Using income funds as part of growth strategy for pension portfolio

bowlhead99 wrote: »

The phrase "even VLS funds have only 25% UK Equity" as if for you to imply that VLS funds are generically a low risk way of investing, is not something that makes sense to do, IMHO. As I mentioned in the earlier post, a couple of rival multi-asset funds with similar charges (L&G MI and Blackrock Consensus) have higher proportions of UK equity.

L&G MI is risk targeted while VLS is performance targeted in fixed ratios of holdings. You can see on the recent charts, VLS 60 and especially VLS 80 have had a very high relative recent performance in their mini league table of "mixed assets, 40-85% equities". Reasons for that include having a high overseas component within their equities, particularly US component, at a time where foreign markets performed quite well and sterling weakened significantly making the overseas holdings more valuable in pounds.

They have 75% of their equities overseas and the UK equities they hold are concentrated in companies with non-UK revenues. So, no wonder they are flying high in the charts when UK has a relative poor year. But something like a VLS80 with that exposure is relatively high risk. VLS80 has done almost 30% in a year and 40% in three. Funds performing like that do not necessarily fit with an 'average' risk profile.

Sure, many of us do hold that sort of ratio if it chimes with our risk appetite but if someone is not looking for that level of volatility (especially if they have hinted to us and perhaps their advisor that they are looking to hold lower levels of equities because they already have a separate pension crammed with smaller companies, emerging markets etc) it is easy to understand why the OP's advisor suggested higher exposure to domestic assets.

As I mentioned in an earlier post, yes half your equities domestic is pretty high, and many might put a greater proportion of them overseas.

However, the fact that one particular poster (MonroeM) - who only started looking into investments four months ago - is deliberately looking for a low exposure to the UK because of what she perceives as a "current climate of uncertainty" and as a result is targeting 15% home country equity is certainly not something that you can extrapolate and say that most IFA portfolios would only be 15-20% UK.

Generally if someone says they are concerned about a climate of uncertainty, they do not go and put a massive proportion of their money in a foreign country. So, she is perhaps tilting her portfolio out of naivety rather than you being able to infer that she is doing it out of insight borne of years of investing experience (we know she does not have much in the way of investing experience over the last few economic cycles - she has nil, having acquired her portfolio on divorce and only looked into it at the back end of last year). She has just read some things, agrees with them and is doing a low-UK equity plan, which might be the right thing to do or it might not.

This is not me being critical of MonroeM who has probably has learned a lot since being here about what she wants and how she might develop her knowledge and target her investments to create a solution that works for her.

It is just to add a counterpoint to your using her, or VLS, as an example of how an average person should create their portfolios, when you say that 15-20% UK equity is the sweet spot because 'even VLS is only 25% UK' and MonroeM prefers a low percentage so anything more is extremely high.