Your thoughts on this fund portfolio please

Imnoexpert_2

We were visited by my wife's IFA last week.

He is proposing consolidating her pot of ISA funds, and indeed her pensions and non-ISA funds into the following 12 funds. Selected by the firms investment committee.

She is a medium risk investor and has other assets so won't need to access this money (all things being equal) for the foreseeable future. We have an ongoing relationship with the firm and would expect the funds to be reviewed annually.

The proposed fund choices surprised me a little. I haven't been able to check the asset allocations, though guess that they will meet the risk profile - but some of the funds are not in the recent past good performers, and some of the big funds I would expect to be there aren't.


2.8% Baring Global Bond Trust
12% Cazenove Multi Manager Diversity A Acc
16% CF Milton SpecialSits. A Acc
16% Ecclesiastical Amity International Fund
3% Fid FIF Strategic Bond Fund Acc gross)
11% Fid FIFIV Multi Asset Strategic OEIC
2.8% Legal & General Dynamic Bond Trust
2.8% M& G Optimal Income Fund A Acc
5% Newton Asian Income Fund
16% Newton Global Higher Income Fund
7% Schroeder Global Property Securities
5% SWIP Property Trust Fund Acc

Do they know something ?

Thanks for any thoughts.

Rollinghome

Looks pretty much the sort of stuff a lot of IFAs out there would come up with. Did they explain what the strategy was if any? The "investment committee" usually sounds a lot grander than it's likely to be.

It's all very generalised including several mixed asset funds in there but with various other stuff added for luck. They won't know from week to week what those mixed asset funds are holding or how they fit with the other funds they've chosen. They’ve got just 3% in each of three similar strategic bond funds presumably because the “committee” can’t make up it’s mind. On what basis would such a generalised collection of funds be reviewed?

The really important bit is the cost, especially as the return on investments over the next few years could be pretty slim. The Miton SS fund they've picked is currently very bearish with around a third held in cash. Exactly how much are they charging for picking a few random funds? Why do they want to consolidate the funds she has and what will the cost be?

I'd guess you could get all of those funds on the Fidelity platform via Cavendish online and pay 0% initial and 0% trail. What do you think they're bringing to the party to justify paying more?

Reaper

They are going heavily for bonds and global income. It's a fair point of view to take though it would certainly need annual reviews as it is a fairly narrow stand despite the large number of funds.

Some things I would not be so keen on such as the multi-manager fund. It seems a bit of a cop out when they are choosing the investments to let somebody else decide which funds to invest in and charge an additional fee. However that's only a small part of the total.

I haven't looked at the past performance of the funds (though historically that is a poor indicator of future performance anyway), nor the charges. I'll leave somebody else to do the homework. But I don't think it is an unreasonable selection if you share their view of how the markets will go.

darkpool

tbh i'm a bit of a sceptic regarding managed funds. as others have said, you should really have a look at the annual fees. but first you should maybe do some background research on investment.

i think if you approach investment with an open mind and look at the evidence you will decide actively managed funds are not cost effective.

sorcerer

The choices seem to be all over the place with little though on what the portfolio is trying to achieve, worth asking what the goal is for this sort of spread.

Imnoexpert_2

Thanks for your thoughts. And others are welcome.

The cost is 1.5% up front and 0.5 PA. for new investments. Fund transfers within the Fidelity platform cost 0.25%.

I do my own research and invest my own money (but with some trepidation), but I value my marriage and for the cost involved it is probably worth never being in the position of having personally lost her money so she uses an IFA. The advice of an IFA is useful and although I don't always take it I like to try and understand it. This recent advice came as a surprise as so many of the funds were unknown to me and had mixed historic performance. The 3% in 3 different bond funds is mindless.

As has been said 3 funds seem similar multi fund or multi asset and over 3 years they are all 3rd or 4th quartile (but who knows if this counts for much?).

