Stocks & Shares ISAs for 60+ yrs?

Aidanmc

Have you looked at HSBC Global Strategy Balanced Portfolio C?
Not a recommendation but looks similar to the Fidelity fund you seek and OCF 0.19%
Also an non ucits fund though.
@masonic - Is oeic legislation not based on ucits?

OldBill

I have really tried to take on board Kroijer's advice re the shares allocation reflecting the world carve-up of equity weightings, so it's irritating to find that, when a fund (or funds) with something like that proportion is found it turns out to be a bit dodgy!

(Wicked thought: to send Kroijer a txt saying, Please don't stop halfway with the advice given in your book / video - just point me at a suitable product!). Wonder what he'd say?!).

N1AK

OldBill wrote: »

Or does the ISA tax-break alone make it all worthwhile, somehow?

The ISA tax break is likely to be effectively irrelevant to you unless you're expecting to build up a couple of hundred thousands in holdings at least. You don't pay capital gains on the first £12k of profit on S&S holdings each year, if you're not holding big amounts and don't intend to divest it all in a short window you won't need to pay tax ISA or otherwise. There's no harm in using your ISA allowance for them if you haven't got plans to use it for anything else though.

As others have already pointed out the benefits of S&S over savings is mainly that people expect better returns.

OldBill

masonic wrote: »

Yes, that's definitely non-UCITS compliant. In your shoes, I'd certainly want to understand why. One possible reason is: "May also make extensive use of derivatives including more complex instruments or strategies to achieve the investment objective and these may result in leverage... The use of derivatives may result in ‘‘leverage’’ by which we mean a level of exposure which could expose the fund to the potential of greater gains or losses than would otherwise be the case."

So extra risks to be concerned with over and above the risks of the underlying holdings. Not a fund I'd consider investing in personally.

A thought just occurred: does the above make the fund toxic?

I may be wrong (I haven't checked every single platford site), but the above has not stopped platforms other than iWeb holding the fund. If it was so bad, surely all of the others would do likewise? Or is iWeb particularly robust in its selection of funds to stock?

masonic

OldBill wrote: »

A thought just occurred: does the above make the fund toxic?

I may be wrong (I haven't checked every single platford site), but the above has not stopped platforms other than iWeb holding the fund. If it was so bad, surely all of the others would do likewise? Or is iWeb particularly robust in its selection of funds to stock?

Synthetic or partially synthetic funds are eligible to hold in a S&S ISA. There is some concern that retail investors would be financially sophisticated enough to understand the different risk profile of such a fund, which is probably iWeb's position. They are more restricted in the USA than they are here in Europe.

The key difference is that instead of the fund physically holding the securities, it enters into an agreement with an investment bank that promises to pay the returns of an index without actually investing in it (so the money is earned perhaps by investing in different investments the investment bank thinks will perform better, so that they can pocket the difference). The risk is the investment bank invests in something that does not generate the expected returns, or the investment bank becomes insolvent. Some of these contracts will be leveraged, so instead of receiving the market return, the fund might receive double its return, which is great when markets are going up smoothly, but not so good when they are going down or are volatile.

So instead of investing in a fund that holds a wide range of shares in the companies making up a market index, you have a contract to deliver some multiple of the market return from some unspecified alternative investment strategy, backed by some unspecified other company. - sounds great, where do I sign up?

When this works, a synthetic position will do a better job of tracking an index because it doesn't have trading costs or tracking errors, but it depends on the investment bank being able to meet its obligations - if it cannot, then there is a risk you would lose part or all of your investment, regardless of what happens in the markets.

For the above reason, I always stick to funds that hold physical securities, although even these will use derivatives to a small extent to keep the fund fully invested when there is uninvested cash held within the fund - but if a fund does this responsibly it can still be UCITS compliant.

bowlhead99

OldBill wrote: »

A thought just occurred: does the above make the fund toxic?

I may be wrong (I haven't checked every single platford site), but the above has not stopped platforms other than iWeb holding the fund. If it was so bad, surely all of the others would do likewise? Or is iWeb particularly robust in its selection of funds to stock?

IWeb (and Halifax Share Dealing which uses the same platform) are no frills platform services without significant ongoing fees for holding assets. Some people might spin it to say they are 'robust' by not offering certain types of funds, but others would say they are a simple platform which doesn't offer the full range of consumer choice like better (typically more expensive) platforms, as they have filtered out some funds they could offer to make their internal compliance processes easier.

