DIY or IFA?

Rollinghome

dunstonh wrote: »

Artemis Strategic Bond has 29% UK Corp Bond, 43% global investment grade bond and 25% NA Equities. That sort of spread puts me off as what is NA Equities doing in a Strategic bond fund. So, I would tend to avoid that sort of fund when building the portfolio. However, another may use it if they are short in GIGB, NA equity and UKCB.

A strategic bond fund with 25% in NA equities would be a strange beast. Where does that come from?

As far as I can see, the fund has:
International Bonds 43.90%
UK Corporate Bonds 42.02%
Cash and Equiv. 7.19%
UK Gilts 5.22%
Non classified 1.66%
International Equities 0.01%
Overall total for US of 6.50%.

So even less in equities or the US than some other popular strategic bond funds. Would agree though that the precise logic behind the full selection isn't immediately obvious.

StellaN

Rollinghome wrote: »

A strategic bond fund with 25% in NA equities would be a strange beast. Where does that come from?

As far as I can see, the fund has:
International Bonds 43.90%
UK Corporate Bonds 42.02%
Cash and Equiv. 7.19%
UK Gilts 5.22%
Non classified 1.66%
International Equities 0.01%
Overall total for US of 6.50%.

So even less in equities or the US than some other popular strategic bond funds. Would agree though that the precise logic behind the full selection isn't immediately obvious.

Could the 25% NA allocation be included in the International Bonds? I don't think its a bad thing to have International & Corporate Bonds as the structure for your holding? I think the Artemis bond seems to have done OK over a period of time?

bowlhead99

StellaN wrote: »

I am personally still not sure about the IFA's list of funds as opposed to the OP's DIY selection.

Well, the IFA's list of funds was not put together for the OP anyway.

I know its all personal but I agree with Linton why 4 Strategic Bonds?

Well, for a start there are 3 really. The Architas Diversified Real Assets Fund is not a strategic bond in the same sense as the others (which hold mainstream listed government and corporate bonds), although it does hold a lot of credit assets among other things. It is a big bag of diversification and income generating - perhaps OP's friend has just bracketed it as "strategic bond" to mark it out as something that pays an income and is likely to be un-correlated with equities.

Then of the three, they have different approaches and offer exposure to different parts of the bonds spectrum.

For example Jupiter has only 22% in bonds rated A and above (most of that in AAA) and is net short Japan and developed Europe while having over 20% in Asia Pac ex Japan, 12% North America, and over 10% across Latin America, Caribbean and Eastern Europe. By contrast Fidelity has over 36% in a broad spread of A-AAA holdings, and under 6% in Asia, a greater amount in US&Canada, with over 60% of the fund being in UK and developed Europe. The overall maturity and duration of the two funds are similar.

So as dunstonh suggests, the IFA has likely looked at what the bond managers hold and how they build their structures and put something together to meet an overall target. Why they decided to use three rather than two, is not at all clear, but the OP herself doesn't just use the one either- it's not necessarily a case of just picking one out of a hat, when they can be so diverse.

I'm not a fan of Abolute Return funds either

As we all agree, investment is about choices, so if you're not a fan of something, don't use it, but it doesn't mean it's an invalid decision for someone to use it.

and the jury is out on Woodford?

What you can say about it is that it's a heavy UK bias and has a skew to income and so it will perform differently from a portfolio component that doesn't have a skew to income.

HSBC Index Fund for me represents a better Global balance but who knows?

I'd say that the IFA portfolio - although using a higher number of funds than you could probably get away with - at least seems to have been put together with the intention of "not just riding a large-cap index up and down". That might seem like a dumb and obvious point for me to make - of course it won't give the result of an index.

However, as most retail investors have practical objectives (rather than just having the objective of riding an equity index up and down and throwing some bonds in there to take the edge off it), then intuitively it feels more likely that it will have a chance of matching its investor's objectives, than just buying HSBC All World off the shelf and hoping that coincides with what the investor wants to achieve.

dunstonh

A strategic bond fund with 25% in NA equities would be a strange beast. Where does that come from?

I just checked it again and it definitely says 25% North American Equities. The feed comes from Financial Express and is a snapshot from 14th Dec 2016. Yet if you go direct to FE, they do not have that spread and their snapshot is two weeks later.

