Pension investment fund choices

PipPip

I've just been reviewing the funds that my two defined contribution schemes (one live, one deferred from a previous employer) are invested in. One was using the Lifestyle option and the other using some fund choices I think I made a very long time ago. I'm a 40 year old and not particularly risk averse at this stage, especially as the growth on my pension funds to date has been pretty poor. The analysis shows that my pension funds are invested as follows:

UK equities 50%
US equities 21%
European equities 12%
Emerging market equities 6%
Asia Pacific exc Japan equities 6%
Japan equities 4%
Cash 1%

The money is primarily in passive funds (98%), the largest being Aquila Global Equities (50% of the money), L&G UK equity fund and L&G World (ex UK) Equity Fund. The investment performance thereofore more or less tracks indices. I do have a small proportion in Baillie Giffird UK Equity and Baillie Gifford Overseas Equity funds which are actively managed and the overseas equity fund in particular seems to do quite well.

I can only choose a narrow range of funds, a few more active managed funds, some emerging market and a socially responsible investment fund. I was thinking that I should reduce the amount of UK and US exposure, increase the emerging markets a bit, put some in the socially responsible investment (since growth seems very good) and increase the proportion in actively managed funds. Does this sound reasonable, any other suggestions/comments?
Thanks

Loughton_Monkey

To put 71% into 'dead' economies (UK and US) is rather suicidal in my book, when investing for the longer term.

What makes you think either of these economies - with minimum wage, health & safety, paternity leave, human rights, equal employment legislation, trade unions, ultra-high taxation, European Directives...... are going to 'compete' in a global market over the next 25 years?

Or do you know something we don't?

jamesd

L&G World is probably a tracker of the MSCI World (ex UK) index which tracks major developed markets in proportion to their stock market size. Aquila Global Equities is probably similar but without a non-UK restriction.

Agreed about the drop in UK and US, increase of emerging markets. Socially responsible funds tend not to do particularly well so if it looks good compared to the others that's more a comment on them than it. More active management seems good also, if you have decent actively managed choices; you might not.

PipPip

Loughton_Monkey wrote: »

To put 71% into 'dead' economies (UK and US) is rather suicidal in my book, when investing for the longer term.

What makes you think either of these economies - with minimum wage, health & safety, paternity leave, human rights, equal employment legislation, trade unions, ultra-high taxation, European Directives...... are going to 'compete' in a global market over the next 25 years?

Or do you know something we don't?

The split is largely as a result of selecting the Lifestyle option, meaning the default investment split decided by the pension fund trustees. Your question is EXACTLY why I am looking to move things around - I no longer trust the default option to be in my best interests as my pension fund has displayed hardly any growth to date and i would like to change the mix to more money in actively managed and more in emerging markets, less in UK and US equities.

Linton

Dont write off US/UK and Europe too soon. I agree that the standard capitalisation based tracker and close to tracker funds dont look to be the areas where the growth will be, but if you look for growth sectors in developed markets you may be well rewarded.

Things, IMHO, to consider: technology, small companies, recovery/special situation funds with a record (sadly no longer Fidelity Special Situations it seems, but M&G Recovery is still looking good).

Loughton_Monkey

Linton wrote: »

Dont write off US/UK and Europe too soon........

I wouldn't exactly 'write them off', although I am thinking only of the longer term pension that is under discussion here.

Within any economy (even UK) there is nothing to stop a small £1 million capitalised business growing like crazy and trebling its share price in a year.... There are good companies who will succeed.

But when talking of a long term fund, in predominantly larger companies trying to compete in a global market, who really believes a country with so much 'baggage' can compete? You can measure every day the $billions of overall wealth transferring from 'West' to 'East'. How long before any 'British' company left standing (and worth more than a candle) will be snapped up by an Indian, Russian, or Chinese entrepreneur.......

In terms of life-cycle, the UK is just like "Loughton Monkey Ltd." This latter 'company' [i.e. ME] started working life with assets of precisely £38.51 in 1972. I worked hard. I saved. I invested. I accrued wealth. Had you 'invested' £3.85 to own 10% of my wealth, then you could - as at the date of my retirement - calculate your own wealth in hundreds of thousands. But now I do not 'compete'. I do not work. I do not earn anything other than a paltry investment income here and there. I am still 'wealthy' by normal measures, but my wealth is dwindling day by day. Why would you invest in 'Loughton Monkey Ltd.' since I retired? You could only lose in the long term.

My wealth is slowly being transferred to financial institutions, utility companies, car manufacturers, holiday companies, Italian restaurants....... I simply cannot stop this. The only way I could reverse the trend is to come out of retirement and work again. So I'll advertise myself as a freelance supermarket shelf stacker. My hourly rate will be £85. A European Directive requires my employer to supply me with a company car because I have ingrowing toenails. I demand 2 months holiday a year (on full pay)......Or maybe you're thinking I've priced myself a little bit out of the market?