Incidentally of last years 7 ISA funds recommended by the company 4 funds are 4th quartile over one year, one 3rd, one 2nd and one 1st. Having said that the overall return is OK. Funny that changing all the funds in this 'should be considered... over 5 years' portfolio' is now being suggested!

The question what do I get from the IFA is a good one. He is better than me on strategy - e.g. 'Time to think about IHT'; Taxation - I'm not good on; and ideas I have automatically discounted e.g. structured products.

Oh and I'm indecisive - or maybe not - but then again.....

gadgetmind

Imnoexpert wrote: »

Thanks for any thoughts.

I just can't see how all those multi-manager and strategic funds sit together in a portfolio. What's the equity/bond/property split going to be from one month to the next? What's the breakdown going to be between corporate bonds and sovereign bonds? (A good six of those funds will hold bonds, three of them almost exclusively, and the other three as they see fit.)

You also need to be aware that the ongoing costs are not 0.5% pa, but closer to 2%-3%pa as the underlying funds have fees, and these accumulate for multi-manager funds. The 0.5% is merely what the IFA will charge for switching you from funds that were 4th quartile last year into ones that could well be 4th quartile next year. (OK, so that last bit was cruel, but not entirely untrue!)

I'm sure that professional portfolio constructors are smarter and wiser than me, but that looks like the kind of "blunderbuss and keep stirring" portfolio of high-fee funds that amateurs usually self select.

I'd be interested to know what others think.

gadgetmind

Imnoexpert wrote: »

for the cost involved it is probably worth never being in the position of having personally lost her money

My wife and I have always pooled everything, so there is no "hers" and "mine", but it did take a little time for her to be totally comfortable with me self-managing all of our investments.

But there again, she was apprehensive about me tackling plumbing, electrics, car repair, and much more, but now realises that while I might make the odd boo boo, the professionals make just as many but then try to cover them up.

He is better than me on strategy - e.g. 'Time to think about IHT'; Taxation - I'm not good on; and ideas I have automatically discounted e.g. structured products.

Yes, I would pay an IFA for his/her input on things I might not have considered and/or not yet know much about. However, suggesting structured products would not go down well with me, not well at all.

BLB53

Do they know something ?

Yes, they know how to milk the system for the highest commission.

HelpWhereIcan

wrt the reason why there may be 3 bond funds recommended at 3% each...

This is unlikley to be as simple as the investment committee being unable to make up their minds.

While it will be due to avoiding an 'all eggs in one basket' scenario this is most likely because the aim is to achieve an asset allocation within the bond funds. They will be making sure the geographic region and sector spreads match the asset allocation they are trying to achieve.

i.e. if they are trying to get a certain % in the uk, another in Asia, a third in central america with a spread at a set level between government securities, financial institutions and major US, UK and Asian Blue Chips it would be very unlikley there would be one fund which would match.

What can seem to be duplication in fund choices can most often be explained by this and I would guess it is so in this case.

However, I have not run these funds through a Portfolio analysis tool which would tell me for sure so this is really a question you should be raising with the IFA direct.

I suspect the Investment Committee is likely to be a third party research company - it should be more than just a couple of colleagues sat around a desk - so it could be more in depth that you fear. If not, that could well be a reason to be concerned.

Any IFA worth their salt with have the research and information to hand (or retrieveable in a short time) so should be more than happy to explain the asset, geographic and sector allocations they are trying to achieve and how that matches your attitude to risk, investment timescale etc.

If asking the question gets you nowhere or, worse, a negative response that is the time to listen to the warning bells in your head.

gadgetmind

HelpWhereIcan wrote: »

However, I have not run these funds through a Portfolio analysis tool which would tell me for sure so this is really a question you should be raising with the IFA direct.

I considered doing it but then decided not to bother; so many of the underlying investments are highly dynamic regards their holdings that an analysis performed one month would give a different result to one run just a month afterwards, and six months later the situation will be very different again.

This thread has actually been a good thing for me, as I do have an oldish S&S ISA that contains far too many active funds of a similarly dynamic nature, and this has given me the kick to get it sorted come May.