multi-asset managed funds (for SIPPs or ISAs)

medindexer

I am 67 and have about 90K in a SIPP but don't need the money to live on for many years (having enough cash savings). Currently my money is exposed overall to moderate risk (a balance of conservative and and moderate/medium risk in three so-called multi-asset managed portfolios from one of the big investment services – Tilney/Bestinvest). However I am paying over 2% for the management and am not convinced that I'm getting value for money. There is a lot of skepticism about how well managed funds do on average compared to passive funds.
So, my questions are (bearing in mind I want to maintain similar risk levels): same:
* Does anyone know of other investment service companies that have well-thought-of ready made managed multi-asset portfolios and whose charges are more reasonable? I'm keen on such funds as it means I will not have to intervene to make changes often. If so, can you give me the name of such investment services and some example funds.
* Are there (and would you recommend), putting my money in cheaper unmanaged (passive?) funds (I presume these include trackers)? I do also have a small amount in two of the lower risk Vanguard Life Strategy. I’m not certain what you call these funds – they are passive and track indices but I don’t know much more than that.
* I'm aware of so-called robotic funds, but hardly know anything about them. Are they something I should consider? Are there robotic multi-asset funds? I’ve just looked at Nutmeg and they seem to offer managed pension funds that you can select suitable risk levels (1-10) . They are all ETFs (I know of the term but am unaware of their significance)
I'm looking for something that is likely to achieve at least average results for comparable funds in similar sectors. As a side issue, I'm also concerned that about 50% of each of my managed funds is in the UK (considering the unknown impact of Brexit - tho I appreciate many of these UK companies are involved overseas). Am I right to be concerned?
If you can keep your answer as jargon-free as possible I'd be grateful. Thank you in advance.

Albermarle

Multi asset funds are a simple way of investing but they seem to come at different charge levels without a lot of obvious difference in what they do , or performance .
For example with the SIPP provider I have if you say you want a medium risk balanced fund, they 'guide' you to one with a charge >1% . However they also have a 'low cost' version for 0.25% similar to Vanguard LS 60 , which is almost indistinguishable from the higher cost funds. This is the kind of charge you should be paying ( + the platform charge so around 0.5 % in total, Maybe have a closer search around your SIPP providers site as to what else they have available.

bostonerimus

You need to factor out where your charges are coming from; are they fund fees, platform fees or advisor fees. Then you can see where you can save some money. The Vanguard Life Strategy funds you mention contain many individual index tracker funds and so give you a low cost diversified portfolio in a single fund.

I think you could also benefit from a bit of research into how to generate and manage retirement income. Having a few of year's of spending in low risk assets like cash and very short term bonds is a good idea, but you don't want to have too much. You also need riskier investments like equities to keep up with inflation. You top up the cash from the equities etc in good times and in bad times you can spend a more of your cash account so that you don't have to sell equities at a loss. So you don't just let the equities sit and spend cash, there should be a regular flow between your assets that is controlled by your investment returns and circumstances.

medindexer

The annual management charge (AMC) is 0.75%.
Ongoing charges figure (OCF) 1.54%
...and do you know, even those terms confuse me as there is so much jargon. I presume the OCF is the fund or platform charge. And the AMC is what Bestinvest charge. So total is 2.3%
But when I look it Bestinvest's info it says `Ongoing Charge Figure (OCF): this is the Fund manager’s annual management charge' i.e. it treats the 2 terms the same. And Vanguard say `...Annual Management Charge (AMC) which covers the fund manager’s costs of managing the fund...' which OFC appear synonymous with AMC'
Anyway, I get what you say about cash and investments and it is something I'll address. I live very simply on a state pension (and have a considerable amount of cash savings which I have no need to access often - possibly for several years!). But I really want to put my money in something where, if I am inactive (I personally find the whole area unintersting though recognise its importance), they are relatively safe - at least (over the long term) keeping pace with inflation. Which is why I want to find some ready-made managed portfolios that I can put my pension pot money in.
I came across AJ Bell's passive funds to mixed reviews - there does seem to be an active element in them. Or am I better off moving all my money to Vanguard funds like the Life Strategy (or other companies similar funds). Any suggestions of articles or funds to look at

Albermarle

Ongoing charges figure (OCF) 1.54%

It is confusing but this is what you are being charged for your managed multi asset fund.
Then the platform charge is 0.3% , although I saw some old news on Google that this was waived if you had one of their ready made portfolio funds with them ( you will need to check this - give them a call)

These ready made portfolio funds are a money spinner for all the platforms . better to pay the 0.3% platform fee and choose a simple multi asset fund your self with a fund charge around 0.25%.
Blackrock consensus 60 as one example . Or a VLS fund like you already have .

