Allocation re-balancing strategies?

bostonerimus

You need to think hollistically about your finances. So work out your asset allocation across pension, ISA, and all general accounts, only then can you sensibly rebalance.

I've generally kept a 60/40 asset allocation using a diverse bond index and domestic and global equity index funds. This makes it simple to rebalance. Multi-asset funds is another way to keep things diverse and simple. With the two funds you have now you are not very diverse at all so I would add some broad bond and equity indexes to what you have now

rathernot

Yes I keep coming back to some kind of multi-asset as a "core" and then use the selection I have now as a concentrated allocation.

I've posted threads on multi-asset before but I'm leaning towards HSBC Global Strategy Balanced because:

• It's risk balanced rather than sticking to fixed allocations
• It's the only multi-asset I've seen that looks to be roughly in line with actual global allocations i.e. most multi-assets look like they heavily over-weight the UK

If my understanding is correct.

It's easy enough for an ongoing contribution with new money, I'll likely wait for things to recover before making any hasty decisions about what I already hold.

Alexland

Hmm a stock market correction isn't great timing to decide you want to reduce your ISA from 100% to circa 60% equities. In addition to investing more I have been increasing my equity allocations as there is now less downside risk.

Unlike VLS fixed allocations the HSBC GS funds use tactical asset allocation (slightly active) but you really need to consider the L&G MI funds if you want risk management across the economic cycle.

With 20 years to go before any withdrawals you might want to consider the HSBC GS Dynamic which currently has circa 80% equities?

https://www.assetmanagement.hsbc.co.uk/en/intermediary/investment-expertise/multi-asset/hsbc-global-strategy-portfolios

Alex

aroominyork

Alexland wrote: »

Now being concentrated can go well or badly and it really falls down to your own judgement on what proportion is acceptable but, as an absolute upper limit, I wouldn't allow those types of funds to exceed 25% of your equity portfolio.

What exactly do you mean by 'those type of funds'? Presumably you include LTUK; do you also include other conviction funds like Jupiter European where Amadeus, Novo Nordisk and Relx - which are also Smith/Train favourites - make up >20% of the fund's value? Or do you just mean "buy good companies and hold forever" funds?

Prism

For active, I pretty much only hold high conviction funds. I can't see the point of too much diversification as they tend to just follow the index.

aroominyork

So I think we have two issues here: 1) funds with a low number of holdings, say 25-40, and 2) funds with very low turnover. Fundsmith and LT meet both criteria, but other funds might fall into only one or the other. What about yours, Prism?

Audaxer

Alexland wrote: »

Unlike VLS fixed allocations the HSBC GS funds use tactical asset allocation (slightly active) but you really need to consider the L&G MI funds if you want risk management across the economic cycle.

Alex, interested to know why you consider L&G MI funds better for risk management across the economic cycle, as opposed to HSBC GS funds?

I was put off the L&G MI funds because they are dual-priced which seems to me like paying an initial fee when you invest in it.

Alexland

aroominyork wrote: »

What exactly do you mean by 'those type of funds'?

I mean concentrated funds with low number of holdings or heavy sector bias. Even index funds can be seen as 'buy and hold' as the majority of the holdings don't change very frequently. I do agree with Prism that there's not much point going active and getting expensive closer trackers.

Alex

Alexland

Audaxer wrote: »

Alex, interested to know why you consider L&G MI funds better for risk management across the economic cycle, as opposed to HSBC GS funds?

While HSBC provide the GS fund series for different risk appetites I haven't seen anything from HSBC to suggest that their subsequent Tactical Asset Allocation within each fund is particularly risk based.

Audaxer wrote: »

I was put off the L&G MI funds because they are dual-priced which seems to me like paying an initial fee when you invest in it.

If you intend to buy and hold then it is small enough that it shouldn't affect your end result and at least the fund won't be incurring the cost of others frequently switching in and out the fund.

Alex

Prism

aroominyork wrote: »

So I think we have two issues here: 1) funds with a low number of holdings, say 25-40, and 2) funds with very low turnover. Fundsmith and LT meet both criteria, but other funds might fall into only one or the other. What about yours, Prism?

It can be hard to tell how much turnover there is when the manager doesn't make it a bit of a sellign point like Nick Train and Terry Smith do. The 6 month reports typically give fuller detail. So I have Legg Mason Japan which has barely changed the top 10 holdings in 2 years. Old Mutual mid cap seems more variable.
My two passive funds over the last 3 years have also been very high conviction at the top end and very low turnover (L&G tech and health index funds)