Pension Fund Selection

Ximian

I usually assess my pension fund performance on an annual basis and I had a look at my existing fund which is the FP Balanced Index Enhanced Fund of Funds and the performance hasn't been that good the past few years. I believe that I can get a better return by switching to a better performing fund. Problem is, how to select a fund and where to research ..... I have used Trustnet to view fund performances but I was wondering if there is a better website out there that details the performance of some of the top funds as well as the costs involved. What sources do you use to select your pension funds? What criteria do you use for selecting funds? I have just downloaded some guides from H&L and will read them this week.

Any information appreciated!

TIA

dunstonh

I had a look at my existing fund which is the FP Balanced Index Enhanced Fund of Funds and the performance hasn't been that good the past few years.

That's a good fund. What makes you think you can do better?
What is it that makes you think it has performed poorly?

For the benefit of other readers, this is a fund of funds that mostly invests in other index trackers where it can with a balanced portfolio mix (i.e. made up of cash, property, fixed interest and equities with sector allocation controlled by FP). Being mostly trackers it is mostly benchmark performance but it has outperformed sector average consistently since launch.

Ximian

dunstonh wrote: »

That's a good fund. What makes you think you can do better?
What is it that makes you think it has performed poorly?

Looking at the performance of other funds and comparing it with the FP fund as well as viewing my FP fund value via the Friends website. I know that the fund has beaten the sector average but I think I can get better returns from other mixed funds.

Lokolo

Ximian wrote: »

Looking at the performance of other funds and comparing it with the FP fund as well as viewing my FP fund value via the Friends website. I know that the fund has beaten the sector average but I think I can get better returns from other mixed funds.

What funds have you been comparing it to though?

You have to make sure you are comparing like for like. You cannot compare a UK Equities fund with an Emerging Markets equity fund for example.

dunstonh

Ximian wrote: »

Looking at the performance of other funds and comparing it with the FP fund as well as viewing my FP fund value via the Friends website. I know that the fund has beaten the sector average but I think I can get better returns from other mixed funds.

Ok. What investment strategy would you be using and which funds would you use to fulfil that investment strategy? How frequently would you rebalance? Would your allocations be static or adjust with the economic cycle?

I'm not saying you cant achieve better. I am just questioning whether you are up to the task of having the knowledge and understanding that is required to give you the potential to exceed it.

As lokolo says, if you are just looking at past performance and seeing funds in other single area sectors beating it and thinking they will be better then you will be wrong.

Ximian

I agree with what you're saying dunstonh. I'm hoping to get better results than what I'm getting, if this means switching funds to a totally different fund then I'll consider it (taking risk assessment into account) or maybe even diversify, keep the FP fund and then have another fund or two funds with a higher risk.

dunstonh

It wont be a case of picking another fund. The fund you have is a portfolio fund. So, if you are going to knock that on the head you then need to pick a selection of funds not just one. Single sector funds are for use in a portfolio of funds. They are for x% of the total. A portfolio fund already has x% in those areas.

Randomly selecting single sector funds starts taking away from having a strategy and turning it more into a punt. You may get lucky and find the sector you increase your weighting in turns out to be the best every year going forward (statistically unlikely). Or you may find a Japan style event occurs and you take very heavy losses.

Investing 100% in JPM Natural Resources over the last decade would have made you very rich in hindsight but it is very poor investing if you do that as it is more of a gamble and you have to cater for the fact that you will get some fund selections wrong. You hope that you get more right with enough research.

Investing is about opinion. So, if that is what you want then it is your choice. However, be wary that it is very easy to get carried away with single sector fund performance

mania112

If the fund has changed it's name (like the company) to:

FL Balanced Index Enhanced Fund of Funds (Pn Gross TR in GB)

The % performance Vs. the sector average is a follows:

1m - 2.73 vs. 2.60
3m - 8.96 vs. 8.31
6m - 12.44 vs. 10.90
1yr - 2.02 vs. 0.71
3yr - 52.50 vs. 49.00
5yr - 17.67 vs. 11.61

It's beaten the sector average on all periods of time.

I don't see a problem with this fund.

However, if you're suggesting you're in the wrong type of fund (when compared to your attitude to risk) you'd need to see an IFA to sort this out.

It's not as simple as you might think. Your fund is a 'fund of funds' and therefore electing to pick your own selection needs professional assistance.

You'll need the right amount of your portfolio in specfic sectors - whilst keeping an eye on the cost of the fund and the other eye (assuming you IFA has two!) on the past performance and future prospect.

- The overall comment though is that 'everyone has struggled with their investments over the past 12 months but 2012 should see improvement, whilst continued issues in Europe may prove further stumbling blocks'

NOTE: FYI the 'sector' as defined by FE Analytics is : Mixed Investment 40%-85% Shares Gross TR in GB

gadgetmind

dunstonh wrote: »

For the benefit of other readers, this is a fund of funds that mostly invests in other index trackers where it can with a balanced portfolio mix (i.e. made up of cash, property, fixed interest and equities with sector allocation controlled by FP). Being mostly trackers it is mostly benchmark performance but it has outperformed sector average consistently since launch.

This is rather uncanny.

After kicking off my new SIPP, I looked at doing a partial transfer from my FL GPP over to the SIPP, but they said "ixnay". Instead I looked at all of the FL funds to see how to put together a portfolio that suited my approach.

I finally decided on this FL Balanced Index Enhanced Fund (of Funds) partly because it didn't just seem to plonk all of its fixed interest in gilts.

I have recently been considering diluting its rather heavy UK exposure by adding global equities alongside, but maybe I'll just leave it alone!