I'm also concerned that about 50% of each of my managed funds is in the UK

Yes this is too high . Not anything to do with Brexit but just that you should be more globally spread.

bowlhead99

medindexer wrote: »

The annual management charge (AMC) is 0.75%.
Ongoing charges figure (OCF) 1.54%
...and do you know, even those terms confuse me as there is so much jargon. I presume the OCF is the fund or platform charge. And the AMC is what Bestinvest charge. So total is 2.3%

Yes, it does sound like you have it confused.

The standard terminology is:
Annual Management Charge (AMC) is a charge paid by the fund to the fund manager for managing the fund. If Tilney Bestinvest is the Manager of the fund, they get paid that amount for providing the service of managing the fund's portfolio, making investment decisions etc.

However, there are other charges involved in running a fund, which can include for example fund administration and accounting fees, auditing fees, legal and other professional fees, bank charges, custody fees and so on. The fund will pay for these expenses just like it pays for the AMC. The total of these operating costs (AMC plus all the other stuff) would collectively be known as the Ongoing Charges Figure (OCF).

The OCF declared for a fund is supposed to be a figure which captures properly the ongoing operating expenses of the fund to which you're exposed as an investor. When the fund you are looking at holds all its underlying investments directly (e.g. a share in Unilever or a share in Tesco, or a UK government bond, or a property on the high street), the OCF will not be massively more than the AMC. However, if the fund holds those investments indirectly - through other funds in which it invests - and the OCF is supposed to include all the ongoing costs to which you're exposed... there are effectively two layers of fees feeding into your OCF.

For example, IFSL Tilney Bestinvest Conservative Portfolio Fund fund puts its money into making investments in the Lindsell Train Uk Equity fund, the Henderson Uk Property fund, the M&G Property Portfolio fund, Twentyfour Absolute Return Credit Aqg etc etc... all of those funds cost money to run and will have their own OCFs (i.e. their own management fees and other operating costs).

If the Bestinvest fund puts its money into the Lindsell Train or M&G or Henderson fund etc, when it gets its money back it will have suffered some OCF which was incurred by the Lindsell Train or M&G or Henderson funds going about their daily business. But then having got its money back, the Bestinvest fund has its own management fee and its own costs too. Under the regulations / guidelines, when you ask the Bestinvest fund what its ongoing charges figure is, they include the ongoing charges they incurred inside the Lindsell Train and M&G and Henderson funds etc.

So, the Bestinvest fund charges a management fee of 0.75% but it has other ongoing costs of its own, and is exposed to all the ongoing costs of the lower-tier funds in which it invests, so overall the OCF is quite a lot higher than 0.75%; the Bestinvest fund's OCF is reported as 1.54% and that includes the various costs at Lindsell Train and M&G and Henderson and TwentyFour etc.

But an OCF reported for the Bestinvest fund includes the AMC charged by Bestinvest as a fund manager of the 'fund-of-funds', so you don't need to add 0.75% to 1.54% to come up with 2.29%

However, OCF (and AMC which was included in OCF) only relate to costs paid by the fund itself, and they do not include 'platform fees' paid by an investor. If you want to hold the fund, you pay someone for an account to get you access to the fund.

E.g. Bestinvest as a platform operator usually charge 0.3% platform fee on the first £250k of investment funds you hold (e.g. if you were to use your account on the platform to directly buy the Lindsell Train or M&G funds, or another fund manager's fund such as Vanguard Lifestrategy, etc). I don't know whether what Albermarle says is correct that they might waive some or all of this 'platform fee' if you are buying their in-house expensive fund-of-funds.

But when I look it Bestinvest's info it says `Ongoing Charge Figure (OCF): this is the Fund manager’s annual management charge' i.e. it treats the 2 terms the same. And Vanguard say `...Annual Management Charge (AMC) which covers the fund manager’s costs of managing the fund...' which OFC appear synonymous with AMC'

Really so far as the investor is concerned, he is investing into a fund to have the fund's manager figure out everything for him and operate a collective investment scheme where his money is pooled with other people's money and invested across a broad range of assets spreading risk.

This will have some operating cost which would be avoided if the investor just decided to invest in their own preferred mix of shares (e.g.) Unilever and Diageo and Sage etc on the stock exchange; those shares are all bought by the Lindsell Train fund which is in turn bought by the Bestinvest Conservative Fund.

The investor might just casually refer to ALL the 'ongoing costs' of choosing to use a fund manager's fund, rather than investing directly himself, as an annual management charge. But really there are usually two elements: what the manager chooses to charge the fund for his management services (AMC), and other stuff which other service providers charge the fund for their services ; collectively the term is OCF.

