NEST Pensions Higher Risk Fund

dunstonh

About right if an expensive platform like HL with its 0.45% a year charge combined with a cheap global excluding UK tracker at 0.08% and UK tracker at 0.06% are used.

Wow.

L&G UK Index Trust C Acc has an OCF of 0.08% but transaction costs 0.29% making total charge 0.37%.

The L&G International Index Trust C Acc is misreporting with a -0.02% transaction cost figure.

Of course, it is possible both are reporting wrong figures as a number of L&G funds are showing negative figures.

jamesd

dunstonh wrote: »

L&G UK Index Trust C Acc has an OCF of 0.08% but transaction costs 0.29% making total charge 0.37%.

HL are saying no initial or dealing charges, no spread, and an OCF discounted from 0.10% to 0.06%. Some in-fund transaction costs, though, 0.29% is what they say.

dunstonh wrote: »

The L&G International Index Trust C Acc is misreporting with a -0.02% transaction cost figure.

Not sure it's misreporting, might be say a net profit from stock lending included. Whatever the reason HL does say that costs can be negative sometimes.

dunstonh

jamesd wrote: »

HL are saying no initial or dealing charges, no spread, and an OCF discounted from 0.10% to 0.06%. Some in-fund transaction costs, though, 0.29% is what they say.

HL dont appear to be displaying the transaction costs yet. Not all platforms are. Financial Express only added it to their paid for offering a few days ago and FE tend to feed a lot of the platforms fund data. I did get an illustration from a platform earlier and it showed the new transaction charges figure.

Not sure it's misreporting, might be say a net profit from stock lending included. Whatever the reason HL does say that costs can be negative sometimes.

None of the other fund houses that have published figures appears to showing a negative. They are either zero or big increases (VLS60 is up 0.11% to 0.33%).

L&G Global Inflation Linked Bond Index has an OCF of 0.27% and a transaction cost of 0.22% making it 0.49%. So, its hidden charges were nearly double its published OCF. That figure was also quoted in the FT and matches what FE is saying.
https://www.ft.com/content/78918c88-fd13-11e7-a492-2c9be7f3120a

The media appears to be showing that fund as having the largest discrepancy yet between the OCF and the actual cost figure.

JustAnotherSaver

Out of interest - for those who are enroled with NEST through their workplace, which of you have stayed with the default fund and which have moved to one of the others (and if so then which)?


I'm not with NEST but my wife is. I'm with NOW and can't really change anything other than my contribution percentage.

jamesd

dunstonh wrote: »

HL dont appear to be displaying the transaction costs yet.

They added a new tab "costs". Expand those entries and there's one row for transaction costs and another for incidental expenses.

ricky_v

Out of interest - for those who are enroled with NEST through their workplace, which of you have stayed with the default fund and which have moved to one of the others (and if so then which)?

I was with NEST for a couple of years until last year and was in the "higher risk fund" as I thought it was 1% matched (£5/week total!) and I'm in my 20's. I've noticed that they're not keen on providing a fund factsheet on the website and when you do find it in a google search it states on the top that it's "for institutional and professional investors only"! Because clearly providing information on what regions/sectors, charges levied, and other basic information about the fund I was invested in isn't for the plebs:rotfl:

I've since transfered from NEST into my current pension provider with a 0.1% platform charge and 0.2% default fund charge, so the same as NEST but without the contribution charge and a much larger range of funds to choose from. And I know that because they easily provide the fund factsheet as soon as you log in!

Malthusian

jamesd wrote: »

That looks like only 73.1% equities even when overweight in them. They don't seem to say what the lowest equity split is.

77%, because property equities are equities and not property, but let's not be pedantic.

A 100% global equity fund that holds the 100 largest global companies which pass the Sharia filter has substantially greater long term growth potential than a balanced managed fund that appears to have around a 73.1% equity even when overweight. Substantially greater returns than a balanced managed fund can be expected, perhaps 1% a year more.

