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Views on Royal London Governed Portfolio

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  • mcc100mcc100 Forumite
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    Mordko wrote: »
    A couple of questions to ask your IFA:

    1. The bulk of this portfolio is in RLP Global Managed. Why has it underperformed it’s benchmark year in, year out? It’s otherwise tracking the benchmark, just a few percent below each period. Why would I not invest in the benchmark instead?

    2. The fund is classified as “balanced”/“moderately cautious”/“moderately adventurous”

    Balanced funds typically have at least 40% bonds. This fund has 20% bonds; the rest is in highly volatile assets, such as industrial property, commodities and stocks. What’s the potential for a drawdown and how it corresponds to my risk tolerance?

    3. How do you justify recommending an investment with over 50% in a single market (UK).

    Thanks, I'll ask these questions of my IFA.

    I intend to consider my options anyway once I have taken part of my TFLS at the end of November. The fund and IFA fees are relatively low, but I'll ask RL whether or not ongoing IFA fees are optional. My plans at present are to retire when I'm 60, so I won't need to consider drawdown for another five years.
  • SonOfSonOf Forumite
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    Thanks, I'll ask these questions of my IFA.

    Be aware that mordko is not an expert. His questions are flawed. For example, how would you be asking question 2 "the fund...."? a) its not a fund. Its a portfolio of funds. Such which fund would you be asking about?

    He mentions Balanced funds typically have at least 40% bonds. That is not correct. The mixed equity 40-85% sector, which used to be known as balanced managed before the term "balanced" was changed to indicate equity weighting, has between 40-85% equities. So, this could be 60% bonds to 15% bonds. Physical property does not fall within the 40-85% band because physical properties are not equities. Property shares fall within equity.

    GP4, 5 or whatever number is not built to use with drawdown. The GP range is the time weighted growth stage of the pension. RL have the GRIP range to cover the drawdown stage. So, asking "What’s the potential for a drawdown" when the fund is not geared for drawdown is pointless. Or he could be referring to a different meaning for drawdown. But would you know the difference?

    He is offering an opinion, which he is free to do so and you are free to take his comments seriously or not. Just as you are free to take mine seriously or not. However, do not go into a situation with an IFA asking questions that a) you wouldnt understand the answer to and b) are based on a bias that ignores reasonable argument. c) completely irrelevent.

    RL is one the largest pension providers in the country (especially with drawdown cases). Its a low cost option but it is a simplified option. It will not be the best. it will not be the worst. It is at the right end in most areas and ideal for low knowledge consumers as you cannot do much wrong with it and you are putting the investment decisions in the hads of people that do know what they are doing.
    The fund and IFA fees are relatively low, but I'll ask RL whether or not ongoing IFA fees are optional.

    You have already been told they are optional. It is a regulatory requirement for them to be optional. You dont need to ask RL. You just say to the IFA that you dont want ongoing servicing.
  • MordkoMordko Forumite
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    The mixed equity 40-85% sector, which used to be known as balanced managed before the term "balanced" was changed to indicate equity weighting, has between 40-85% equities. So, this could be 60% bonds to 15% bonds.

    Wrong. Balanced funds traditionally have been 60-40 stocks/bonds as recommended by Benjamin Graham in Intelligent Investor.

    These days balanced funds, although mostly 60/40 can deviate, but still hold at least 30% bonds. Anything with 10 to 20% bonds and 90 to 80% in highly volatile assets is distinctly unbalanced.

    Everything else is wrong too. You can own REITs, property shares traded on a stockmarket or you can own a commercial property portfolio. Call it what you want, they will perform in a similar manner to each other. And to stocks in general. Can easily halve during a bear market in stocks. Same goes for commodities.

    The point is that 80% of the recommended portfolio is in highly volatile correlated assets. Is that appropriate for someone retiring in 5 years? Often the answer is no, but the owner should be aware that this is an aggressive high risk portfolio with asset classes such as “commodities” which are both risky and provide zero long term return.

