SIPP portfolio, all equities, what percent in UK?

[Deleted User]

Out of interest, something like the Blackrock Consensus 100, which is a global multi index tracker. The annual charge is 0.24%.

However I could buy the individual index trackers with an annual charge of around 0.08% each.

Your thoughts? I take it the Blackrock manager actively manages the Consensus 100 fund, eg sell Ftse this year and buy S&p 500, that's why it costs more?

Malthusian

newbinvestor wrote: »

Your thoughts? I take it the Blackrock manager actively manages the Consensus 100 fund, eg sell Ftse this year and buy S&p 500, that's why it costs more?

Sort of, although they don't just do it on a whim. The idea behind the fund is that the BlackRock manager looks at what other fund managers use as their global asset allocation, works out the average and copies that, hence "Consensus".

So you need to factor in how much time it will take you to look at all those fund managers, work out the average and switch your individual index funds on a regular basis. If you're not going to bother it's not a like for like comparison. If what you want is a static asset allocation, or to actively manage your asset allocation, then the Consensus fund isn't aimed at you.

Malthusian

newbinvestor wrote: »

True, however there must be some profit lef in Shell/BP. May go for an equal weighted FTSE tracker to avoid high oil concentration.

Equal weighted trackers are weird and for ETF occultists.

Holding an equally weighted FTSE 100 means you want to dramatically overweight the 99th and 100th biggest companies in the FTSE but hold nothing in the 101st and 102nd, which makes little sense.

An equally weighted FTSE All Share tracker would be even weirder as it would mean you think Industrial Heat and *looks over his shoulder* Vordere are as worthy of your dolla as HSBC, Diageo and GSK. I don't think one exists.

A diversified portfolio will hold less than 1% in each of Shell and BP. If fossil fuel production becomes obsolete and Shell and BP crash to zero, I don't think many of us will mind the resulting minor drop in our portfolio too much because we'll be too busy enjoying our clean air and electric cars, and the terrific performance of all our shares invested in renewables. (To which market-cap-weighted index funds will have increased their exposure as they grew.)

Excluding Shell and BP because there is a risk that fossil fuels may become obsolete or banned does not make sense. Everyone knows that might happen and the market has already priced in that risk. Shell and BP have not already been dumped to zero because there is a possibility that fossil fuels will not become obsolete in our lifetime, or that they do but Shell and BP successfully pivot to producing renewables rather than doing a Kodak.

To exclude Shell and BP you are saying that you know more than the market does about the potential for renewables or the possibility of a ban on fossil fuels, and yet that this insider knowledge isn't something you have to declare to the market.

Shell and BP are highly unlikely to go bankrupt overnight. If they do lose value, it is likely that they will slide down the market gradually. As they do, passives will reduce their exposure and increase exposure to renewables as they come up. It would drag down performance but no-one is going to lose their retirement money over the switch from fossils to renewables.

If Shell and BP do fall to zero then those who were ahead of the curve in dumping them will outperform the rest. If they don't - if, as newbinvestor says, there is some profit left - then those who excluded them will underperform. There is no evidence that anyone is consistently able to get this kind of fortune-telling correct. Shouty schoolchildren bunking off have not changed this simple law of markets.

AnotherJoe

To be fair there are ETFs which exclude oil and related companies, not on ethical grounds but because some wish to act on their belief that that industry is coming to a close and a whole of market without that area will do better.

Cursory reading certainly ends to suggest their dividends are unsustainable. I dont think the market has fully priced in the risk that ff will suffer a faster decline than the majority think indeed it cant by definition, plus their prices are much more related to day to day activities in the middle east than longer term prospects.

Thrugelmir

BLB53 wrote: »

I would suggest no more than 10% due to its high concentration of big oil such as Shell and BP which are now v risky due to climate change.

Are you expecting Shell and BP to simply fade away. Renewable energy is flavour of the month. In no way suggesting that either share offers good value at the current time. Worth researching thoroughly before dismissing any company outright.

Though I prefer these shares to Uber. Which as yet hasn't proved it's business model to even be profitable. Or Tesla who are struggling to sell overpriced cars currently. Potentially the long term value is in their GRID. Though other car manufacturers don't seem to want to play ball. Rather like the battle between Betamax and VHS. With the inferior product winning in the end.

[Deleted User]

I'm not sure renewable energy is just the flavour of the month. It is definitely the future imo.

I expect NEW electric cars to outsell gas cars from 2022 onwards. They already outsell gas cars in Norway.

BLB53

A diversified portfolio will hold less than 1% in each of Shell and BP

Shell and BP account for 17% of FTSE 100 tracker
https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-100-index-unit-trust-gbp-accumlation-shares?intcmpgn=equityuk_ftse100indexunittrust_fund_link

Why would you want to be overweight with FTSE and exposed to the risks from big oil and stranded assets?

BLB53

Are you expecting Shell and BP to simply fade away

I believe a lot of investors have not yet realised the huge risks from large pension funds and institutions divesting their portfolios of these big oil companies. The landscape is changing very quickly and I believe small investors need to be aware of these risks.

Thrugelmir

BLB53 wrote: »

I believe a lot of investors have not yet realised the huge risks from large pension funds and institutions divesting their portfolios of these big oil companies. The landscape is changing very quickly and I believe small investors need to be aware of these risks.

Are you referring to Norway's decision to reduce it's exposure to oil and gas companies in it's wealth fund?

bowlhead99

Malthusian wrote: »

Equal weighted trackers are weird and for ETF occultists.

Holding an equally weighted FTSE 100 means you want to dramatically overweight the 99th and 100th biggest companies in the FTSE but hold nothing in the 101st and 102nd, which makes little sense.

An equally weighted FTSE All Share tracker would be even weirder as it would mean you think Industrial Heat and *looks over his shoulder* Vordere are as worthy of your dolla as HSBC, Diageo and GSK. I don't think one exists.

As an occultist I have a holding in iShares MSCI World Size Factor which is a mid(ish) cap equal weight tracker. Having cut out the truly large caps and the small caps, it just grabs a load of the stuff in the middle (and the types of industries found there) and then equal weights it. Then rebalances twice a year.

The methodology is fine with me as I am not trying to deploy tens of trillions of dollars into the global markets so don't necessarily have a need to weight my money to the largest of large caps just because they exist, and are large. Diversification (meaning a bit of everything) is fine with me and the fund is not too pricy or illiquid. Though obviously the nature of a mid cap fund doesn't include the mega caps so no harm holding other fund types too.

There's also a Europe (rather than World) version of the product, which I bought a few years back when trying to beef up my Euro allocation, but the problem with niche products is that they don't always have longevity, and €25m ETFs risk poor liquidity or being wound up if a cornerstone investor no longer really wants the strategy.

But no I wouldn't really want a FTSE100 equal weight tracker either.