Usually the OCF figure will be higher than the AMC by a few tens of basis points (e.g. perhaps by 0.10 to 0.40%) because there are always a bunch of these other operating costs for the fund to bear. However, the manager might choose to simplify things by volunteering to pay all the ongoing running costs of the funds out of the AMC income they receive from the fund. In that case, the AMC might be higher than it would otherwise have been, but the OCF is no higher than the AMC because there are no other operating costs left over for the fund to pay. Effectively you get one big simple price and OCF = AMC if there are no furthe costs being taken off by lower tier funds.

I came across AJ Bell's passive funds to mixed reviews - there does seem to be an active element in them. Or am I better off moving all my money to Vanguard funds like the Life Strategy (or other companies similar funds). Any suggestions of articles or funds to look at

There are a lot of companies these days coming up with mixed asset investment funds which invest in other funds in a fund-of-fund style but have most of those investee funds be passive indexes. There is still an 'active' choice and discretion being used by the manager to decide which underlying funds to invest in, in what proportion, which is not a bad thing as long as it is not costing you a lot of money for them to do that, because it is saving you the effort of making the decisions yourself.

The criticism of the AJ Bell funds was initially that they were wanting to charge 0.5% OCF for their brand new funds with no experience of running such funds; while existing rivals like HSBC Global Strategy, L&G Multi Index, Vanguard LifeStrategy etc only charged 0.2-0.3%. As such, people here said they were funds for gullible customers of AJ Bell's investment service who would be attracted by the simplicity of the product being promoted heavily by the investment service rather than bothering the whole of market for something equivalent and cheaper. They have since reduced their fees to cap the maximum OCF at 0.35% which is better than what they had when first set up. They are probably not bad funds, but even as an AJ Bell customer I haven't bothered to look at them in detail.

You mention you have some money in a couple of the lower risk Vanguard Lifestrategy funds. For a fund with low to middling risk you could look at something like the L&G Multi-Index 4 fund (there is also a '3' for lower risk or a '5' for middling risk, or 6 or 7 on the high side). These are 0.31% OCF plus the platform fee and include equity, bonds and alternatives (property/infrastructure).

Compared to L&G, the Vanguard Lifestrategy funds have a more rigid allocation (e.g. fixed allocation of your choice of 20%, 40%, 60% equity to bonds, and a fixed ratio of UK to overseas equities). Whereas the L&G funds are risk targeted so where it is felt that certain asset classes are more volatile at different times in the economic cycle, they will adjust their ratio of bonds to equity (or types of bonds, or geographic regions etc) to stay in their band of 4-out-of-10 on their risk scale.

Over the long term you would expect a fund such L&G 4 or 5 to produce some growth over inflation without the massive value swings you'd get by being fully invested in equity. If you don't need the money back any time soon, you can generally take your eye off it without worrying. But you are right to mention that key concept '(over the long term)' in relation to your target of keeping pace with inflation. If you are using investments, even at the lower end of the risk scale, there isn't a product that guarantees you will match inflation each and every year, and some years you will make a paper loss and would need to wait for a recovery which could take a few years.

medindexer

Wow, it is confusing. Excuse my ignorance. It seems that you are saying that OCF can include AMC. That would imply that all one need do is look for OCF. But it was only by chance that I saw Vanguard were quoting an OCF of .22% and that only on another unlinked page did they mention an (additional) AMC of .15%.
The platform charge equates (yes?) to the the annual management charges of the investment services (i.e. what AJ Bell and Best charge one for their business service) - then there's the fund managers charge (which Best puts in - tell me if I'm wrong - the OCF).
It's terrible that they all seem to use different and overlapping terminology. I thought law was coming in to enforce simpler terminology and to make clear ALL the charges and what they total. Don't see it yet.
I'm thinking that the 2.3% that Best charges for the ready-made managed funds is probably not going to be earned back by them performing better than these funds I and some of you you have mentioned (Vanguard/Blackrock/L&G/AJ Bell). And whatever the criticisms of AJ Bell passive funds in terms of their charges, they seem excessive by a small amount compared to what Best is charging me.
Can I now ask, would it be wise to not put all my money into several Vanguard LF funds but to use a few others as have been mentioned by yourselves.
I'm going to to do a bit more looking around these funds - can you tell me what is the term for these funds that we've been talking about - The Vanguard/AJ Bell passive/Blackrock consensus 60 - that distinguishes them from the others (managed or trackers). They are all passive yes? But there is some management.
Once again, I appreciate your help.

cogito

You also have to consider transaction costs add to the cost. So if a fund manager is actively trading stocks, so if you look at the Woodford Equity Income fund, for example, it’s transaction costs are about .27%. Add in its basic charge of .75% and it goes over 1%. That's another 36% but if you compare that to Fundsmith Equity which has transaction costs of .04%, you can see what a difference transaction costs make.

