investments

moneyfoolish

TheTracker wrote: »

A straight line is basically what it is selling - the fund uses smoothing to keep up a constant return which it can apply to fallow years. We all have different definitions of cautious. I consider myself a cautious investor and in my definition I want to know exactly what's happening, not pay for an instrument to disguise (OK, lessen the impact of) volatility. So since it is selling a straight line I'd be a little concerned that returns have dropped. Yet others will have a very different definition of cautious.

The issue with these funds is the black box smoothing and the hidden cost of providing that smoothing/insurance/hedging. It is difficult to argue it doesn't cost. One way of handling that volatility isn't to pay for it, but to educate oneself about it and the lack of long term impact. Still others will do the reverse and buy the guarantees that dunstonh mentions, which I see can cost an additional 0.8% pa.

On the other hand, from what I can see on Trustnet, it holds approx. 63% Fixed Interest which almost equates to the much-lauded Vanguard Lifestyle Funds and beats the comparable Vanguard 40% over 1 year and 3 years.

TheTracker

moneyfoolish wrote: »

On the other hand, from what I can see on Trustnet, it holds approx. 63% Fixed Interest which almost equates to the much-lauded Vanguard Lifestyle Funds and beats the comparable Vanguard 40% over 1 year and 3 years.

I don't know that it's a valid comparison. At a one year horizon it's almost meaningless, as Cautious is designed to spread return/loss on a multi year basis. And VLS40 returned 6.0%pa over three years, Cautious 6.4%. Again, not much can be fathomed here as the first year of the Cautious had a running start with carried over return. And then VLS doesn't have the 8% property Cautious does.

They are different beasts.

In the long term I'd be highly confident VLS40 would beat it, probably by about the 1.2% annual charge difference, but with greater volatility. An investor needs to determine to what extent they wish to balance return and volatility. An advisor needs to test the extent, nature, and perception of caution.

bigadaj

This just reminds em of an endowment too much, swapping a 'guaranteed' final sum with a smoothed yearly return. Black boxes with little openness or clarity, would the uninformed investor realise there is still risk in the mix of assets invested in, how much is being hedged or have counter party guarantee, charges look high too.

carlbhoy

thanks for all your honest answers i really do appreciate your time and effort, I got it wrong and should have said it was growth rate of 6.7% before charges of 1.35%, but am I right in thinking that a lot of you guys think for some one like me it sounds a good deal while others [EMAIL="don@t"]don't[/EMAIL] really think so

dunstonh

carlbhoy wrote: »

thanks for all your honest answers i really do appreciate your time and effort, I got it wrong and should have said it was growth rate of 6.7% before charges of 1.35%, but am I right in thinking that a lot of you guys think for some one like me it sounds a good deal while others [EMAIL="don@t"]don't[/EMAIL] really think so

Is that the figure on the illustration? If it is, then the adviser has no control over what is printed there. It is set by the regulator. It is just an example.

The returns are best looked up on Trustnet or other data suppliers.

darkidoe

Is there something wrong with me or is the graph on the fund factsheet too straight too be true? Granted this seems to be quite a diversified fund but with about 50% in fixed interest securities, on average a 5-6% yearly growth. This doesn't seem to correlate with the market at all does it? Of note this fund doesn't seem to issue dividends, maybe they have reinvested the dividend as growth?

paulstar

Dird wrote: »

What IF PruFund goes bust? What would that look like on your investment platform? Presumably you still own the shares in the underlying companies?

If you buy a fund, for example a 'FTSE all share tracker' unit trust, you have in effect bought shares in every company quoted on the London Stock Exchange.

So a fund such as this is not going to 'go bust' unless every company held within the fund goes bust. If that happens it's probably the end of the world anyway, so you really aren't going to care too much about your ISAs.

Linton

darkidoe wrote: »

Is there something wrong with me or is the graph on the fund factsheet too straight too be true? Granted this seems to be quite a diversified fund but with about 50% in fixed interest securities, on average a 5-6% yearly growth. This doesn't seem to correlate with the market at all does it? Of note this fund doesn't seem to issue dividends, maybe they have reinvested the dividend as growth?

How the fund works is that the manager determines a monthly % return in advance based on his assessment of economic conditions. They are free to change it each quarter but usually dont. The fund deliberately sets out to provide a steady long term return, by the look of it rather more successfully than the absolute return funds.

In its management it is closer to a with profits fund than to a normal unit trust.

Newly_retired

Any update of opinions on the Prufund?
I have had it recommended to me and it can go in an ISA wrapper.

dunstonh

Pru have been doing it for generations. It gets tweaks every now and then but its much the same as the old days. Just a bit more expensive on the guarantees side now (if you pick those options)