There have been threads on this before with people wondering why they can't use IWeb to buy some popular multi asset funds like the L&G Multi Index range or the Blackrock Consensus range, or certain popular equity funds with a minor quirk to their structure such as Lindsell Train Global Equity. The answer is generally that it is easier for them to exclude something that doesn't meet a checkbox on their criteria (like being UCITS compliant) rather than redesign their internal systems and controls processes to offer such funds. Similarly their platform doesn't offer several mainstream popular property funds that have been structured tax-efficiently as PAIFs, making more work for the platform provider with streaming of different types of income and which customer types are allowed to use them.

If Halifax / IWeb are not making much money from the service they are generally not going to make one-off exceptions or redesign their systems to handle anything 'out of the ordinary' for them, even if rivals with a broader range of offerings will think the same fund is quite ordinary and easy to handle and not 'toxic' for investors to hold.

One of the more common structural reasons for a fund to be unable to go for the UCITS classification is when they are mixing illiquid asset types (like property) with other things like shares and bonds in the same fund. For example, Vanguard have a cheap multi-asset fund range called 'Lifestrategy' which is a fund that in turn holds a bunch of other index funds, but those index funds only hold shares or bonds. Whereas L&G's cheap multi-asset fund range called 'Multi Index' holds a bunch of shares and bonds index funds while also holding a small allocation in an L&G property fund.

The L&G fund in that example won't qualify for UCITS so is instead a NURS (non ucits retail scheme); an investor who doesn't mind this 'complexity' (and in fact welcomes it, because commercial property is a reasonable thing to hold and it's useful to be able to access it all within the same fund) may be entirely happy with the product, but won't be able to buy it at IWeb.

Other blockers to UCITS status can include the ability to use certain types of derivatives, gearing, illiquid assets and so on. Note that the ability to use them doesn't mean they actually do use them in practice. Competent fund managers like Fidelity or L&G will have some funds that use the UCITS status as a passport to offer it across Europe, and others that use a different status such as NURS. Being a UCITS structure means certain boxes are checked in the construction or investment strategy but it doesn't mean that a fund without it is dodgy or toxic.

Some commentary on UCITS vs NURS in the below link

https://www.barclays.co.uk/smart-investor/investments-explained/funds-etfs-and-investment-trusts/fund-structures/

masonic

Aidanmc wrote: »

Have you looked at HSBC Global Strategy Balanced Portfolio C?
Not a recommendation but looks similar to the Fidelity fund you seek and OCF 0.19%
Also an non ucits fund though.
@masonic - Is oeic legislation not based on ucits?

The HSBC fund looks to be a better option than the Fidelity fund as it states it makes significantly less use of derivatives. I don't see an obvious reason why it is non-UCITS and would want to understand this if I were considering investing. (Edit: Still not sure why it isn't UCITS compliant, but I noticed the top holding is "GBP FWD FX CONTRACT 09 JAN 2019", so this fund makes significant use of currency hedging - not something I'd want)

On OEIC legislation, this was created in 2001 and while it has been amended over the years I don't believe it is harmonised the UCITS regulations (Edit: see bowlhead's very clear explanation above).

Another alternative is just to go with a major global ETF such as iShares Core MSCI World ETF (which is physically replicated and UCITS), combined with a global bond fund such as Vanguard's.

Aidanmc

Strangely enough the Hsbc global strategy funds are available on iweb and they are non ucits, so its not a matter of iweb excluding all non ucits funds.

OldBill

masonic wrote: »

Another alternative is just to go with a major global ETF such as iShares Core MSCI World ETF (which is physically replicated and UCITS), combined with a global bond fund such as Vanguard's.

This is what Kroijer suggests in Investing Demystified, which I am reading at the moment. For an ISA, does this entail simply buying (say) £15k's worth of the ETF & £5k's worth of the bonds? Is that how it works for a (say) 75/25 split?

Incidentally, Kroijer does say: I'm wary of suggesting specific products to buy as the development in index tracking moves so fast . . . (p.8).

Thanks for the detailed responses re non-UCITS, etc.

bowlhead99

Aidanmc wrote: »

Strangely enough the Hsbc global strategy funds are available on iweb and they are non ucits, so its not a matter of iweb excluding all non ucits funds.

The last time I had checked on Halifax they only listed one of the GS funds rather than the full range and one (the highest equity content) of BlackRock Consensus. Perhaps 'by popular demand' or perhaps listed but not actually available to purchase for new investors. I'm not a customer with a login so it might be different if you are logged in rather than browsing the funds centre as an outsider, and the search tool can be a bit tricky to find some funds.