Virgin index tracker unit trust?

freddykrueger

Can I ask a quick question if you don't mind - I have a Scottish Friendly policy that I have been paying into for around 8 years....should I keep paying into this until maturity and get the terminal bonuses etc or surrender it now as there doesn't seem to be an easy way to get an immediate valuation.

nrsql

Wouldn't say investing small amounts is a waste of time - if nothing else it gets you used to investing. Having money there helps you to concentrate.

The Virgin product is expensive and I would suggest the only reason to choose it would be because of the minimum amount. For trackers I would go for Fidelity or L&G if you can afford them -and through H-L in an ISA if possible.
You could always drip feed in to Virgin and then transfer when you have enough.

balaclava

Feb 2009 Investors Chronicle . . .
Ten years ago, Richard Branson created some clever PR around his newly launched Virgin FTSE All-Share tracker fund, by placing a bet with a SocGen (SG) fund manager that his tracker would outperform the manager's UK growth fund over a three-year period. Three years after the much-publicised duel, Mr Branson was forced to eat humble pie. The SG fund had returned 19.2 per cent, compared with Virgin's paltry 9.9 per cent.

koru

If what you want is a tracker, HSBC's unit trust trackers are cheaper than all the options mentioned previously (at least they are if you buy through Hargreaves Lansdown, although the minimum investment is £50 per month).

vandanfc

I have one and wish I didn't. Not an expert opinion, but avoid would be my advice. Very poor performance compared to a lot of the market.

koru

vandanfc wrote: »

I have one and wish I didn't. Not an expert opinion, but avoid would be my advice. Very poor performance compared to a lot of the market.

If you mean trackers generally, rather than Virgin specifically, then the statistics say that trackers perform better than the majority of so-called actively managed funds in the same sector. For instance, a FTSE 100 tracker will perform better (after expenses) than the majority of active funds which invest in UK large-cap equities and measure their performance against the FTSE 100. (You need to compare the same sector. For instance, Asia has had such a good year, comparatively, that almost any Asian fund, active or tracker, will have outperformed a UK tracker. But it is not reasonable to compare a UK tracker with an Asian active fund. If you want to invest in Asia, you need to decide between an Asian active with an Asian tracker.)

Many so-called active funds are so scared to underperform the index that they closely mirror the market, and if they don't take big contrary positions they are not going to outperform by a large margin. Better to have an overt tracker with an expense ratio of 0.27%, rather than a covert tracker with an expense ratio of 1.5%. Of the funds that are truly active and do not slavishly follow market sentiment, some will get it right and some will get it wrong. Only those that get it right will turn out to have been better investments than a tracker.

There will certainly be some active funds that do get it right (for a period) and outperform the relevant index by a big enough margin to compensate for the extra 1-2% expenses that they levy. At any one time, the performance tables will show you a number of funds that outperformed over the last, say, five years. But spotting them in arrears is easy. How many of these are the funds that financial advisers were tipping five years ago? If you are sure you (or your adviser) can consistently spot the ones that will outperform in the future and can spot (beforehand) when they will start underperforming so you can disinvest, you should certainly prefer them to a tracker.

The key word is consistently. We can all pick the right ones occasionally, but I have yet to see any evidence that an adviser can get it right most of the time. For instance, I have never seen an adviser go back to the full list of the funds they recommended three, five and ten years ago and show that most of them are now in the top quartile in their sector (or they were top quartile up until the point at which the adviser recommended disinvestment). Until I see this sort of evidence, I think trackers make a lot of sense.

With a tracker, you are never going to be in the top quarter of performance in the relevant sector, but you are never going to be paying through the nose for bottom quartile performance.

I think what I am going to do is go for a mix of low cost trackers (expense ratio less than 0.4%) and truly active funds, including absolute return funds (ones which don't stick to one sector and do not measure themselves against an index at all). I am going to weed out the mock active ones whose performance is closely correlated to the index. Not a recommendation to anyone else; you have to make your own decision on these things.