Should I change investment options?

[Deleted User]

Hi,

I've received my annual pension benefit statement from my companies Group Money Purchase Scheme and I was looking for advice regarding my investment options. Currently I'm invested in Option 1 and I was wondering how Option 2 compared:

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Option 1:

Current Investment Managers

Schroder (c.10%), Baillie Gifford (c.10%) - UK; BlackRock (c.34.0%) - US ; BlackRock (c.7.5%) – Europe; Lazard (c.7.5%) - Europe ex-UK; Blackrock (c.4.0%) - Japan; JP Morgan (c.4.0) – Japan; JP Morgan (c.5.0%) – Asia ex-Japan; Colonial First State (c.18.0%) - Global Emerging Markets

Benchmark

20% FTSE All Share Index, 34.0% FTSE USA Index, 7.5% FTSE All World Developed Europe ex UK Index, 7.5% FTSE World Europe ex UK Index, 18.0% MSCI Emerging Markets Free Index, 5.0% FTSE All World Asia Pacific (ex Japan) Index, 8.0% FTSE All World Japan Index

AMC (% p.a.)

0.686

TER (% p.a.) 2

0.710

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Option 2:

Current Investment Managers

Standard Life Investments Global Absolute Return Fund (c.25.0%), Colonial First State Emerging Market Equity Fund, (c.15.0%), Legal & General Passive Developed Global equity Fund (c.50.0%), Aviva Property Fund (c.10.0%)

Benchmark

25.0% 6 month GBP LIBOR, 15.0% MSCI Emerging Markets Index, 12.2% FTSE All Share Index, 37.8% regional overseas indices (sterling hedged) weighted as follows 20.7% North America, 9.2% Europe (ex UK), 4.9% Japan, 3.0% Asia Pacific (ex Japan), 10.0% IPD All Balanced Funds Median

AMC (% p.a.)

0.639

TER (% p.a.) 2

0.719

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While I can see there's a difference in management cost the rest goes over my head to be honest.

From what I suspect to be a very naive perspective I've compared the unit price of Option 1 and Option 2 over the past year and Option 1 has increased by 19% while Option 2 by 12.2%. I appreciate past performance means very little and this is only over 1 year, but in my very limited understanding I don't have much else to work with.

I've also compared the reported fund performance over 1 year, with Option 1 reporting a fund % = 19.2 and an index % = 17.8. Option 2 reports a fund % pa = 11.7 and an index % pa = 8.7

Some more info: I'm 30, investing in my pension since I was 23, I invest 6%, my company 5% - anything else please ask.

Any advice is appreciated.

Thanks

Linton

Option 2 should be less volatile because of the 25% Absolute Return fund but at the sacrifice of some potential return. In my view, as you have many years to go before retirement you wouldnt get any long term benefit from the reduction in volatility.

[Deleted User]

Thanks Linton.

Anyone else?

kidmugsy

If I were inclined to Take A View it would be that all financial assets look a bit pricey at the moment, but that Wall St especially is much too high. Therefore I might go for whichever has the smaller %age in US equities, which would lead me to Option 2: I suppose I'd accept the rather conservative investments in property and Absolute Return funds - after all, if the money isn't in US equities it has to be somewhere else.

But you might decline to Take a View on the grounds that the Court of MSE would accuse you of attempting Market Timing, a heinous crime in the view of some.

[Deleted User]

I generally consider the 'Lifestyle' investment choices on offer when I receive the yearly statement and try and make sense of how they're fairing against each other - I think with my age I'd be inclined to go with Option 1 then. Thanks all