Any thoughts on the new 'HL Multi Manager High Income Fund?

aajax42

I took H&L's advice a while ago and invested 7K in the Woodford Equity and Income fund at start up. Up to this point I am happy with that decision. H& L are now promoting this new 'High Income' Fund with what they claim will have a £1.00 launch price if I invest before the 12th April.
I wondered what your views are, or are there better alternatives even with the launch price?

bowlhead99

The "offer" to let you have it at launch price if you apply before launch just means that you will definitely pay £1 per unit because it is a new fund and on launch day each unit will represent a pound of cash in the bank.

On day 2, the money will have been spent on other managers funds and will not just be cash in the bank so it won't be valued at £1 per unit. It might be £0.98 or £1.02 to buy in, depending on the assets involved and their market values. So, "even with the launch price" is a red herring. They could set the launch price per unit at whatever they liked, but at the end of the day your £1k investment buys £1k of fund assets.

Whether you make the investment in a new fund or an existing fund there is no magic free money and just because woodfords fund is currently valued above its launch price, no guarantee that this HL one won't fall 20% over the next year. Woodford's second fund for example, "patient capital trust" is worth less than day one, so you'd have been better waiting for now to buy it , instead of investing at launch, even though buying at either of those points might be a good long term decision when you look back after a decade and it's doubled.

As an overview, HL multi manager funds spend their money on buying other funds from other managers. And they charge you for deciding how much they want to put with whom. This is known as a "fund of funds". Some would call it a " fund of fees " because you're paying money to the underlying manager (eg woodford) and paying HL for running the multi manager fund, which is two levels of running costs, before you pay the HL platform fee on top.

Multi manager funds can be OK if you have no clue which manager to pick or the amount you're investing is too small to allow you to spread your money between multiple funds manually yourself.

AnotherJoe

I've gone for it (put in order last night as it happens) because I am looking to put some money in dividend paying investments as a contrast to pretty much all of my other investments which are essentially anywhere from medium to high risk.

In essence I'm diversifying mildly, and decided I've got better things to do with my time than either buy half a dozen high interest shares or funds and switch between them as I need to, and HL should be able to pick better candidates and rebalance more often than i can (or more to the point, will) plus they include bonds and the like about which I know zero.

I do realise there is a situation of fees on fees here but my feel/hope/wish is that their expertise in picking will outweigh that.

To put it in context, its only about 2.5% of my total SIPP allocation and 1.5% of my overall retirement portfolio. Also as I dont need the money as income immediately I've gone for the accumulate option. But if its working well then in say 10 years I might switch to the income version.

bowlhead99

AnotherJoe wrote: »

I've gone for it (put in order last night as it happens) because I am looking to put some money in dividend paying investments as a contrast to pretty much all of my other investments which are essentially anywhere from medium to high risk

In essence I'm diversifying mildly.

Just an observation in case others are misled as to the risks: investing in a portfolio targeted at investments which have a high dividend yield with 40% in higher yielding bonds certainly isn't outside "anywhere from medium to high risk". Though of course it might be lower risk than your equities-only funds, it probably won't be as low as your medium risk funds.

I do realise there is a situation of fees on fees here but my feel/hope/wish is that their expertise in picking will outweigh that.

If you don't know what to pick and can't afford personal advice, there are worse things you can do than employ a fund-of funds manager to help.

But if you don't actually need the income which it is so dedicated to producing, it's perhaps questionable why you'd pay a lot more to buy into that dedicated specialist strategy. Other than, diversification of approach can be useful in a broad portfolio as the returns may not be quite so correlated with your other, less div-focused funds

To put it in context, its only about 2.5% of my total SIPP allocation and 1.5% of my overall retirement portfolio.

So if it outperforms everything else you hold by 10%, you will grow your overall portfolio by a tenth of a percent...

AnotherJoe

bowlhead99 wrote: »

Just an observation in case others are misled as to the risks: investing in a portfolio targeted at investments which have a high dividend yield with 40% in higher yielding bonds certainly isn't outside "anywhere from medium to high risk". Though of course it might be lower risk than your equities-only funds, it probably won't be as low as your medium risk funds.

If you don't know what to pick and can't afford personal advice, there are worse things you can do than employ a fund-of funds manager to help.

