Friends Provident Stewardship fund crashes

EdInvestor

simonleblank wrote: »

Hi Dunstonh,
In my humble opinion, it was bloody obvious that the equities were going to fall from the FTSE @ 6500, hence risk should have been reduced by the fund manager to look after customers interests. They should be dismissed in my opinion!

I suppose you think the fund manager should have switched all the investments into cash.

But he is not allowed to do that.He must invest at all times in UK equities with ethical characteristics. That is the basis of his fund.

How come you didn't know that?

If you are worried about risk it is up to you to sell that fund and move your money into cash. Not the fund manager, YOU.

bigbloke45

Haven't we strayed a bit from the Friends Prov. Ethical Fund thing?

ChrisBristol chose to put all of his investments into the FP ethical fund. This must have been because he has strong convictions about where his money goes. That's fine, but I think it's a bit rich to complain about investment performance from sometning that is, essentially, a "conviction" fund.

Either you want to get the best investment performance or you want to put your money somewhere "ethical", I can't see how you can have both.

ChrisBristol

bigbloke45 wrote: »

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

What you have to get your head around is this; Friends Prov. Ethical Fund is only allowed to invest in companies that it has "screened" using it's fund criteria. For example, if "Big Oil" is doing well, but is not allowed in the FP "Universe", then FP Ethical Fund cannot, even if it would be the best investment in the world at the time, take a position.

So, you chose to invest in an "ethical" fund; that's OK, but what you must accept is that such a fund will always be a "tilt" fund i.e. it will always not match the all shares or any other index.

Sometimes it will do better, sometimes worse; but what you can't do is to blaim the fund managers - you must have chosen this fund for a reason.

Hi, Ed -

Thanks for your response, and to everyone else, especially Dunston who's explained things very clearly.

I first started investing in this fund in my 20s because I liked the concept of an ethical fund, and by and large I haven't regretted it. I had been told by my IFA at the time that the Stewardship fund invested in a whole raft of ethical products. People on here have asked why I've put all my eggs in one basket - I had assumed that I was only doing that in the sense of having a pension with one company, but that the fund itself was spread over a number of "baskets".

The reason I was concerned about the investment decisions for this fund is that the fund is near the bottom of FP's list of funds in terms of performance. Most of their high risk ones have dropped a lot less. Indeed, when I phoned up FP when I got my statement, the person I spoke to told me "there must have been a mistake" as he didn't think it could have dropped by that much, that 10% would have been a much more usual figure, and promised to phone me back. He did, to tell me the bad news, which is when I posted on here - I thought that if even FP's advisors thought something was seriously amiss then there was something strange going on.

I suppose my real concern is that I don't feel I have much control over my money leaving it in a pension scheme. Admittedly, it hasn't been an issue until recently - I put the money in the fund in my 20s, knowing I couldn't touch it until I was 50. Well, that's only 18 months away now, which is why the value is of more concern to me now than in 2000-2003 when it also dropped. I will indeed be paying for an IFA before doing anything rash - but I wanted to sound people on here, and am very grateful for your responses. The transfer value of the scheme is a few thousand less than the value of the fund, so there's a penalty if I try and transfer bits to different companies in the next 18 months. There's no penalty (or at least, there is, but it's only £15) for transferring within FP - so I'm wondering if I should move it into one of their schemes that effectively "freeze" the fund (a fixed interest one that gives virtually nothing, but won't drop) where it is, as no one seems to be of the opinion that there will be a recovery in the next year!

ChrisBristol

bigbloke45 wrote: »

Haven't we strayed a bit from the Friends Prov. Ethical Fund thing?

ChrisBristol chose to put all of his investments into the FP ethical fund. This must have been because he has strong convictions about where his money goes. That's fine, but I think it's a bit rich to complain about investment performance from sometning that is, essentially, a "conviction" fund.

Either you want to get the best investment performance or you want to put your money somewhere "ethical", I can't see how you can have both.

This is a very fair point. I did, and do, want to put my money somewhere ethical. I admit, I put the money in and paid into the scheme without regularly monitoring where that money does go.

Having looked at the FP website, I'm not sure that the Stewardship fund *is* an "ethical" one per se - it's simply that it's NOT specifically "unethical". They seemed to put an awful lot of money into Vodafone last year, for example. I've nothing against Vodafone, but this isn't a name that one instantly associates with ethical issues.

