use Active Management or a Tracker Fund

Greenwoodman

I have a pension pot privately invested. The fund manager charges 2% for active management. Would putting the funds in some sort of Tracker Fund e.g. a FTSE100 Fund be better?

Prism

You will need to find out how much you pay for trackers and compare. I wouldn't use a FTSE 100 tracker but a world tracker, or a managed fund of country trackers.

I prefer active management in general but you can't really go wrong with passive funds as long as they are balanced across the world

AnotherJoe

Think about it.

The performance of a tracker fund depends what you track. Its got almost nothing to do with the fact it has low charges.

Now, 2% is a very high figure, however since you appear to have no clue what you are doing i suggest you leave it where it is for the time being, rather than, say, try to track the North Korean Stock market (FTSE 100 isnt much better) and educate yourself, perhaps try Monevator as a starting point.

Then look at what to invest in.
Then look whether to pick active or passive.

dunstonh

The fund manager charges 2% for active management.

That is a charge in line with 1980s pricing.

Would putting the funds in some sort of Tracker Fund e.g. a FTSE100 Fund be better?

No. That would be bad quality investing. The FTSE100 is a dire index. It also may not save any money as if you pension provider is charging more than double the 2001 benchmark chances are they are charging similar amounts whether it is passive or active.

I would be more focused on your pension contract itself at this stage. That pricing was good when black & white tvs were the newfangled invention.

bostonerimus

Greenwoodman wrote: »

I have a pension pot privately invested. The fund manager charges 2% for active management. Would putting the funds in some sort of Tracker Fund e.g. a FTSE100 Fund be better?

You are being charged far too much.

At those prices, yes! you would probably be better off in a well designed tracker portfolio....FTSE 100 might be a small part of that portfolio, but you also need global stocks and some fixed income for diversity. So take this as an opportunity to go out and learn a bit about fees and portfolio construction and management. A simple solution will get you the vast majority of what you need to save for retirement......it does not need to be complicated.

Greenwoodman

Thanks - will look at monevator.com

Greenwoodman

bostonerimus wrote: »

You are being charged far too much.

... take this as an opportunity to go out and learn a bit about fees and portfolio construction and management.

Apart from the monevator.com suggestion above, where would you suggest I start that learning process?

Greenwoodman

dunstonh wrote: »

you pension provider is charging more than double the 2001 benchmark.

Can you give me a url re the 2001 benchmark? I would like to discuss the disparity between current charges and any benchmark with the pension adviser
.

dunstonh

Greenwoodman wrote: »

Can you give me a url re the 2001 benchmark? I would like to discuss the disparity between current charges and any benchmark with the pension adviser
.

2001 was when stakeholders were introduced. That set the benchmark at 1%. If a pension was sold under advice after 2001 that had charges higher than 1% then it had to be justified. Rule RU64.

It doesnt mean that higher charges were not allowed. By default, if you wanted a SIPP and a managed fund before 2013 then you would pretty much exceed 2%. It just needed justification.

For basic pensions being set up after 2001, they virtually all become 1% or cheaper. Charges continued to fall between 2003 and 2012 for new pensions.

Cost is a secondary consideration to investment selection. Your investment selection may be more expensive but justifiable with its performance. Its finding the balance and its not always clear cut.

I did a review recently of someone who had a fund with a 1.54% charge and a platform charge of 0.36%. Total charge 1.90. It had consistently outperformed a much cheaper passive based multi-asset fund of 0.22% (plus platform charge). If charges had been the driver and she went with the cheaper option, she would have had a lower fund value.

So, there can be a difference between a modern pension investing in more expensive assets on the basis of investment potential and an old pension set up decades ago charging old fashioned rates for rubbish funds.

Who is your pension provider and what fund(s) are you in? It would help us know which you are.

C_Mababejive

Didnt i read that the sage of Omaha conducted an experiment where he got an institution to pick their choice of active managed funds and wagered that his choice of trackers would beat them and he won?

dunstonh

C_Mababejive wrote: »

Didnt i read that the sage of Omaha conducted an experiment where he got an institution to pick their choice of active managed funds and wagered that his choice of trackers would beat them and he won?

He won but he also got lucky in timing. He picked S&P500 during a period when S&P500 outperformed everything. Had the same selection taken place a decade earlier, when it signficantly underperformed he would likely have lost.

Which does go towards the argument that the most important thing of all is asset allocation