Friends Provident Stewardship fund crashes

ChrisBristol · 13 August 2008 at 4:08PM

I've been investing in this fund as my main pension for many years, and it's done pretty well. It invests only in ethical sources, and this is still something of a growth area as far as I can tell - certainly the emphasis on moving to lowering our carbon footprint should be good news for "green" funds.

So I was a bit shocked to find that the value of my fund has dropped from £114,230 last August to just £88,717 now. This is a huge drop, and it's put this fund in the bottom 10% of all funds, given that most pension funds seem to have dropped less than 10% over the last year.

Is this simply atrocious management on the part of Friends Provident? Their own fact sheet (http://factsheets.finexprestel.com/frie/_0353544.pdf) claims this is a "medium" risk, so a 22% drop seems pretty high.

I'm 48, but I've been worried for a long time about having all my eggs in one basket, so I had been planning to cash this pension in when I reach 50 in March 2010, take the 25%, invest that in a number of funds, and draw an annuity and re-invest that. I believe that by spreading my investment over a number of areas, some will go up and some will go down. I think I'd have to be appallingly bad to do a worse job than FP have done with this fund.

On the other hand, it has done better than expected overall in the 20-odd years I've had it. I'm unsure whether I should leave it in that fund and hope they aren't as bad at managing it next year, or cut my losses and move it to a low-risk fund where at least I'll protect *some* of my investment.

I know no-one has a crystal ball to give precise answers, but I'd really appreciate any comments and suggestions!

Chris.

dunstonh · 13 August 2008 at 4:27PM

So I was a bit shocked to find that the value of my fund has dropped from £114,230 last August to just £88,717 now. This is a huge drop, and it's put this fund in the bottom 10% of all funds,

That is not a huge drop. Its capable of dropping double that.

What is of bigger concern is what are you doing investing so much money in just one fund?

given that most pension funds seem to have dropped less than 10% over the last year.

No they havent.

Is this simply atrocious management on the part of Friends Provident?

No.

Their own fact sheet (http://factsheets.finexprestel.com/frie/_0353544.pdf) claims this is a "medium" risk, so a 22% drop seems pretty high.

Its Medium risk on their scale based on unit linked investments. However, its medium to medium/high on independent risk scales and it is a fund that can see 40-50% potential loss in bad times so 22% is only half way there.

You would have noticed between 2000 and 2003 that the fund dropped 41% in value. Why were you not concerned then?

I'm 48, but I've been worried for a long time about having all my eggs in one basket

Rightfully so. Investing in one sector and one fund is bad investing.

so I had been planning to cash this pension in when I reach 50 in March 2010, take the 25%, invest that in a number of funds, and draw an annuity and re-invest that.

Probably a bad decision if you had done that. You bring the pension out of a tax free position into a taxable one. You create a increased tax burden on yourself and you are subject to annuity rates which are rubbish at that age. FP have a range of funds available (indeed, the PPPs are not too bad) and you could have diversified within the FP pension.

I think I'd have to be appallingly bad to do a worse job than FP have done with this fund.

And given your current lack of understanding you probably would do.

I dont mean that to sound harsh but your current understanding of investments, risk, options available and taxation and consequences indicates that you dont have the knowledge or experience to make such important decisions. That is nothing to be ashamed about. Everyone has skills which are different from others.

At the moment you are making the wrong assumptions and have some pretty poor ideas about what to do. I suggest you either spend a lot more time researching or pay someone to do it for you.

cooper2110 · 13 August 2008 at 4:36PM

It sounds rather harsh what the above has said, but it is correct. Relying on one fund (that I would consider medium/high risk) for all of your pension pot is not a great idea. By relying on this fund alone, it puts your attitude to risk off the scale as diversification can help soften the downs of the market by investing in a variety of assets. I would consider taking a very close look at other funds you can use within FP, or like the above says, get a professional opinion.

EdInvestor · 13 August 2008 at 5:30PM

This fund has quite a few characteristics of the Equity Income style of investing - Ted Scott, the manager, is one of the best regarded in this area.EI funds have a terrific track record since the market recovered in 2003 but have been hit badly over the past year, partly because they often invest in banks and other companies which pay quite high dividends, but have been trashed due to the credit crunch..

There are signs of recovery now beginning to peep through in this area, so I would suggest patience. It is never sensible to act like a "mug punter" and sell out at the bottom anyway .Once the fund has recovered some of its value you can consider redeploying some of the money around to a more diversified selection of unit trusts.

