Thoughts on this ethical SIPP portfolio?

zolou

OK, here's my first stab at a fairly cautious hypothetical ethical pension portfolio, combining a GPP with two SIPPs, for someone about 3 years from retirement. Thoughts or improvements anyone? Does it seem like a reasonable spread?

Non-SIPP element, actively receiving EE and ER contributions:
Aviva Pensions Stewardship Bond, risk level 3, £65K (20%)

Abundance SIPP, risk level not quantified, £34K (10%) - investments across a dozen or so renewable energy schemes etc as and when they come up

Interactive Investor SIPP, 3 funds:

Threadneedle UK Social Bond Fund, risk level 3, £85K (25%)
Rathbone Ethical Bond, risk level 2, £85K (25%)
FP WHEB Sustainability Fund, risk level 4, £70K (20%)

dunstonh

Does the ethical fund selection meet your ethical requirements? (i.e. did you match the funds against your ethical filters or did you just pick them as they said ethical or socially responsible)

That is what really matters when making ethical investments as you know you are going to underperform in the long run.

[Deleted User]

Your money - your choice. IMHO you are sacrificing expected return for the sake of a few marketing gimmicks.

Malthusian

Are you planning to buy an annuity in three years, use drawdown or both?

70% into corporate bonds is extremely conservative, verging on recklessly conservative, and is completely at odds with putting 10% into a dodgy and totally speculative P2P investment.

AnotherJoe

zolou wrote: »

OK, here's my first stab at a fairly cautious hypothetical ethical pension portfolio, combining a GPP with two SIPPs, for someone about 3 years from retirement. Thoughts or improvements anyone? Does it seem like a reasonable spread?

Non-SIPP element, actively receiving EE and ER contributions:
Aviva Pensions Stewardship Bond, risk level 3, £65K (20%)

Abundance SIPP, risk level not quantified, £34K (10%) - investments across a dozen or so renewable energy schemes etc as and when they come up

Why not just invest in a fund that invests in renewables?
For example

- iShares II plc S&P Global Clean Energy
- The Renewables Infrastructure Group Limited
rather than open a whole new SIPP?

Interactive Investor SIPP, 3 funds:

Threadneedle UK Social Bond Fund, risk level 3, £85K (25%)
Rathbone Ethical Bond, risk level 2, £85K (25%)
FP WHEB Sustainability Fund, risk level 4, £70K (20%)

Just to pick one at random, whats "ethical" about AXA, HSBC, Rathbone, Rabobank, Aviva etc? AFAICS these "ethical" bond funds merely dont invest in certain industries directly, eg they wont buy a bond in Acme Armaments, but if Acme Armaments banks with or has a loan from (say) HSBC or Rabobank, then is it really "ethical" ?


And to pick up on another posters question, why so much in bonds? Whats your investment horizon?

zolou

Thanks for the responses.

> Does the ethical fund selection meet your ethical requirements? (i.e. did you match the funds against your ethical filters or did you just pick them as they said ethical or socially responsible)

I've drilled down to see what the funds invest in and all the funds I've found are a bit of a compromise in some way. For instance, those that are described as "carbon divested" invest in companies which are not themselves carbon divested (not surprisingly). And those that have a long list of things to avoid tend to invest mainly in banks, so you then have to try and get a feel for what those banks invest in. But yes, I have done some investigation.

> Are you planning to buy an annuity in three years, use drawdown or both?

Drawdown

> 70% into corporate bonds is extremely conservative, verging on recklessly conservative, and is completely at odds with putting 10% into a dodgy and totally speculative P2P investment.

That's really useful feedback, thanks, I hadn't considered the idea of reckless conservatism. I guess I feel there's more leaway with risk if you can get a bigger ethical payback, which the P2P has. I wonder what risk number you would give P2P (on the 1 to 7 scale) - it's the only one I haven't got a number for.

dunstonh

I wonder what risk number you would give P2P (on the 1 to 7 scale)

The 1-7 scale is not used by anyone other than an exercise to meet a compliance requirement. It is a flawed measure and has limitations.

However, if you wanted to use that scale for some reason you could easily find P2P up at 8 or 9 on the 1-7 scale.

firestone

i have a small amount in p2p and did look at Abundance some years back (you could also look at Triodos Bank an ethical bank who also crowdfund projects and also have ethical funds) At the time it struck me that many of their projects can run over 10 years or more and there was not much of a secondary market if you wanted to sell.
While there is no guarantee in the future its the same(or which does better in performance) but i would think there is better liquidity in the funds mentioned in post #4 and to which you could also add Greencoat Uk wind,Bluefield Solar or Foresight solar as worth looking at but thats not a recommendation.But being investment trusts make sure you are happy with any fee's on the fund
Have also mentioned before for an eco outlook but a bit different to the above funds Impax Environmental Markets IT which i am in and there is also Jupiter Green IT

Malthusian

zolou wrote: »

That's really useful feedback, thanks, I hadn't considered the idea of reckless conservatism. I guess I feel there's more leaway with risk if you can get a bigger ethical payback, which the P2P has.

If you're happy to lose your money providing that the person you lent it to said they were going to build a wood-burning power plant, it's a free country.

I wonder what risk number you would give P2P (on the 1 to 7 scale) - it's the only one I haven't got a number for.

On a scale of 1 to 7, lending money to unlisted startups with no meaningful due diligence is AAAARGH.

The (flawed) 1 to 7 scale looks at volatility and volatility alone. These investments are extremely illiquid (except when new money is flowing onto the platforms) so the volatility is impossible to measure.

If I sound cynical, that's because a) investments that list themselves on Trustpilot make me cynical b) more generally, Warren Buffet's rule no. 1 requires being a cynic at times.

zolou

> Just to pick one at random, whats "ethical" about AXA, HSBC, Rathbone, Rabobank, Aviva etc? AFAICS these "ethical" bond funds merely dont invest in certain industries directly, eg they wont buy a bond in Acme Armaments, but if Acme Armaments banks with or has a loan from (say) HSBC or Rabobank, then is it really "ethical" ?

Yes, that had occurred to me - tbh, I was struggling to find a cautious ethical fund to bring the risk down, since the funds I was looking at were risk 5 or 6, which seemed a bit high 3 years from retirement.

> why so much in bonds? Whats your investment horizon?

3 years from retirement, then drawdown, so between 3 years and (hopefully) several decades. The stockmarket feels like very unsure footing, and especially unreliable given the climate prognosis - I'm having trouble getting my head round the idea of trusting something as important as one's retirement livelihood to it. Of course bonds aren't safe either in that context, but perhaps I was just reassured by the lowness of the risk number.

zolou

> On a scale of 1 to 7, lending money to unlisted startups with no meaningful due diligence is AAAARGH.


Thanks for the clarity. This is all really helpful. It's odd that Abundance have a SIPP at all, given what you describe as a lack of due diligence. You do have to go through a screen where you agree that as an ordinary punter you won't invest more than 10%.