Odd asset allocation. 20% UK 17% property 23% bond

intowhere

Hi I have been looking over my wife's pension fund and the asset allocation is very odd. It's a default fund that people are invested in when they join the pension scheme

It seems to be low on equity, over exposed to the UK and has too much property. But I am guessing that some with a fair amount of experience put this together and it has grown by 60% in 5 years. Thoughts? Her employer matches her contribution up to 8% of her salary.

20% UK equity
22% world equity ex UK
12% emerging markets
23% bond funds
17 property
3% absolute return
3% alternative investments

kidmugsy

It looks reasonably well diversified though I'm never sure it's worth bothering with 3% of this and 3% of that unless it's derivatives being bought to offset an asset class.

It's always hard to know what the %UK really means since so many FTSE companies earn most of their revenue abroad.

Linton

What is the fund?


It looks a reasonable relatively cautious allocation except for the high % of Emerging Markets which seems rather out of place. Could it be a fund where the allocation is changed dynanmically on the basis of computer modelling of the market conditions? You might expect apparently odd allocations to appear temporarily.

dunstonh

Not seeing anything odd with that allocation. Global equities are 34% and UK is 20%. So, UK exposure is in line with expectation. Property is a bit higher than expected for 2018 but under 20% (wouldnt want to be any higher than that). And Emerging Markets is high for what appears to be a cautious spread. Indeed, a figure around 5% or even no emerging markets would have been more typical for that risk level.

Given the cautious nature of the spread, you would expect a greater UK weighting as this reduces the negative impact of currency fluctuations. Plus, UK doesn't necessarily mean UK (as kidmugsy says above).

AnotherJoe

When you say its grown by 60% do you mean your wife's amount, or just the fund looking at its stats?
To me property seems very high and 20% "UK" most likely means 20% invested in 10 or so global companies in only about 4 or 5 industries, with a preponderance of finance and oil
EDIT; Having said that VLS80 is up about 50% in the past 5 years* so thats a comparable performance for a well regarded investment with a similar bond allocation - if thats the bare fund performance and doesn't wrap in the contributions your wife has made.



* thats to date, are you looking at this fund to date or a few weeks to months ago?

intowhere

Hi had another look. The fund itself has grown by 60% excluding my wife's contributions. It's just the property allocation is very very high and looking at multi asset funds the property allocation is normally less than 10%. Would this type of allocation be classed as cautious?

AnotherJoe

I'd say since its ~75% equity/property it would be regarded as adventurous-ish (no doubt there are gradations of that and with the high property that probably brings it to the lower side of adventurous but then again 12% EM bumps it up).
Given it has a good record over 5 years I'd stick with it, unless suddenly realising its adventurous gives you/wife the screaming ab dabs and you decide to look at something else.

MaxiRobriguez

Looks fine to me.

Malthusian

Nothing wrong with that asset allocation as a default option for a workplace scheme at all.

The questions being asked over the allocations to emerging markets and commercial property are just a matter of style.

System

Typical example of home market bias with 20% of the portfolio in UK equities so UK equities are 37% of total equities. For comparison, in the MSCI ACWI ALL CAP INDEX, UK equities are 5.56%!

dunstonh

Economic wrote: »

Typical example of home market bias with 20% of the portfolio in UK equities so UK equities are 37% of total equities. For comparison, in the MSCI ACWI ALL CAP INDEX, UK equities are 5.56%!

MSCI ACWI ALL CAP INDEX is also much higher up the risk scale.