I have fired off an email to their support side to make them aware of the discrepancy.

StellaN

bowlhead99 wrote: »

So as dunstonh suggests, the IFA has likely looked at what the bond managers hold and how they build their structures and put something together to meet an overall target. Why they decided to use three rather than two, is not at all clear, but the OP herself doesn't just use the one either- it's not necessarily a case of just picking one out of a hat, when they can be so diverse.


As we all agree, investment is about choices, so if you're not a fan of something, don't use it, but it doesn't mean it's an invalid decision for someone to use it.


What you can say about it is that it's a heavy UK bias and has a skew to income and so it will perform differently from a portfolio component that doesn't have a skew to income.

As I said it's all personal preference and we are all entitled to our opinion.

Dunstonh did say 'I agree on all those points' regarding the amount of strategic bonds, absolute return funds and Woodford but for sure your views are also valued and taken into consideration but I beg to differ.

StellaN

Sally57 wrote: »

It is very interesting for me to read all your different views on this thread.

My friend has no interest in finance or investments whatsoever and that is why she uses an IFA. I would imagine it must be quite frustrating for him because apart from discussing her risk profile which they settled on a 6 she really doesn't want any other input and tells me she trusts her IFA and leaves the fund choices and asset allocation to him.

After reading the other posts I must admit I am thinking of carrying on with my DIY investing. I have taken some time to research some of the funds I didn't know about and there are others that I do and I have to say this portfolio wouldn't be my choice. However, that's why you employ an IFA to offer a tailor made portfolio to your own liking so its nothing personal regarding the IFA's choice for my friend (if I met with the IFA I am sure he would structure a portfolio more to my liking).

I'm too inexperienced an investor to know why this portfolio has a certain structure but I feel happier with what I have at the moment so I will just tweak it bring my risk profile down to 5/6 instead of 7.

As you said if you did meet the IFA he would prepare a structured portfolio bearing in mind your preferences so it may be worth a meeting?

I'm not an experienced investor myself but I also cannot see the structure and why the particular selection choice in this portfolio of funds (especially if you say your friend left the choice of funds totally to the IFA).

Rollinghome

dunstonh wrote: »

I just checked it again and it definitely says 25% North American Equities. The feed comes from Financial Express and is a snapshot from 14th Dec 2016. Yet if you go direct to FE, they do not have that spread and their snapshot is two weeks later.

I have fired off an email to their support side to make them aware of the discrepancy.

Very odd. Seems like they've screwed up. Those figures I gave are from FundsLibrary as of 31 Dec 2016 and are in line with FE's own Trustnet figures.

The IA definition for the Strategic Corporate Bond sector is:
"Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This excludes convertibles, preference shares and permanent interest bearing shares (PIBs)."

StellaN wrote: »

Could the 25% NA allocation be included in the International Bonds? I don't think its a bad thing to have International & Corporate Bonds as the structure for your holding? I think the Artemis bond seems to have done OK over a period of time?

Seems a fairly average fund so nothing wrong with it but it doesn't have 25% in North American equities, nor in any other equities (which would put it outside the IA definition for a fund in the Strat Bond sector). They say the total of all US investments, presumably bonds, is just 6.50%.

dunstonh

Very odd. Seems like they've screwed up. Those figures I gave are from FundsLibrary as of 31 Dec 2016 and are in line with FE's own Trustnet figures.

The IA definition for the Strategic Corporate Bond sector is:
"Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This excludes convertibles, preference shares and permanent interest bearing shares (PIBs)."

I have seen snapshot data wrong a number of times before. The same source gave the fund data for the insurance company versions of the fund and they are closer to the finex versions (bar daily movements for a couple of weeks different on the snapshot date). My guess is that they have mapped it to the wrong fund or a field has been missed and it is displaying the date one further or less along. Another one I have seen before is that there are actually well over a hundred fields that can be mapped on asset allocation. Many of the data suppliers cover less than this. So, they map multiple sectors to the shortened list they have. Sometimes that mapping is not correct.

SavingisFun

For £220k I would get an IFA, no question.

Sally57

Thank you to all of you for your input and views which is greatly appreciated and interesting.

I have decided to carry on with DIY for the time being and will do a lot more research! Only time will tell if this is the right decision and I suppose I can always change my mind (many women do) in the future if I feel I need advice from an IFA.