DrSyn

I will try and keep this as simple & short as possible.

1. . Costs are important The less you pay in charges the more money you will end up with. The Vanguard Life Strategy Fund basically follows the approach advocated below,watch it.

http://www.kroijer.com/


2. Below explains why passive funds are increasingly popular.

https://www.ifa.com/indexfundsthemovie/


3. Multi-Asset Funds 9th Aug 2018

From looking around the options seem to be:

Vantage Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

Life Strategy seems the most often mentioned. The 60% shares/40% bonds for me is pretty much "fire and forget" which is the point.

There is also Fidelity Multi Asset Allocator

Baillie Gifford Managed. Holds individual shares, rather than index funds.

https://forums.moneysavingexpert.com/discussion/5879942/multi-asset-funds-differences&highlight=multi+asset#topofpage


4. These sites may help you in trying to find a cheap SIPP provider.

http://www.comparefundplatforms.com/compare.aspx

https://monevator.com/compare-uk-cheapest-online-brokers/


5. If I was in your position,

(a) I would first look around for a cheap multi-asset fund or ETF which I liked the look of.

(b) Look around a for a SIPP provider who had that fund on their platform, at a cost I thought fair and reasonable.


6. This may or may not be of interest to you. Its at the bottom of the page.

https://www.trustnet.com/fund/sectors/focus?universe=O&sector=O%253ABALMAN


I hope at least some of this is helpful to you. Good Luck!

bowlhead99

medindexer wrote: »

Wow, it is confusing. Excuse my ignorance. It seems that you are saying that OCF can include AMC. That would imply that all one need do is look for OCF.

Correct. The Ongoing Charges Figure of a fund always includes the expenses paid out of the fund, and this will INCLUDE the AMC (a charge from the manager to the fund for the manager providing the service of managing the fund's investments)

But it was only by chance that I saw Vanguard were quoting an OCF of .22% and that only on another unlinked page did they mention an (additional) AMC of .15%.

There is nowhere that they have an additional fee which they call AMC. If they are calling it AMC, it is included in OCF. AMC is an industry standard term for a fee charged to the fund by the fund manager for managing the investments of the fund.

What you are getting mixed up with is that Vanguard's consumer investment platform - on which you can have an account to invest in Vanguard funds or ETFs - charges the customer 0.15% a year to hold investments in their funds.

This is known as a platform fee by most people, although some people will call it an account management fee (for managing / maintaining your investment account) or a custody fee (for holding and safekeeping your assets and giving you a statement). Vanguard just call it an 'account fee'.

It is nothing to do with the management fee that the fund manager charges to the investment fund for looking after its assets.

So the basics are:

1) OCF is an ongoing charges figure which says how much the fund costs to run. The fund pays those costs to the fund manager and other third parties.

Those running costs will always INCLUDE the management fee billed to the fund by the fund manager known as AMC. You do not need to add this amount billed to the fund by the fund manager to the OCF, because the OCF already includes such costs. Probably best you forget AMC. The OCF is a broader measure, so look at that instead.

2) Separately from the costs and fees that the Fund pays, if you want to get access to invest in a Fund in the first place there will be some charges that You pay. This is generally termed a platform fee. Vanguard's fund platform https://www.vanguardinvestor.co.uk charges 0.15%. AJ Bell's platform https://www.youinvest.co.uk charges 0.25% plus £1.50 per sale or purchase. Tilney Bestinvest's platform at https://www.bestinvest.co.uk charges 0.30%.

The platform charge equates (yes?) to the the annual management charges of the investment services (i.e. what AJ Bell and Best charge one for their business service)

Yes it is what they charge to the customer for the service of maintaining and administering an account for the customer and allowing them to buy and hold and sell investment funds. You pay that direct out of your account.

then there's the fund managers charge (which Best puts in - tell me if I'm wrong - the OCF).

Yes, you do not pay that directly out of your account, but the fund or funds that you own will be paying that OCF to the manager and other third parties out of the fund's own bank accounts.

It represents the fees and charges borne by the fund, so ultimately the investors such as yourself will bear the costs, but you won't pay them directly out of your own account. The fund will pay them over the course of a year, out of the money that you and all the other investors put in and the income and gains that the fund makes from its investment activities.

It's terrible that they all seem to use different and overlapping terminology. I thought law was coming in to enforce simpler terminology and to make clear ALL the charges and what they total. Don't see it yet.