I disagree that commercial property has "substantially" lower growth potential than equities over all but the very longest time frames, given both have a yield, both have real growth potential and equities are at an all-time high (not that this is inherently a bad thing) whereas commercial properties aren't.

So in my opinion the only real dampener on growth is the 8.4% in bonds (90% of which is emerging market) and that isn't enough to make you kick yourself in twenty years' time for not investing with the imams.

But yes, the statement that equities might be reduced in the future is a potential concern, so while I still go for the Higher Risk fund as the least bad option, it should be monitored (as with any fund). And I fully agree that there are no good options in NEST, only least bad ones.

I still have misgivings with the Sharia Fund's split of 31% tech, 25% healthcare (maybe it's different now but that's all I have to go on as to which funds passed the imams' scrutiny when they cast the runes). Even if these are major tech and healthcare multinationals, having so much in those sectors suggests the fund may fall by significantly more than 50% when a major crash comes.

jamesd

Malthusian wrote: »

77%, because property equities are equities and not property, but let's not be pedantic.

Given that part of the problem is working out what the funds might hold it is worth looking more closely:

"The Managed Property Fund (UK) invests directly in commercial property in the UK. This generates returns in two ways: income from rent, and capital appreciation (the market value of buildings increasing).

The Global Real Estate Equity Index Fund invests in the shares of real estate companies around the world. A real estate company invests in a portfolio of property."

That's from the link I gave earlier. It appears that the global one isn't confined to just owning property but could involve property developers as well, if it's their version of this fund which tracks this index. So if that fund invests solely in property developers rather than properties I'd agree with 77.1% equities at the moment.

Malthusian wrote: »

I disagree that commercial property has "substantially" lower growth potential than equities over all but the very longest time frames, given both have a yield, both have real growth potential

For the UK this document for financial advisers says:

12.57% Uk Equities
9.60% gilts
10.67% commercial property

That's annualised total returns for the period from 1971-2013. I assume nominal rather than inflation adjusted. So about 2% lower total returns from UK commercial property than UK equities over the period.

Malthusian wrote: »

And I fully agree that there are no good options in NEST, only least bad ones.

Probably a good sign that we agree on the big picture...

Malthusian wrote: »

I still have misgivings with the Sharia Fund's split of 31% tech, 25% healthcare

It's a consequence of the filter rules. They exclude companies that make a lot of interest (financials including insurers), have a lot of borrowing (so capital-intensive things like infrastructure) and military activities (aerospace) or alcohol (lots of entertainment groups). I share those misgivings, just think it's the least bad of the two.

Malthusian

That's annualised total returns for the period from 1971-2013.

42 years is what I call "the very longest timeframes". Over 10 year timeframes the picture is a lot more blurred; sometimes commercial property does better, sometimes equities, usually depending on where the crashes fall. Only a very small number of people will be invested in NEST for forty years (hopefully they'll at least manage to get into a better pension scheme in that time).

Over 40 years equities are extremely likely to outperform commercial property but over comprehensible timeframes the outperformance of equities over property is smaller and near-random. The likely performance gap becomes too small to justify the increased volatility and maximum drawdown of going all-in on equities.

In current economic conditions, it makes sense for almost everybody whether low-medium, medium or high risk to have at least some exposure to commercial property. If you are certain that you aren't going to touch the investment for 40 years then it may make sense to ignore both current economic conditions and volatility, and invest 100% in equities, but who is? Apart from people who open pensions for babies?

It is perfectly possible that equities will spank property over the next 10-20 years but even if it does, it wouldn't make me regret investing 15% of my portfolio into commercial property instead of investing 100% in equities that have had favourable augurs cast upon them by the imam's chicken entrails.

finellah

Malthusian wrote: »

so while I still go for the Higher Risk fund as the least bad option, it should be monitored (as with any fund).

I'm looking for a website that will allow graphical comparison of NEST Higher Risk fund with other funds. Doesn't seem to be on Trustnet or Morningstar. Does anyone know of somewhere I can do this?