Unit / Investment trusts with the broadest spread

rpenrose

I currently live overseas and have a SIPP in the UK. Before the Pound dropped in value against most major currencies, I was looking at transferring my SIPP to a local QROPS where we live.

The company that appealed to me used matrices produced (I believe) by Dimensional Fund Advisers in the US showing annual returns from smallcap, large cap, value etc etc shares / equities since 1900. This was a very convincing marketing tool which showed that over time, the "Market" always gave the best returns over most other investments.
Q1 - Would those reading this agree that this was the case??

One could invest in the QROPS based on an individual risk profile and ours came out at 35% fixed interest based investments and 65% global equities, with the equities being rebalanced weekly depending on whether the market rose or fell. The company also bought equities "off market" when someone wanted to offload Equities but not cause a reduction in the price due to others noticing an "offload".There were roughly 5000 companies invested in. To me, this appears to be like a hybrid Unit trust which the QROPS provider said would ride out the storm of most of the ups and down in the market and over time, give a good return.

Q2. Does this sound like a hybrid Unit Trust or just an Index tracker fund and would the theory ring true?

If anyone feels that both the above sounds plausible;

Q3. Are there investments in the UK, that I could invest in through my SIPP that would be similar to that described above?

Last year I approached DFA in London and they talked to my SIPP provider. The outcome was that at the time, with the SIPP structure that was in place, it would not be feasible or too costly to use DFA.

I don't see the GBpound improving for some time, don't need the pension for at least 5 years (I am 52), so it would seem prudent to leave it in the UK, to hopefully grow.

The local tax position here is that I would pay tax on the growth (whether it was in the UK or here)

I really would appreciate any response as only 20% of the SIPP is invested in anything (Cash at 2.65% P/A) and the rest just sitting there.

DavidHayton

Hi
These are big questions! Here are short answers:

(1) If by "the market" you mean equity investments in the means of production, then yes, I agree that this will/should produce the best returns over the long term. However, my supplementary question would be: How do you decide on the weighting between different sectors and different geographical regions. This is the key to riches!

(2) It doesn't sound like either a Unit Trust or a tracker to me. I would worry about all this talk of buying things off market. Maybe stock isn't being bought at all? How would you know?

(3) There are several huge Investment Trusts like F&C or Witan which would give you broad international coverage over many sectors. They are properly regulated and audited in the UK.

Other questions that I would be asking DFA are what are their total charges: ongoing as a percentage of your investment, who regulates them and is there any counter-party risk.

Finally, globalisation is such that equity investments should not be affected too much by currency movements. If the pound drops then stocks quoted in GBP should rise (and vice versa). However, cash deposits in GBP are another thing. I can't see the pound going much lower but I wouldn't stake many pounds on that opinion.

Best wishes and hope that you're enjoying NZ.
David

rpenrose

Hi David

Thanks. NZ is great, if a bit surreal - as the downturn hasn't really hit us hard - and I find it hard to believe it won't!

Buying Off Market is apparently quite usual for large funds, it's buying large tranches of shares at a discount without alerting the rest of the market to what is happening and thereby devaluing the share price because of large stock movements. Unless someone can tell me otherwise.

Fees are the other issue (and I suspect it's not just me that thinks this). I have had a look at commfreefunds.com based in Bristol and regulated by the FSA.

If I left the SIPP where it is, I am hoping that new structures just being offered by my SIPP provider will allow me to use commfreefunds.com allowing me to retain the 3ish% initial commission and also the trail commission if I were to use a UK Investment manager or move it to an overseas QROPS.

If I transferred my fund to NZ then I would pay around 3% for the transfer - an immediate loss which would have a significant compounding effect over time. On from that, there are annual charges of around 1.8 - 2.8% OUCH.

Ideas anyone