Ongoing Charges Figure is paid by fund and it includes the fees that the fund pays to be managed by a fund manager and other operating costs it incurs while it sits there holding investments.

Platform fee is paid by the customers of the platform for the administration of their account, safekeeping of their assets, customer service, website access to statement etc etc.

Those are quite straightforward and when you are looking to buy a simple mixed asset fund from a mainstream investment manager it's pretty much all you need to know.

There is a third type of cost which came in with the latest round of regulations known as 'fund transaction costs' which relates to the fact that when the fund buys and sells investments it pays money to stockbrokers which the fund simply records as part of the cost of buying the investment. E.g. the fund buys 1000 Microsoft shares for £100,000 including fees and commissions - but the regulator would like you to know that the Microsoft shares bought only had a market value of £99,900 and the rest was brokerage fees and foreign exchange commissions. Those are not captured in the OCF as they are not an ongoing running cost of the fund. However, due to EU regulation, the funds are now supposed to display somewhere the information about the average expected transaction costs over the course of a year, as a percentage of their assets, because some funds will do a lot of trading and others won't, depending on their strategy.

Unfortunately the way funds try to work out and predict future levels of transaction fees is complicated and has different choices of measurement which can result in garbage numbers. If you already have the OCF it is probably easier to just ignore the 'fund transaction costs' number rather than go looking for it.

The final type of fee you get is investment advice, again paid by you rather than the fund.

So there's:
- OCF of the fund
- transaction costs of the fund
- platform fees paid by investor
- advice fees paid by investor

I'm thinking that the 2.3% that Best charges for the ready-made managed funds is probably not going to be earned back by them performing better than these funds I and some of you you have mentioned (Vanguard/Blackrock/L&G/AJ Bell).

Firstly, if you have followed the above, you should realise that Best are NOT charging you 2.3% for access to their fund. You got that by adding 1.54% OCF which already includes 0.75% management fee, to the 0.75% management fee. They appear on the same factsheet but you don't need to add one to another.

You may be paying 0.3% in platform fees to Bestinvest, unless you have some sort of waiver arrangement as mentioned in earlier posts, but the only way you would be paying over 2% total to hold that investment is if you are personally paying some part of Tilney Bestinvest an additional advisory fee for professional financial advice on which fund to buy. If there are no financial advice advisory fees then you are not going to be suffering 2%+ of costs.

But you are right that if you would be happy with a fund product that invests exclusively or primarily into passive investment funds, producing a low overall OCF of 0.2-0.35%, you can save a lot of money over using a Bestinvest actively managed fund of funds where Bestinvest charge a high management fee for managing the funds and invests into a bunch of other funds which each have their own active managers resulting in a much higher OCF. The Bestinvest fund has to earn a whole percent or more of gross investment returns to be able to bear those extra costs and still get the same return back to the investors' pocket.

Can I now ask, would it be wise to not put all my money into several Vanguard LF funds but to use a few others as have been mentioned by yourselves.

You don't really need several Vanguard LS funds. They are designed to be an all-in-one, out of the box solution. Pick which one you want, and you're done. Alternatively, look at rivals like L&G multi index range, AJ Bell passive range, Blackrock consensus range etc etc etc but you don't need to hold 'a few others'. If you are only talking about a few tens of thousands, one fund in total is fine.

I'm going to to do a bit more looking around these funds - can you tell me what is the term for these funds that we've been talking about - The Vanguard/AJ Bell passive/Blackrock consensus 60 - that distinguishes them from the others (managed or trackers). They are all passive yes? But there is some management.

They are all 'mixed asset funds' or 'multi-asset funds' (means same thing), aiming to achieve their objective by holding other funds which gives them exposure to different classes of assets (shares and bonds etc all over the world). That is the same as what your Bestinvest fund does, and it would also call itself a mixed asset fund. It holds a range of different assets from shares to bonds to property. The difference with the ones we are talking about is that most or all of the funds they use to achieve their objective are passively managed.

To clarify a little, a pure passive fund just passively tracks one index (e.g. an index of UK equities, or global equities, or of UK government bonds, or international corporate bonds etc). Having one fund that tracks one index is not going to be suitable as your whole portfolio. Whereas a multi-asset fund using indexes is going to hold different index funds at the same time to give you a blended return. What you have at the moment is a multi-asset fund but it doesn't use indexes, it invests into funds which are actively managed.

Albermarle

Tilney Bestinvest slashes the cost of multi-asset SIPP investing
Removes SIPP service fee of 0.3% on Ready-made Portfolios

This was from 2016 , so no idea if it still applies.