AJ Bell Passive funds

koru

Any thoughts on the new AJ Bell Passive funds?
https://www.youinvest.co.uk/investment-ideas/ajbell-passive-funds

These seem to be five different funds that provide different mixes of equity tracking, bond tracking, property tracking and cash, to fit different risk/growth appetites. So, pretty similar to the Vanguard Lifestyle funds. I'm not quite clear if they are doing the tracking themselves or they are just buying different mixes of trackers provided by other companies.

On the face of it, the AJB funds seem to be way over priced. Their marketing makes a big song and dance about how they will generously cap the fees at 50bp, but that's more than double the fees you would pay for the Vanguard Lifestyle funds, and more than triple the fees you would pay if you bought your own mix of the cheapest trackers to duplicate the same portfolio.

I have a feeling they are not targeting investors who already have big holdings in passive funds. Rather, they are aiming to look cheap in comparison with other prepackaged portfolios, which are usually a lot more expensive because they include active funds.

The only real benefit I can see is that AJB is offering to waive its platform fees until 2019, which makes them reasonably good value for the next two years, particularly for people with small portfolios who would probably have to pay at least 25 BP of platform fee on top of the fees for the funds held on the platform.

Just wondering if I'm missing any other benefits that might make me consider buying these funds.

BLB53

I agree, the 0.5% charges are on the high side considering the underlying funds charge an average of 0.15% but the advantage over Lifestrategy is the allocation to property and cash and also I think the weighting for UK equity is lower.

If they would waive their platform fee permanently, they would be a good option.

I am not sure why they use 2 different ETFs to cover the S&P 500?

koru

Thanks. Actually, for me the cash element makes it worse. 50bp for holding cash is crazy, when I can do that myself and pay nothing. And 30 bp is a pretty steep cost to save me the hassle of buying a separate property tracker. But perhaps it will attract some people.

Where did you find out what the constituent funds are?

stevegregory33

Without wading through the small-print - is it possible that the charges are for 'active' management of the portfolio balance. So even though each constituent part of the fund strategy is passive, they perhaps change the % mix, based on market conditions emerging risks etc.
Given that most texts on investment suggest that it is mix of asset types in a portfolio (not fund selection) that makes a difference, I wondered if this was their key attraction (bit like a 'fund of funds' pproach )?

seacaitch

Why choose a fund that locks you into a specific broker platform?

Great for the broker as it makes you the customer that much more 'sticky': less likely to seek better service or lower cost services elsewhere because of the additional hassle and costs involved in transferring a portfolio that includes funds that no other broker offers.

I'd suggest keeping your portfolio as portable as possible and avoid funds like this.

koru

stevegregory33 wrote: »

Without wading through the small-print - is it possible that the charges are for 'active' management of the portfolio balance. So even though each constituent part of the fund strategy is passive, they perhaps change the % mix, based on market conditions emerging risks etc.
Given that most texts on investment suggest that it is mix of asset types in a portfolio (not fund selection) that makes a difference, I wondered if this was their key attraction (bit like a 'fund of funds' pproach )?

If active asset allocation is their value proposition, they aren't making it very prominent in their marketing. Even if they were, if you accept that active stockpicking is unlikely to beat the market, net of costs, I'm not aware of any good evidence that it is any easier to reliably pick which asset classes will outperform and underperform.

Their main argument seems to be that it is cheaper than similar "off-the-peg" portfolios, using active funds. Which is true. But unless you really have to have a property and cash component and you can't cope with buying more than one investment, there are other much cheaper passive options.

cashbackproblems

When you consider hl charge 0;45% custody fees then you pay the amc from 0.08-0.30% fund dependent, it doesnt seem bad

However i prefer being in charge of the asset allocation and if you look at the breakdown it just invests in a collection of funds so is a fund of funds. Seems they will also rebalance but hard to tell from the factsheet. Similar to nutmug might be good for certain people who dont have time to do all research themselves

koru

cashbackproblems wrote: »

When you consider hl charge 0;45% custody fees then you pay the amc from 0.08-0.30% fund dependent, it doesnt seem bad

Yes, though if your point of comparison is HL, almost anything will seem reasonable! You could DIY a similar portfolio with a number of other platforms for less than 0.5%, all in.

If AJB start adding a custody fee in 2019, the total fee would be 0.75%, which is very steep.

stevegregory33

Agree that it's not easy, but general wisdom seems to suggest that portfolio balancing vs your risk appetite is more important than stock picking and for those who don't have enough time or know-how, it may be worth paying for this.

[Deleted User]

I have been actively managing my husbands large sipp, now transferred to me as widowed before he was 75. I took it over in 2006 and the pot more than doubled in that time. I still have active charting screens and level 2 but was very pleased to see the aj Bell funds. I think they are very good and am happy to pay for my money to be actively managed. I don`t want to spend my days screen watching, I have done enough in the past 20 years. I have put orders in for three of the passive funds and for some of the income stream favourite funds. I still have equities and cash and can carry on managing that proportion of my portfolio but tbh it is a relief to have AJ Bell do it for me via those passive funds which will soon be the core holding in my portfolio

rpbrookes

kittie wrote: »

I have been actively managing my husbands large sipp, now transferred to me as widowed before he was 75. I took it over in 2006 and the pot more than doubled in that time. I still have active charting screens and level 2 but was very pleased to see the aj Bell funds. I think they are very good and am happy to pay for my money to be actively managed. I don`t want to spend my days screen watching, I have done enough in the past 20 years. I have put orders in for three of the passive funds and for some of the income stream favourite funds. I still have equities and cash and can carry on managing that proportion of my portfolio but tbh it is a relief to have AJ Bell do it for me via those passive funds which will soon be the core holding in my portfolio

I'm curious, as I've just this week signed up to one of the "Moderately Cautious Passive Funds", how is this going for you? I'm also toying with investing a little in the adventurous fund.

I'm totally amateur with all of this, which is why I went for the fund as I want my money to work for me, but I've always made bad investment decisions. So if anyone has an update on how their passive fund with AJ Bell is performing, please let me know!

Cheers,
Ryan