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Passive or Active Fund choice
![[Deleted User]](https://us-noi.v-cdn.net/6031891/uploads/defaultavatar/nFA7H6UNOO0N5.jpg)
[Deleted User]
Posts: 0 Newbie
Hi,
Quick question really - we've got a new salary sacrifice pension scheme at work and from what I've read, on the whole it's going to be better all round. However with this new scheme comes new investments and here's my question:
Would people say it's better in general to have a "Passive Global Equity Fund" or an "Active Global Equity Fund"? Or would a mixture / percentage of the two be better?
I'm not sure if it makes a difference but the charges per annum would be 0.19% and 0.71% respectively.
If I was planning to leave the company within a year or two then would the passively managed fund be better, as let's say the (actively managed, more risky) fund goes down in the short term but would more than likely go up in the long term - then if I left in the short term there could be less in the fund hence the passively managed fund might be better in this example. Or is this just rubbish?
I'm quite happy with these two types of "Lifestyle" options as I'm not great with the investment side of things savings wise.
Thanks
Quick question really - we've got a new salary sacrifice pension scheme at work and from what I've read, on the whole it's going to be better all round. However with this new scheme comes new investments and here's my question:
Would people say it's better in general to have a "Passive Global Equity Fund" or an "Active Global Equity Fund"? Or would a mixture / percentage of the two be better?
I'm not sure if it makes a difference but the charges per annum would be 0.19% and 0.71% respectively.
If I was planning to leave the company within a year or two then would the passively managed fund be better, as let's say the (actively managed, more risky) fund goes down in the short term but would more than likely go up in the long term - then if I left in the short term there could be less in the fund hence the passively managed fund might be better in this example. Or is this just rubbish?
I'm quite happy with these two types of "Lifestyle" options as I'm not great with the investment side of things savings wise.
Thanks
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Comments
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Depends on the active fund manger / team and what the two funds invest in.
You'll need to look more at the detail of the funds.
You might consider going for a bit of both weighted to whichever I feel will do best.0 -
Depends on the active fund manger / team and what the two funds invest in.
You'll need to look more at the detail of the funds.
Active Global Equity Fund:
Schroder 30%
Baillie Gifford 30%
Barclays Global Investors - US 13.3%
Barclays Global Investors - European 9.3%
Barclays Global Investors - Japan 6.7%
Lazard 4%
Colonial First State - Global Emergency Markets 2.7%
JP Morgan - Asia Pacific ex Japan 2%
Lloyd George - Asia Pacific ex Japan 2%
Outperformance target: 1.73% (before fees) over rolling 3-year periods
Passive Global Equity Manager
Legal & General
Outperformance target: To track the benchmark return within a reasonable tolerance.
There's also a list of benchmarks for each fund - do you need to know these too?
If people suggested a mixture of the two how could I decide what percentage to go for? Is this based on experience / knowledge? If so could people say what they might do as an example?0 -
It's a no brainer in my book, I'd go for 100% active all the time.0
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Well of course you would, they pay IFAs more commisions
OP - you would be utterly mad to take an active fund if you are investing for the long term (I'm assuming you are) - there is practically no chance it would outperform the passive fund.
If you want a bit more info on why fund managers are mostly lucky morons I'd recommend two books... "A random walk down wall street" and "Fooled by randomness".
Credentials: Fixed income trader. Admittedly not equities, but I know enough 0 -
Well of course you would, they pay IFAs more commisions
Thats a myth. Especially on life and pension funds more than any other. They pay identical remuneration on pensions and the trail on a unit trust is typically on par with a fixed interest fund.OP - you would be utterly mad to take an active fund if you are investing for the long term (I'm assuming you are) - there is practically no chance it would outperform the passive fund.
Apart from half of them typically do outperform general trackers.
We dont know the risk levels of this managed fund against the tracker. Just because they are in the same sector, doesn't mean the asset allocation and risk are the same.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Apart from half of them typically do outperform general trackers.
That simply isn't the case.
In an individual year about half will outperform the average (well duh, it's the average).
Over a decade very few... and over twenty years? Berkshire?
I would agree that asset allocation is an important choice the OP ought to know a wee bit about - but I'm only talking asset classes here.0 -
That simply isn't the case.
In an individual year about half will outperform the average (well duh, it's the average).
Take a look at the UK All companies sector and you will find the FTSE all share trackers are consistently mid table.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Well, there's food for thought so far.arabianights wrote: »OP - you would be utterly mad to take an active fund if you are investing for the long term (I'm assuming you are) - there is practically no chance it would outperform the passive fund.
I will be investing for the long term, pension wise, however it's likely I'll move on from this job in a few years and will probably transfer my pension. What impact would this have on my choice of active / passive?We dont know the risk levels of this managed fund against the tracker. Just because they are in the same sector, doesn't mean the asset allocation and risk are the same.
The only mention of risk levels in the document we've been provided with is out of 10 for each fund, active being 7 / 10 and passive 6 / 10...
There seems to be 1 for 100% active fund, 1 for 100 passive fund, dunstonh what are your thoughts on this?0 -
Take a look at the UK All companies sector and you will find the FTSE all share trackers are consistently mid table.
I don't have lipper access (not that I'd know how to use it) but accepting your ridiculous task I've done my best to do something similar using morningstar
http://www.morningstar.co.uk/UK/fundquickrank/default.aspx?tab=2&sortby=ReturnM60&lang=en-GB
481 funds ranked by their performance in the last 10 years.
And there's index funds on page 2 - I.E. in the top 10%. And expense ratios of up to 69% as well...
Classic example of the uselessness of active funds.0 -
Deleted_User wrote: »I will be investing for the long term, pension wise, however it's likely I'll move on from this job in a few years and will probably transfer my pension. What impact would this have on my choice of active / passive?
This is something you are best off asking an IFA.Deleted_User wrote: »There seems to be 1 for 100% active fund, 1 for 100 passive fund, dunstonh what are your thoughts on this?
Honestly I suggest getting at least one of the books I recommended - see if you find them convincing...
Or if you have time to kill: http://www.e-m-h.org/0
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