You may consider it worth paying an IFA a fee to advise you on the deployment.Alternatively this site is a good spot for looking up quality funds:

https://www.citywire.co.uk/Home/Funds.aspx

This site also has a lot of good information about fund choice: https://www.h-l.co.uk

It is worthwhile spending some time getting to grips with investment strategy IMHO, once the basics are understood it is quite straightforward, not rocket science.

jem16 · 13 August 2008 at 5:52PM

EdInvestor wrote: »

It is worthwhile spending some time getting to grips with investment strategy IMHO, once the basics are understood it is quite straightforward, not rocket science.

If it was as easy as all that we would all be doing it and not coming on here asking stupid questions!

cooper2110 · 13 August 2008 at 6:56PM

And I'd be out of work, despite studying for years with more exams to go!

EdInvestor · 13 August 2008 at 9:44PM

I did not say it was easy - it needs time and effort. It's also the kind of skill that not everyone can grasp very well - including quite a few advisors, otherwise there would be no misselling complaints or losses because everyone would be making tons of money.

A major problem is finding an advisor who is actually any good at investment, rather than just at flogging insurance products. The difficulty in obtaining competent advice is a key reaosn why so many people decide to DIY.

dunstonh · 13 August 2008 at 10:32PM

otherwise there would be no misselling complaints or losses because everyone would be making tons of money.

Complaints about investments tend to occur in a market downturn and usually are based on attitude to risk. Usually the person complains that their investments are too high risk for their profile. Whether a complaint is upheld or rejected will depend on the documentation on record more than an actual assessment of risk in most cases. Historically, risk assessment was basic but it has improved significantly with most advisers. Salesforces are still typically below par on this front though (IMO).

A major problem is finding an advisor who is actually any good at investment, rather than just at flogging insurance products. The difficulty in obtaining competent advice is a key reaosn why so many people decide to DIY.

By seeing an adviser and not a salesrep will reduce the chances of policy flogging. However, with respect to the OP, his investment choice has been very poor as has his assessment on the risk profile. Doing it DIY in his case means he has no-one to complain about. With the vast majority of advised investment cases being done correctly and without complaint then you assume that had proper advice been sought and given then the OP wouldn't be in this position now. If the OP had been unfortunate enough to have had poor advice about risk profile then at least the complaint option was there.

Going DIY is no answer to reducing the risk of investments. Look how many times we see DIY investors posting about their funds and clearly investing above their risk profile or fashion investing.

Debt_Free_Chick · 13 August 2008 at 10:33PM

EdInvestor wrote: »

A major problem is finding an advisor who is actually any good at investment, rather than just at flogging insurance products. The difficulty in obtaining competent advice is a key reaosn why so many people decide to DIY.

Hi Ed

Whilst I fully agree with

A major problem is finding an advisor who is actually any good at investment, rather than just at flogging insurance products.

part of the problem is that for those who don't have the confidence/time/energy/whatever to DIY, they often are not prepared to pay a professional for their knowledge and expertise. Advice on investment strategy - alone- involves the purchase of knowledge, experience and time. Trustees of DB schemes, for example, pay tens of thousands (and in some cases, hundreds of thousands!!!) of pounds for exactly this advice. We can not and must not expect qualified experienced professionals to dish out valuable advice for nothing.

I guess conveyancing might be a suitable analogy - either DIY, with all the risks, time and effort that involves - or pay a suitably qualified, experienced and trusted professional to do it

dunstonh · 13 August 2008 at 10:50PM

We can not and must not expect qualified experienced professionals to dish out valuable advice for nothing.

The Retail Distribution review seems to be focusing on this somewhat with the current proposals.

The effective downgrading of FOS protection for tied agent sales reps and the lower remit they will have for giving advice in future (better than doing nothing) and using lower quality products with a more defined structure will suit the lower end of the market.

IFAs will have to have higher qualifications and assuming the advanced FPC (or diploma as its now called) is the level they choose (which it is expected to be), then one of the exams required is a higher level of investment knowledge. With IFAs being higher qualified and in lower numbers (as the older ones wont want to sit exams and some wont be capable of passing the higher ones) the FSA have conceeded that IFAs will focus more on the upper end of the market leaving the middle market somewhat stuck between basic sales reps trying to get them to sign up using simple products or actually paying for qualify advice and products which is something the middle market is not generally used to.

TRUSt_NO_1_2 · 13 August 2008 at 11:26PM

ChrisBristol wrote: »

I've been investing in this fund as my main pension for many years, and it's done pretty well....
Chris.

...and I have recently talked with Alistair Darling during my wife's birthday bash in the Virgin Isles .
Both Ali's and my prognosis is that short terms funds are under pressure,but will recover in 2010 and beyond that resume their powerful uptrend.
So hold on in there.
As Mama used to say..
Think long term.
Diversify.
Risk Management

Get the suckers $ and hide it..

Friends Provident Stewardship fund crashes

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free