Pension Investment Strategy

Pip_Boy_111

AnotherJoe wrote: »

I think you'll find that putting 25% in "the U.K." is harder than you envisage. You'll likely find you end up with huge multinationals that are nominally HQ'd here but the bulk of whose revenue is overseas and might as well be global.

These are the funds available through our works pension plan. These are the 3 equity funds i can pick from (ignoring the sharia fund), along with the IL gilts, property, multi asset and cash funds.
Looking through the fund information sheets, the global fund invests mainly in US equities ( over 50%), EM predominantly China, Taiwan and India (50% again) and the UK fund in UK companies. There is a breakdown of the area (financials, tech etc.) Other than that I can only really choose from what's available in the plan. The other option is a lifestyle strategy.
Aside from the comment regarding bonds (which I appreciate by the way, I guess this is just what I've always been told, plenty of time to read some before then though:D), i take it there's nothing majorly flawed with this approach?

Thanks for taking a look

AnotherJoe

In that case its probably the best you can do with limited options.

Pip_Boy_111

AnotherJoe wrote: »

In that case its probably the best you can do with limited options.

Ok thanks for that. Really do appreciate you taking the time to look.

AnotherJoe

Ps i would reconsider the U.K. % you have set. 25% is quite high because it's really being invested in about 20 companies witha big skew towards pharma financial and extraction (oil and mining). This is due to the way the indexes work. You might want to consider something like 80% global and then 10% each EM and "UK" or "pharma oil and mining and banks" which is what it really is. Take a look at the top 10 or 20 constituents of the U.K. fund to see what I mean. Unless it's very unusual it will be shell, hsbc, bp,Astra Zeneca Rio tinto Unilever Lloyd's and so on. And the top 20 will be about 50% by value of the whole U.K. allocation. A side effect of the indexes. So it's like picking a random 20 global companies and arbitrarily calling them U.K.

cfw1994

foofi22 wrote: »

Sounds all very reasonable. Like I said earlier, I am already taking a very similar strategy so I'm inclined to agree with you!

My work pension provider also offers some smaller company funds which I have included with small allocations.

With annual rebalancing, I expect to continue this theme until my late-40's/early 50's (scary!!!) when I'll start reducing the equity exposure.

40s to 50s? You could have 40 to 50 years ahead.....I wouldn’t personally be reducing equity exposure too dramatically then - you still need growth to cover those years!
As AnotherJoe put it: “Old fashioned approach. If you will remain invested for years after retirement that's too early to scale back”

I have, however, read that ones gilts/bonds should reflect ones age in % terms. Not sure I agree....almost mid 50s here and have 20% of my pension pot in them....
Welcome other thoughts on that...thinking of upping mine a little.

AnotherJoe wrote: »

Ps i would reconsider the U.K. % you have set. 25% is quite high because it's really being invested in about 20 companies witha big skew towards pharma financial and extraction (oil and mining). This is due to the way the indexes work. You might want to consider something like 80% global and then 10% each EM and "UK" or "pharma oil and mining and banks" which is what it really is. Take a look at the top 10 or 20 constituents of the U.K. fund to see what I mean. Unless it's very unusual it will be shell, hsbc, bp,Astra Zeneca Rio tinto Unilever Lloyd's and so on. And the top 20 will be about 50% by value of the whole U.K. allocation. A side effect of the indexes. So it's like picking a random 20 global companies and arbitrarily calling them U.K.

AFAIK, the UK is somewhere between 6 and 11% of the worlds economy (depends what you measure, from what I read!)....so 25% indeed sounds rather “home-heavy”.
But then, I’m a fan of the Lars Kroijer approach to sharing the world s evenly as you can!!

ex-pat_scot

AnotherJoe wrote: »

Ps i would reconsider the U.K. % you have set. 25% is quite high because it's really being invested in about 20 companies witha big skew towards pharma financial and extraction (oil and mining). This is due to the way the indexes work. You might want to consider something like 80% global and then 10% each EM and "UK" or "pharma oil and mining and banks" which is what it really is. Take a look at the top 10 or 20 constituents of the U.K. fund to see what I mean. Unless it's very unusual it will be shell, hsbc, bp,Astra Zeneca Rio tinto Unilever Lloyd's and so on. And the top 20 will be about 50% by value of the whole U.K. allocation. A side effect of the indexes. So it's like picking a random 20 global companies and arbitrarily calling them U.K.

Agreed (broadly)

UK is roughly 6% of global GDP.
In my book, you ought to be trying to have an overall weighting that reflects the balance of world markets, ie <10% in UK.
As others have noted, the FTSE100 is heavily invested in /dependent on overseas.

lassfarfromhome

It's worth looking at some of Lars Kroijer's videos on you tube. He wrote a book called investing demystified and makes a compelling case for having all of the equities portion of your investments in a single fund that tracks the global index such as vanguard VWRL.

lassfarfromhome

p.s. I'm in my 40s and still have 100% equities and will do until I'm really ramping up towards retirement.

Pip_Boy_111

Thanks all. The breakdown of the global equity fund (ex UK) available from our provider is below:

Financials 16.25%
Information Technology 16.02%
Health Care 13.29%
Industrials 11.12%
Consumer Discretionary 10.69%
Communication 8.35%
Consumer Staples 8.18%
Energy 5.12%
Materials 4.41%
Utilities 3.40%
Real Estate 3.17%

United States 63.44%
Japan 9.90%
France 3.85%
Germany 3.26%
Switzerland 3.18%
Canada 3.16%
Australia 2.66%
Korea (South), Republic Of 1.84%
Hong Kong 1.49%
Netherlands 1.25%
Spain 1.15%
Sweden 1.00%
Italy 0.89%
Denmark 0.64%
Finland 0.49%
Other 1.78%

The UK fund is pretty much a carbon copy of what Another Joe posted. The general concensus here seems to be along the lines of 10% or less in the UK fund. Would people suggest upping the EM allocation (10% currently) or going to 80% + on the global equity fund?
Again, these are the funds provided by our scheme so this is what I have to pick from (ignoring the Sharia law equity fund). I think I'm pretty much settled on the decision to go 100% equities, now to fine tune the allocations

Pip_Boy_111

Financials 29.95%
Technology 15.81%
Consumer Services 12.09%
Oil & Gas 8.68%
Industrials 8.15%
Consumer Goods 7.76%
Basic Materials 7.14%
Telecommunications 4.98%
Utilities 2.96%
Health Care 2.49%

China 32.64%
Taiwan (Republic Of China) 12.88%
India 12.05%
Brazil 9.18%
South Africa 7.70%
Russian Federation 4.22%
Thailand 3.57%
Mexico 3.40%
Malaysia 3.26%
Indonesia 2.53%
Philippines 1.33%
Qatar 1.31%
Chile 1.27%
United Arab Emirates 0.96%
Turkey 0.82%
Other 2.87%

Breakdown of the EM fund if it makes any difference to the suggestions