A single fund of funds for all investments?

cheerfulcat

EdInvestor wrote:

Do bear one thing in mind:funds operate according to a benchmark related to their sector.So a "balanced managed fund" will have a minimum of x percent in equities y per cent in bonds z per cent in property at all times.

While there can be fine tuning around the percentages,it doesn't amount to much.If the market has a major crash, and the fund is benchmarked 70-80% in equities, it will crash too.The manager is not allowed to sell the equities and park your money in cash for the duration.

It's up to you to sell the fund and convert your money to cash, if that's what you think needs doing.The fund manager won't do it for you.

You are talking about unit trusts/OEICs, not ITs.

dunstonh

However, ITs do not pay commission; this may be why IFAs tend not to bother with them.

Thats a myth. The main reason is that they are outside the scope of advice for most finanancial advisers. They are not a packaged product but come under the same rules as shares.

Packaged ITs tend to be more expensive as commission is factored in and with what there is available on that front, you may as well go with unit trust.

Chrismaths

Well it's a bit chicken and egg dh. Is it that IFAs don't have permissions because they can't get paid through commission?

It's more likely that if an IFA is part of a network, he will be limited to packaged products by the compliance regime - and indeed, whether an IFA would want to arrange investments into investment trusts or shares. That comes down to both commission (as they need to get paid), but probably more importantly, a lack of expertise - which is no bad thing, you can't know everything - an IFAs job is really to advise people on tax wrappers and packaged products, managing shares is a full time job.

Here's a list of permissions of the FSA website for an IFA (I checked 3 that I know, they are all the same)

Activity Name:  Advising on investments (except on Pension Transfers and Pension Opt Outs)

Investment Instrument
      Certificates representing certain security
      Debenture
      Government and public security
      Life Policy
      Non-investment insurance contracts
      Rights to or interests in investments (Contractually Based Investments)
      Rights to or interests in investments (Security)
      Share
      Stakeholder pension scheme
      Unit
      Warrant

They also have permissions to arrange such investments, but would probably be limited by expertise - FSA conduct of business principles mean you have to excercise your "controlled function" with due skill, care and diligence.

dunstonh

Well it's a bit chicken and egg dh. Is it that IFAs don't have permissions because they can't get paid through commission?

Hmm. I am a little stumped. Last time this point was raised, I looked up the details on the network scope of authorisation and it stated only packaged ITs could be recommended. Now the list is:

Savings & Investments
[FONT=Frutiger 55 Roman,Frutiger 55 Roman]• Bank/Building Society Accounts
• Child Trust Fund
• Endowment Savings Plan
• Friendly Society Bond
• Friendly Society Savings Plan
• Guaranteed Bond
• Investment Bond
• Investment Trust (non split cap)
• Investment Trust (split cap)
• ISA Transfer
• Low Cost Endowments
• Maxi ISA
• Maximum Investment Plan
• Medium Term Investment Fund
• Mini ISA
• National Savings
• OEIC
• Offshore Investment Bond
• Offshore Investment Plan
• Offshore Unit Trust
• Offshore With Profit Bond
• PEP Transfer
• Purchased Life Annuity
• Referral to Investment Management Service
• Smoothed Investment Fund
• Structured Capital at Risk Products
• Structured Products (Guaranteed)
• Traded Endowment Policy
• Trustee Investment Plans
• Unit Trust
• With Profit Bond

Further qualifications are required for:
• Direct Gilt Holdings
• Enterprise Investment Schemes
• Film Partnerships
• Venture Capital Trusts

Exclusions are:
Commodity Funds
Derivatives
Direct Investment in Shares (including with SIPP or SSAS or Self Select ISA Wrappers)
Enterprise Zone Property Unit Trusts
Experienced Investor Funds
Futures
Options
Qualified Investor Schemes
Unregulated Collective Investment Schemes
Warrants

edit: found and old authorisation sheet and ITs were excluded at that point.
[/FONT]

competitionscafe

The Midas fund has a broad range of assets (I have their growth fund in my ISA) although for their income fund the % in overseas equities is only 9.6% compared to the growth fund at 24% - factsheet doesn't give a further breakdown by country though.

CF Midas Balanced Income Fund:
http://www.midascapital.co.uk/download/20061231%5CMidas_Income_00066.pdf

http://www.midascapital.co.uk/main.asp?pg=mcplhome.asp

As a core one-stop fund it's not a bad choice, although no one fund is likely to be as good as an IFA recommended portfolio of funds specifically aimed at your risk profile and investment objectives. I am a fan of investment trusts too though, particularly for regular savings - you can bung £50 a month (or more) into an investment trust or selection of trusts at very low cost in terms of charges.

Note: none of the above is a recommendation/financial advice and I am not an IFA.

Chrismaths

Can we expect a raft of ETFs and Investment trusts for dh's clients then?

Andy1663

So... .

Which fund/IT would you say comes closest to the right mix of assets - for a standard low, medium and high risk (I know no one is standard - but to give an idea. dunstonh pointed out some of the missing elements from the Jupiter Merlin Income fund - so what gets a better/best spread?) + has the flexibility to adjust weightings as necessary?

Is the Midas Growth the front runner for a medium risk balanced portfolio? (i.e. not a recommendation, but closest to a theoretical ideal)

I've been looking at the asset mix of global ITs on the trustnet site - they're pretty varied, and not that many seem to have property in their portfolios, although I may not have spotted shares in property companies. Which come closest to my ideal of a balanced high risk fund and a balanced low risk fund?

Andy

dunstonh

Chrismaths wrote:

Can we expect a raft of ETFs and Investment trusts for dh's clients then?

No. I am good on the UT/OEIC/SICAV/Life/Pension front. To try and build ITs into that as well is pushing it.

There isnt anything that I cant do on a UT etc that can be done on an IT (apart from gearing and that isnt something that rears its head at IFA level normally). This thread is looking for a single fund solution and I that isnt a position that I would ever find myself in.

not that many seem to have property in their portfolios, although I may not have spotted shares in property companies.

property shares are high risk (on a 1-10 scale, they are 10). Property funds that are bricks and mortar are cautious (5 on that scale). Dont get them mixed up otherwise you are going to get the risk balance all wrong.

edit: 5 mins after typing above, an email arrives from New Model adviser site Citywire with "topic of the day" being Property share risk vs bricks and mortar. Take a look at:
http://nma.citywire.co.uk/News/NewsArticle.aspx?VersionID=88495&re=776&ea=0

Chrismaths

property shares are high risk (on a 1-10 scale, they are 10)

I think you need a Spinal Tap scale dh - one that goes all the way up to 11! Always the problem with a risk scale, you can always find something riskier...

Andy1663

Thanks for the warning on property - so on trustnet when it says that a fund has a property holding, does that mean equities or bricks and mortar?