Halifax FTSE 100 Tracker ISA

ISAmad

I'm a total newbee to non-cash ISAs and a have a question or two:

• If, in the unlikely event, Halifax went the way Icesave did - would I be able to get my money back from the government. Or what would happen to the fund & shares within?

• Is a 1% management charge a bit high? Could you recommend a place for me to compare different FTSE 100 tracker charges? Or recommend a cheaper FTSE 100 tracker?

Thanks all :beer:

dunstonh

If, in the unlikely event, Halifax went the way Icesave did - would I be able to get my money back from the government. Or what would happen to the fund & shares within?

Halifax dont have your money. It is invested in the shares of the FTSE100 and held under a trustee arrangement. So even if HBOS went under, you would either get the money back in cash based on the value on a certain date or you would transfer (or re-register, although that option isnt available to you with HBOS). With unit linked investments, FSCS protection does exist but its only really any use with fraud as solvency of the parent company doesnt really matter.

Is a 1% management charge a bit high? Could you recommend a place for me to compare different FTSE 100 tracker charges? Or recommend a cheaper FTSE 100 tracker?

Yes it is high for a tracker. 0.25-0.5% is much closer to the average.

Why do you want to put all your money in a FTSE100 tracker? Were you aware that they have spent most of the last 15 years in the bottom of the performance tables and its a very narrow and limited index to track.

ISAmad

Thanks Dunstonh. Re - protection, that is comforting.

The reason I thought a FTSE 100 Tracker is most suitable is primarily because of the information given on this website. It says things like "9 out of 10 managed funds don't manage to beat the index over the long-term." To be honest, I'd always been thought that managed funds generally do better in the long-run. Also, when I had some pension advice I was told that because I am 27, it would be better to put my pension into a more adventurous fund because I have enough time to ride the waves and ease myself out of the water - so to speak. Now, also you, as an IFA, seem to be contradicting this website's advice. Could the clue be in the name of the domain?! Have I been 'Fool[ed]'?!

tradetime

ISAmad wrote: »

• Is a 1% management charge a bit high? Could you recommend a place for me to compare different FTSE 100 tracker charges? Or recommend a cheaper FTSE 100 tracker?

For a passive tracker 1% seems high to me, you could buy the iShares FTSE100 in a slef select yourself which has an expense ratio of 0.4%.

Aegis

ISAmad wrote: »

The reason I thought a FTSE 100 Tracker is most suitable is primarily because of the information given on this website. It says things like "9 out of 10 managed funds don't manage to beat the index over the long-term." To be honest, I'd always been thought that managed funds generally do better in the long-run.

Many of us here seriously disagree with the arguments given on the MF website in favour of trackers, as they seem to either misrepresent or totally invent statistics to support their claims. For example, if you look over the last 1, 3, 5 and 10 year periods, you find trackers roughly mid-table for most sectors in terms of performance, meaning that only 50% of managed funds fail to beat them. If you then eliminate the managed funds run by retail banks rather than investment houses, you probably get rid of at least a third of the managed funds, almost entirely from the bottom half of the table. Once you've done this, a random pick of one of the remaining funds has a good chance of having beaten the index over most time frames in the last decade.

You'll probably be able to find more by doing a search for "trackers" on this forum. Almost every time they're discussed, the Fool's article on them appears.

Personally I'm starting to wonder if this is they're preferred method of investing because they actually believe it or because they have a commission-generating arrangement with a tracker provider, because it's just not true for the majority of asset sectors that I've researched into for myself.

Dooooooooooooooonut

Outperformance can be possible, the difficulty is in distinguishing it from good luck - I am extremely skeptical anyone here can do that.

I would always advise a tracker unless you know something about the manger that others don't. And I would be very skeptical that you do.

I believe fidelity do a tracker with fees of 0.1%, although it might be 0.3%.

dunstonh

The reason I thought a FTSE 100 Tracker is most suitable is primarily because of the information given on this website

As Aegis says, the data and info supplied by Fool is inaccurate and taken out of context. There is some truth in what they say but present it in the wrong way.

It says things like "9 out of 10 managed funds don't manage to beat the index over the long-term."

It does. However, that is out of context. The fund you are in for example has finished in the bottom 10% over 10 years. Meaning 9 out 10 funds did better. How can fool say that you are beating 9 out of 10 funds when you are struggling to beat 1 in 10?

What the article should say is that trackers will beat 9/10 funds with a similar or same objective. Problem is that many of the funds dont have the same objective. The passive managed funds are easily beaten. Bank and insurance company equity funds tend to be on the poorer side as well.

The Fool article is largely based on the US market which has different rules for trackers and managed. Also, Fool is not the once decent resource it used to be. Its too commercial now and has a nice income stream as it is tied to L&G for investment products and L&G have a good range of trackers. So, guess what they promote?

purch

9 out of 10 managed funds don't manage to beat the index over the long-term

Yes but 1 out of 10 does, and identifying that 1 is all the fun !!!!

The Fool article is largely based on the US market which has different rules for trackers and managed

Which is also why the U.S. Mutual Fund market has a huge number of different Tracker products tracking just about every individual sector of the Equity markets (Healthcare, Tech, Financial Services, Construction etc etc) whereas over here we tend just to have trackers following the whole Index

dunstonh

copied from a recent thread:

I have put the percentile in brackets. Sector average is mid table so would be 50. If a fund is (1) that makes it top. If it is (100) it makes it bottom. I have also topped it off with the 10 year cumulative figures.

[php]Year Sector Average L&G 100 L&G all share

1996 16.62 13.75 (73) 15.15 (60)
1997 18.29 26.99 (13) 22.01 (46)
1998 9.78 15.22 (23) 13.13 (35)
1999 26.07 17.30 (89) 23.18 (54)
2000 -4.58 -9.78 (89) -5.73 (53)
2001 -14.67 -15.41 (68) -13.17 (38)
2002 -23.55 -23.88 (58) -22.97 (42)
2003 22.66 15.32 (96) 19.99 (57)
2004 12.65 8.69 (85) 11.88 (48)
2005 21.23 17.94 (83) 21.11 (43)
2006 17.46 12.39 (89) 16.42 (53)
2007 1.62 4.83 (34) 4.45 (37)
10 year cumulative
5.55% 3.18% (94) 5.68% (46)

[/php]

So, we can see from those figures supplied by Financial Express that neither the FTSE100 or FTSE index trackers from L&G have managed to enter the top 10% of funds at any point since 1996. The L&G 100 did come close in 1997 by hitting 13% but over 10 years but spent most of the time at the bottom end. It had a cumulative return that put it ranked at 94%. You would have had a harder job picking a managed fund that fell into the bottom 6%. Also, the all share can be seen to be more consistent at the mid table range as you would expect.

Dooooooooooooooonut

purch wrote: »

Yes but 1 out of 10 does, and identifying that 1 is all the fun !!!!

And how do you propose to do that?

In fact, which is harder? Doing that or managing your portfolio yourself*?

*I'm aware this might be prohibitively expensive when transaction fees are brought into account for small accounts; but then it should be easy to grow your account beyond that if you're genuinely that good.

Aegis

Dooooooooooooooonut wrote: »

Outperformance can be possible, the difficulty is in distinguishing it from good luck - I am extremely skeptical anyone here can do that.

Personally I'm more skeptical of claims that a fund manager can fluke his way to outperforming the index over pretty much any time frame you'd like to pick. There are several fund managers that do just that, and calling it luck is effectively ignoring the statistical unlikelihood of someone managing to achieve that result without some sort of advantage over the index.