    Not for the faint hearted.
  • MordkoMordko Forumite
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    It is at the right end in most areas and ideal for low knowledge consumers as you cannot do much wrong with it and you are putting the investment decisions in the hads of people that do know what they are doing.

    This is REALLY bad. First of all the recommended portfolio is poor and misleading. Crucially, nobody should “put investment decisions in the hands of people who know what they are doing”. Decisions, and consequences of these decisions, are always with the investor. “Advisors” don’t make decisions. They provide advice. They don’t suffer if the investment underperforms. As a minimum, investors should educate themselves to make an informed decision.

    The OP should do some reading before pulling the trigger.
  • SonOfSonOf Forumite
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    Wrong. Balanced funds traditionally have been 60-40 stocks/bonds as recommended by Benjamin Graham in Intelligent Investor.

    Its not wrong. Just because one person says 60-40 does not mean its right. In the UK, 40-85% equity was the balanced range.
    Everything else is wrong too. You can own REITs, property shares traded on a stockmarket or you can own a commercial property portfolio. Call it what you want, they will perform in a similar manner to each other.

    Please explain how physical property performs in a similar way to equities? (clue for the OP - it doesnt).
    This is REALLY bad. First of all the recommended portfolio is poor and misleading.

    No. you are misleading the OP.
    Crucially, nobody should “put investment decisions in the hands of people who know what they are doing”.

    Crucially, the vast majority of the population neither have the knowledge to understand what is being down and have no inclination to obtain the knowledge to understand what is being done. So, there has to be solutions that exist that cater for people like that.

    To criticise sensible mainstream solutions aimed at those people just shows a complete lack of understanding and awareness of the average consumer.
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  • MordkoMordko Forumite
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    Just because one person says

    Really? Benjamin Graham is “one person says”?
  • MordkoMordko Forumite
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    This is how physical property performed in 2008 (plot in the linked article). The portfolio recommended to the OP would have crushed. It’s basic logic that during an economic downturn companies are squeezed, their margins suffer, some go bankrupt and the value of commercial (physical as you seem to like the word) properties goes down.

    https://economix.blogs.nytimes.com/2010/01/13/was-there-a-commercial-real-estate-bubble/?mtrref=www.google.com&gwh=BE232ABC1661A1A1B4123A315E180C96&gwt=pay&assetType=REGIWALL
  • MordkoMordko Forumite
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    To criticise sensible mainstream solutions aimed at those people

    The financial services industry has been doing very well. Just not for the people who have no knowledge and put all their trust and decision making into someone else’s hands.
  • SonOfSonOf Forumite
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    Mordko wrote: »
    Really? Benjamin Graham is “one person says”?

    Does he have multiple personality disorder? if not, then he is one person.

    The ABI and AMI handle the classifications in the UK and they moved to rename the defensive, cautious and balanced sectors using the equity range they held. e.g. the balanced managed funds sector became "Mixed Investment: 40-85% shares"

    This is by far the mainstream definition of balanced, cautious etc used in the UK. It was not perfect as 85% equity content is not what many would consider balanced but that is how it was. It is also still rather daft that a fund with 60% equity can choose to invest in the 20-60% sector or the 40-85% sector. This is part of the reason why using sector averages as a benchmark is pointless. A fund that has a more cautious approach in a sector which includes funds with a higher risk approach would be expected to underperform the sector average
    This is how physical property performed in 2008 (plot in the linked article).

    Really? Your measure is based on one event that saw the rare outcome of every asset class losing value.
  • MordkoMordko Forumite
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    FYI, Graham is no longer with us.

    If you are unhappy with the 2008 example, why don’t you tell us how physical property performed in the UK during the early 80s recession.

    And it’s false that “every asset class lost value” in 2008. You can’t make up facts. Treasury bonds rose sharply. Vanguard's long-term bond fund rose 20%. Of course it would be irrelevant to a fund with 20% or 10% bonds like RL “balanced”, some of which are junk bonds.
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