusted automatically. With asset under management of £317.81 million It suits investors who want a low-maintenance, long-term strategy that becomes more conservative with age.
4. Vanguard Target Retirement 2055 A Acc
This fund is designed for investors aiming to retire around 2055, typically within five years before or after that date. In its earlier years, the fund prioritises higher-growth assets such as equities. As the target date approaches, the portfolio steadily shifts toward more defensive, income-oriented investments.
Currently managing £202.21 million, the fund allocates over 90% of its assets to Vanguard’s range of passive, index-tracking funds. This structure provides broad global diversification while keeping costs low.
The fund has consistently delivered impressive performance within the IA Mixed Investment 40–85% Shares sector in recent years. Over the past 12 months, it returned 6.83%, outpacing the sector average of 5.26%. Its longer-term results have been just as compelling, with a 30.68% gain over three years—ranking 14th out of 212 peers. Over five years, it achieved a 49.97% return, securing 20th place among 189 competitors. These outcomes underscore the strength of its long-term investment approach.
5. Vanguard Target Retirement 2060 A Acc
As the name suggests, Vanguard Target Retirement 2060 A Acc is intended for investors planning to retire around the year 2060. Similar to other funds in the Vanguard Target Retirement range, it follows a glide path strategy - automatically adjusting its asset mix over time.
The fund has delivered competitive performance over different timeframes. In the past 12 months, it returned 6.82%, beating the sector average of 5.26%. Its lonIts three-year return of 30.79% ranks it 11th out of 212 peers, while the five-year performance of 50.10% places it 16th out of 189, well ahead of the sector’s average. These figures make it one of the best performers within the Vanguard Target Retirement range.
Low Fee and Competitive Returns
Vanguard has become a key beneficiary of the growing demand for low-cost, passive investment products, with assets under management rising from £575 billion in 2005 to around £8 trillion today. Jack Bogle, Vanguard's founder, revolutionised investing by launching the first index fund, championing the idea of “buying the haystack, not searching for the needle”—a philosophy that remains central to Vanguard’s investment approach.
More recently, Vanguard’s ready-made portfolios have gained popularity among UK advisers and investors, who have committed billions to these low-cost solutions. While these products generally deliver solid performance compared to their peers, Vanguard’s passive structure may not always be the best fit for those seeking maximum portfolio growth. As highlighted in our top fund reports, active managers often achieve significantly higher returns, making them more attractive for growth-focused investors.
However, despite some underperforming funds, Vanguard still offers a range of competitive options that benefit from lower fees than their peers, making them a strong choice for cost-conscious investors.
Why Comprehensive Portfolio Management Is Key to Achieving Long-Term Success
Vanguard’s low-cost, passive funds have long been a cornerstone for many investors, but recent performance data shows that some of their funds struggle to deliver consistent returns over the long term. This highlights the importance of assessing funds within the context of a broader portfolio strategy, rather than relying solely on historical performance.
Not all Vanguard funds are created equal, and many underperform relative to sector peers. This reinforces the need for careful diversification and alignment with broader financial goals. Understanding how individual funds work together within a portfolio is as important as selecting funds based on past performance.
To ensure long-term success, performance insights must be integrated into a strategic, structured approach to portfolio management. While past returns are informative, consistent oversight and timely adjustments are critical to maintaining a resilient, growth-oriented portfolio.
Discretionary investment management, like that provided by MKC Invest within the MKC Wealth group, enables timely portfolio adjustments without waiting for client approval, ensuring portfolios remain aligned with evolving goals.
Following the merger between Yodelar and MKC Wealth, clients can benefit from this proactive, dynamic approach. If you’re unsure whether your portfolio is positioned to meet your long-term goals, a free portfolio review can help provide clarity.
After all, achieving success isn’t just about choosing the right funds - it’s about having a robust management framework that ensures those funds continue to work for you.
