L&G Pensions Options

LookingForTheSun

Hi,
As I'm approaching my 40th, I've been looking at some past investments, particularly an L&G cautiously managed workplace pension fund which was taken out under a previous employer. The fund gave a return of 30% over a 10 year period (2008 to 2018), comparing this to several benchmarks (FTSE 100. 250, Nikkei, S&P 500, etc.) over the same time period they've given returns of 70% to 200%. I'm now thinking of switching funds and looking at North America:

https://literature-lgim.huguenots.co.uk/srp/documents-id/f1f8470c-7675-4e40-9127-dd3744451210/Factsheet.pdf

One annoying thing I find with L&G pension funds is that often the fund literature will say fund started around 2004, but historical data only shows going back to 2012.

I know that US equities are at a historic high, but I'm thinking over a 20 year time period, they'll offer a good return as I believe in the long term strength of the US markets.

I'd be interested to hear member's views on whether this is a reasonable strategy for long term growth?

Thanks in advance

Albermarle

As you say the fund is cautiously managed , so you have only seen some of the benefits of a long bull run on the markets. If the markets had gone down you would have been glad to be in a cautiously managed fund....

It would probably make sense long term to be in less cautiously managed funds but I would be wary about switching funds over wholesale due to the short term risk of a big downward market correction . So maybe do it in 3 or 6 month stages.

dunstonh

As I'm approaching my 40th, I've been looking at some past investments, particularly an L&G cautiously managed workplace pension fund which was taken out under a previous employer. The fund gave a return of 30% over a 10 year period (2008 to 2018), comparing this to several benchmarks (FTSE 100. 250, Nikkei, S&P 500, etc.) over the same time period they've given returns of 70% to 200%. I'm now thinking of switching funds and looking at North America:

Clearly FTSE 100. 250, Nikkei, S&P 500 etc are bad comparisons. Indeed, they are bad comparisons within themselves as they are different risk levels. Let alone a cautious investment fund. If you take a risk scale of 1-10 with cash being 1 and the highest risk conventional options being 10, you are comparing otpions at risk 8,9,10 with around risk 3 or 4.

I know that US equities are at a historic high, but I'm thinking over a 20 year time period, they'll offer a good return as I believe in the long term strength of the US markets.

Single sector investing is very high risk and bad investing.

In this cycle, US equity has outperformed global assets. In the previous cycle, it underperformed global assets. it is rare for an sector to be the best performing area in two cycles in a row. Indeed, what often happens is the best in one becomes one of the worst in the next US equity entered this cycle from a period that made it look under priced. So, it had more scope to grow. Trump has spent the US stimulus package towards the end of growth cycle to prolong it. Potentially creating a larger bubble to burst and leaving little or no stimulus to be used when it really needs to be used. This could point to the US being an underperformer in the next cycle.

I'd be interested to hear member's views on whether this is a reasonable strategy for long term growth?

No. it is a classic newbie investor mistake that is likely to result in lower returns over the long term. Having spent most nearly all of this cycle in risk 3/4 and jumping to risk 9/10 near the end smacks of chasing returns.

Plus, do remember that some of the gains are down to the fall in Sterling. If Sterling begins to recover over the next cycle, this will create a drag on global assets. By being 100% in US equity, you could find the gains wiped out. In very simple terms, if Sterling rose 1% and the US stockmarket rose 1%, then you would get zero.

You are effectively playing roulette with your approach and hoping your number wins. I don't like your odds.