Fund choices....

EdInvestor

But the main attraction of traackers is their low charges, typically 0.5%.In a pension that attraction is immediately cancelled out because the pension annual charge is typically 1-1.5%. Often the provider pockets the entire dividend yield - almost 3%.

IMHO trackers if wanted should be in ISAs, or held direct.These days you can often get access to good quality external managed funds in a pension for not that much more than you would pay outside, even at a discount broker. These are a better bet IMHO.

Also, the property fund should always be considered, as this asset class is dominated by the insurers and an area where they know how to perform.

EdInvestor

clairehi wrote:

Thats an interesting point.

Whats the difference between a passive managed fund and an actively managed one though?

A passive tracker fund is run by a computer according to a preset formula involving the shares which make up the chosen index, usually with weightings related to the size of the company.Thus for instance the UK trackers are donminated by banks and oil/mining companies, which are the sectors containing the largest listed UK firms: more than 60% of your money is actually invested in 20 shares, mostly in the two sectors.This increases the risk of UK tracker funds.

With a managed fund the human can choose the mix of stocks and their weightings.beware of managed funds which are actually "closet trackers" - they charge active fees but invest in much the same shares/weightings as the tracker.They are a waste of money.

Top funds are rated by performance on this site, as are fund managers:

https://www.citywire.co.uk/Funds/Home.aspx

The quality of the fund manager is usually a key factor affecting performance.

dunstonh

But the main attraction of traackers is their low charges, typically 0.5%.In a pension that attraction is immediately cancelled out because the pension annual charge is typically 1-1.5%. Often the provider pockets the entire dividend yield - almost 3%.

Conventional trackers pocketed the dividends and that was seen as a negative on trackers. However, most modern trackers pay the dividend income so its not an issue.

The main point here is that the stakeholder fund is likely to mirror sector average or be passive managed. So, you may as well go in the tracker.

clairehi

dunstonh wrote:

When you see this trackers beat managed funds comment, it tends to be too simplistic. If you take out closed managed funds and disregard passive managed and stick with active managed funds you remove a lot of the poor quality managed funds. .

Sorry I may be missing something here but DH seems to be including "passive managed " funds as a subcategory within managed funds as separate and distinct from trackers.

if this is the case how is a passive managed fund different from a tracker?

EdInvestor

dunstonh wrote:

Conventional trackers pocketed the dividends and that was seen as a negative on trackers. However, most modern trackers pay the dividend income so its not an issue.

IMHo it's a big issue which needs clarification.If held direct or in an ISA, the L&G UK all share tracker pays a yield of something like 2.5% after an AMC charge of 0.5%.

But do you get this yield if you hold the tracker in a pension? If not it means you are paying massive charges on the pension, which will gobble up half your fund over 25 years.

People complain about Gordon Brown's so called raid on dividends, but the fund managers are often much worse.

dunstonh

Sorry I may be missing something here but DH seems to be including "passive managed " funds as a subcategory within managed funds as separate and distinct from trackers.

Managed funds are either active managed or passive managed. Passive managed funds are best avoided and will usually only give you sector average performance.

if this is the case how is a passive managed fund different from a tracker?

A tracker should track the index it is tracking. A passive managed fund doesnt have to track any index or have the same weightings.

But do you get this yield if you hold the tracker in a pension? If not it means you are paying massive charges on the pension, which will gobble up half your fund over 25 years.

Of course you get the income the funds. What on earth made you think otherwise?

People complain about Gordon Brown's so called raid on dividends, but the fund managers are often much worse.

Especially when you work on incorrect information.

EdInvestor

Of course you get the income the funds. What on earth made you think otherwise?

Charges are normally deducted from the income.

Can you advise what yields L&G is giving to pension investors in these funds, compared with investors who buy the equivalent unit trust?

Jap. Equity Index Fund
US Equity Index Fund
European Equity Index Fund
UK Equity Index Fund

clairehi

EdInvestor wrote:

beware of managed funds which are actually "closet trackers" - they charge active fees but invest in much the same shares/weightings as the tracker.They are a waste of money.

Top funds are rated by performance on this site, as are fund managers:

https://www.citywire.co.uk/Funds/Home.aspx

The quality of the fund manager is usually a key factor affecting performance.

Tks Ed and DH for clarification re passively managed funds. Next question, how can you tell whether a managed fund is actively or passively managed?

ReportInvestor

Passive funds will tend to track the index more consistently (but underneath due to the charges).

https://www.trustnet.co.uk

Has 5 year graphs for most funds v their relevant index.

It also gives the top ten stocks held by the fund which you could compare with the Sunday Times Business list of top UK companies to see if the top ten are the same.

Gartmore UK Growth is example one that stands out on the Trustnet site

EdInvestor

There are loads of these funds about - they are very similar to trackers, holding more or less the same shares,but usually with different weightings.This can reduce the risk ( UK trackers are heavily overweight banks and oil/mining companies), but you are not getting the benefit of any real expertise.

After all anyone can go out and buy a portfolio of shares featuring the top 20 on the FTSE, 100 quid in each, why would you pay anyone a fee for doing something so straightforward?