Well, i dont know what to pick but I dont think an IFA would do any better a job than a FoF manager and if they picked funds for me that would be no different to a FoF management fee anyway. Lets say I have £100k to invest. I could pay an IFA 1 to 2% to pick some funds or HL (or similar) 1.33% via their inbuilt fee. No difference between the two approaches AFAICS

bowlhead99 wrote: »

But if you don't actually need the income which it is so dedicated to producing, it's perhaps questionable why you'd pay a lot more to buy into that dedicated specialist strategy. Other than, diversification of approach can be useful in a broad portfolio as the returns may not be quite so correlated with your other, less div-focused funds
So if it outperforms everything else you hold by 10%, you will grow your overall portfolio by a tenth of a percent...

Yep though I'm expecting it to under perform in good times and over perform (comparatively) in bad, but yes in general there is the issue of what you can do to make a material affect on your investments without radical surgery.

I know some people go for the high dividend route and that's one I'm essentially looking to edge towards / put my toe into the water and since I haven't been impressed with the few shares I've looked at for income via dividends I thought I'd let someone else do the picking much as you sugegsted using an IFA . My intent is to gradually move into say 2/3 highish risk and 1/3 low to medium. To me income shares would be lowish because the income buffers against falls. As an example of the sort of funds I'm calling high risk I'm looking at various US tech shares, a China based fund, some UK builders.

dunstonh

I took H&L's advice a while ago and invested 7K in the Woodford Equity and Income fund at start up.

Do not mistake marketing for advice.

H& L are now promoting this new 'High Income' Fund with what they claim will have a £1.00 launch price if I invest before the 12th April.

Easy claim to make seeing as that is the conventional launch unit price.

wondered what your views are, or are there better alternatives even with the launch price?

How can anyone offer a realistic view on a fund that has no track records and hasnt launched and is being marketed by it's own provider.

However, the HL funds are unfettered fund of funds and don't appear to offer anything that can be obtained better and cheaper elsewhere. So, if this one follows that trend, you cant really see it being worthwhile.

Platform own brand funds (regardless of platform - this is not specific to HL) tend to be average at best and cash cows for the platform as they not only get the platform charges but a cut of the fund charges as well.

if you are going to DIY and pick a fund like that then you may as well use an IFA as the point of DIY is to save money. Not pay more (unbundled OCF for the fund is 1.33% not including platform at 0.45%. We run at around 1.24% average including adviser, platform and fund - just so you have some benchmark. Even if bog standard multi-asset funds were used, it would still be cheaper than this MM fund). So, I am not convinced.

AnotherJoe

dunstonh wrote: »

if you are going to DIY and pick a fund like that then you may as well use an IFA as the point of DIY is to save money. Not pay more (unbundled OCF for the fund is 1.33% not including platform at 0.45%. We run at around 1.24% average including adviser, platform and fund - just so you have some benchmark. Even if bog standard multi-asset funds were used, it would still be cheaper than this MM fund). So, I am not convinced.

So do you think you'd do a better job than HL's team in putting together an income portfolio??

dunstonh

AnotherJoe wrote: »

So do you think you'd do a better job than HL's team in putting together an income portfolio??

I can't compete with their marketing team and they manage to get people to see every advert as advice. However, when it comes to portfolio build, I can't see any reason why they would be any better (or worse). It's not as if IFAs do this sort of thing themselves nowadays. They are doing exactly the same as any IFA would be doing.

However, that deflects from the point being made. DIY is about saving money. This fund does not save money. It is a cash cow fund similar to the other cash cow funds run by other platforms. it exists purely for one reason. A bigger cut of the pie.

bigadaj

dunstonh wrote: »

I can't compete with their marketing team and they manage to get people to see every advert as advice. However, when it comes to portfolio build, I can't see any reason why they would be any better (or worse). It's not as if IFAs do this sort of thing themselves nowadays. They are doing exactly the same as any IFA would be doing.

However, that deflects from the point being made. DIY is about saving money. This fund does not save money. It is a cash cow fund similar to the other cash cow funds run by other platforms. it exists purely for one reason. A bigger cut of the pie.

One would assume you could put something together no worse, probably better tailored for that individuals circumstances and cheaper so a high probability of outperformance.

dunstonh

bigadaj wrote: »

One would assume you could put something together no worse, probably better tailored for that individuals circumstances and cheaper so a high probability of outperformance.

That is probably the thing. It would be tailored. Not an off-the-shelf solution that is trying to fit everyone. It is cheaper and that gives it a head start.

However, if you want to DIY and want something simple then use something like L&G Multi Index Income fund. Or Jupiter Distribution if you want management but established history and track record (not a recommendation. Just an observation). If you want DIY and are wiling to pay more than an IFA arrangement then you seriously need to consider why you are going DIY and what you are trying to achieve.

AnotherJoe

What about a Vanguard Lifestrategy ?