So given that my money is simply being invested in companies that don't deliberately try to cause distress, my thought was that given that everyone could see the writing on the wall a year ago, that the fund managers would have spread their (and my) investments across a broad range of safer products. I know, I should have taken my own advice and stuck it into a different fund MYSELF a year ago, and what I'm actually doing is crying over spilt milk. I don't know now whether to leave it where it is and hope no more milk is going to be spilt, or to cut my losses now

If I knew all my money had gone towards investing in projects that would help the environment or to help reduce poverty in the third world, I'd take my losses a little more stoically! Besides, permit me a little hypocrisy and self-interest - when you're 25, retirement age seems a long way off and principles very important. When you're approaching retirement age and your pot of money is dwindling, those principles can be tempered a little

sdooley

One reason peole are likely to complain about solicitors is that they are already in a litigious mood!

Obviously there are going to be complaints against any profession. What is good is when the professional handles to complaint well.

In the case of the Stewardship fund, that would mean explaining that its limitation to equities and with a bias to non-industrial stocks may leave it over-exposed to certain business cycles, e.g. the dot-com bust and the banking crisis and under-exposed to other growing areas like commodities.

Equally it may have done better in some areas over the years (the mid-90s oil price slump) than the average.

The truth is that the companies which have done well over the last year or so are generally 'evil' ones like arms manufacturers, oil companies, 3rd world resource plunderers and pesticide purveyors. The rest of the stockmarket has done rather worse. I'm surprised it's only a 20% drop - it could go further so some rebalancing (not all at once) could be a good idea.

sdooley

Don't switch it all into one fixed interest securities fund in one go without advice! Fixed interest securities like bank and corporate bonds can drop quite suddenly if there is an inflation shock or spike in interest rates.

Spread your money (gilts, bonds, equities, more than one fund of each) and transfer out in stages.

bigbloke45

Quote;

"So given that my money is simply being invested in companies that don't deliberately try to cause distress, my thought was that given that everyone could see the writing on the wall a year ago, that the fund managers would have spread their (and my) investments across a broad range of safer products. I know, I should have taken my own advice and stuck it into a different fund MYSELF a year ago, and what I'm actually doing is crying over spilt milk. I don't know now whether to leave it where it is and hope no more milk is going to be spilt, or to cut my losses now "

Chris, the Stewardship fund must follow it's mandate; it can't do what you want. It was the first ethical fund to be set up and has, from time to time, done very well.

May I suggest that you take a look at the stocks it is invested in and, with a good IFA, see what you can do ASAp?.

Good luck, and don't blame yourself!

sdooley

Vodafone (as the world's largest mobile carrier) has done more for Third World development than countless aid projects, let alone military intervention from the West.

But that's not why the Stewardship Fund's invested in it. It's because it has a huge pot of money and Vodafone is one of the only huge companies in the UK which aren't against its ethical policies.

EdInvestor

There are noiw quite a wide selection of ethical funds to invest in, ranging across a variety of asset classes, from low to high risk.

Trustnet ethical list


You would probably need to move your pension to a SIPP to be able to choose from a decent selection.Most insurance pensions will only offer one or two ethical funds, if that.

Debt_Free_Chick

ChrisBristol wrote: »

So given that my money is simply being invested in companies that don't deliberately try to cause distress, my thought was that given that everyone could see the writing on the wall a year ago, that the fund managers would have spread their (and my) investments across a broad range of safer products. I know, I should have taken my own advice and stuck it into a different fund MYSELF a year ago, and what I'm actually doing is crying over spilt milk. I don't know now whether to leave it where it is and hope no more milk is going to be spilt, or to cut my losses now

This is my own massively over-simplified take on ethical funds .....

They give themselves no chance to escape to a "safe-haven" of other stocks, because they're operating with one hand tied behind their back.

By "safe-haven", there's really been no such thing in the past 12 months or so, but often, certain sectors hold up better. There are times when energy or the banking sector or someother sector falls less, but the ethical fund can't pile in there - unless the stocks they choose in that sector meet their own "ethical" criteria. By its own admission, it invests in a concentrated market - there ain't a lot of stocks for them to choose from!

Again - my own personal view - ethical funds are nice and cuddly and designed to satisfy your conscience. They're not for the out-and-out committed investor chasing returns - just MHO.

It's recent performance looks pretty dismal to me. It's failed to meet the benchmark over 1, 3 and 5 years and in each 12 month period from 30/06/2004 to 30/06/2008, except 2006/07.

2003/2004 was a good year too and I suspect that kept its cumulative performance looking pretty good until recently. In other words, the three year performance to 30/06/2006 would have looked OK, as it included that good year in 2003/2004.

You really need to look behind the headline performance when you buy a fund to see where that "good" performance came from.

Incidentally - you don't see pension scheme trustees buying "ethical" funds