CTF Advise please

ixedoc

When my son was born in 2005, I invested the £250/- investing into
Family Charities Ethical Trust. I regularly put in £50/- each month. But the returns I have had are not great. Have I made a mistake. If I have can I change it to something else and what are the alternatives available. I would be grateful for your advise.
Kind regards
Ixedoc

Linton

I have looked up the details of this fund on trustnet. I would agree that its performance has not been great. In the past 10 years it has increased by 60% whereas a simple FTSE100 tracker would have increased by 120%. On the other hand its average return is 4.7%/year which is better than you would have got with a bank savings account - so poor but not disastrous. Note that you wouldnt have got a 120% return because much of your money being drip-fed has been invested for less than the full period of time.

The poor overall performance is substantially affected by its disastrous performance in the 2008/2009 crash - I guess at that time banks were deemed to be more "ethical" than some other sectors. Since the crash it has averaged 7.9%/year, very good compared with bank savings though rather worse than the index as a whole.

The fund seems to invest in large FTSE100 companies so its difficult to see why the performance has not been better. The charges seem high, but that's not sufficient to explain the under-performance. Perhaps the devil has had the best tunes.

As to what you should do - its not clear to me. I dont know what choices you have. Also there's the question of when the son is to receive the money. Currently it is a fairly high risk investment as exemplified by the very poor performance in 2008/2009. Its a bit early, but at some stage closer to when the money is handed over you should de-risk the investment so its not unduly hit by another crash.

On balance I think you could look for a more global fund that invests in countries all over the world. And also start to consider transferring some of the money to bond investments.

xylophone

https://www.gov.uk/child-trust-funds/overview

http://www.which.co.uk/money/savings-and-investments/reviews-ns/child-trust-funds/how-to-switch-child-trust-funds/

It is possible to transfer the CTF to another provider.

From April next year, it will be possible to transfer to the more flexible JISA.

http://www.money.co.uk/savings-accounts/junior-isas.htm