Reviewing my pension funds

chriss1979

After recently turning 40, and having had discussions with much more clued up people closer to retirement age than myself about pensions (funds, growth etc) I've been looking into my own with a view to changing my funds around.

Currently I'm paying in 5% of salary via salary sacrifice scheme, matched by employer into a HL SIPP. Since day one after indicating to the pensions advisor that I'm somewhere in the middle on the risk scale, all contributions have gone into the fund;

Schroder Managed Balanced Inclusive - Class H - Accumulation (GBP)

With just coming up to 6yrs worth of contributions, its total growth is around 25%. Now I have a better understanding of compound growth I can see that is around 4% annual growth which doesn't seem that great?

After hovering around the forums reading lots of similar threads this past week, I'm trying to put together a more diverse portfolio with greater growth potential and have drafted the below based on low ongoing costs and good coverage geographically and across different industry sectors.

Legal & General US Index Class C - Accumulation (GBP) 50.00%
Lindsell Train Global Equity Class D - Income (GBP) 20.00%
Legal & General UK Index Class C - Accumulation (GBP) 10.00%
Ishares Emerging Markets Equity Index Class H - Accumulation (GBP) 10.00%
Ishares Japan Equity Index Class H - Accumulation (GBP) 5.00%
Ishares Global Property Secs. Eq. Index Class H - Accumulation (GBP) 5.00%

Realistically retirement is going to be 60-65 at best, so these funds are long term investments.

I know 'advice' as such cant be offered here, but very happy to have the opinions of those with much more knowledge and experience in this area!

Thanks in advance.

SunnyCat

From someone who is messing around with the same thing without really having a clue what I'm doing...

I think you're doing the right thing to spread things out as much as possible to create a diverse portfolio. I've been trying to pick my funds to have a geographic as well as type of investment (companies in varying industries, property, gold) spread.

I pay attention to the management fee as it can be quite a lot for managed funds, as opposed to trackers which are usually quite a bit lower. Also, in my pension funds have a 1 to 7 risk rating and as I am at least 30 years away from retiring, my funds are 6 or 7. In some years i plan to switch to less risky ones and in 15 years before retiring to start switching to lowef risk forms of investment.

Gary1984

When you say total growth is 25% over 6 years do you mean that the current fund value is 25% higher than total contributions? If so annual growth is likely to be closer to 8% assuming a reasonably steady level of contributions over the 6 years. The reason being that on average each contribution has only been invested for 3 years.

Gary1984

Checking morningstar the 3 year annualised return is 6.5%. But your own money-weighted rate of return will be higher as the Year to Date return for 2019 is 12% and this is the period when you'll have had the most money in your account, dragging your average higher.

https://www.google.com/url?sa=t&source=web&rct=j&url=http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx%3Fid%3DF000002QT3&ved=2ahUKEwik7Y35ydbkAhVoURUIHTVVBhUQFjAAegQIBhAB&usg=AOvVaw1jaTwFQ2cqg3AJl7DxNbtR&cshid=1568680055700

Albermarle

Schroder Managed Balanced Inclusive

I can not actually find a fund with this exact name on the HL website ?
There are ones with similar names that are not the same as the morning star link above.

With regard to the proposed change in portfolio . I think a change from approx. 50% equities to >90% when we are probably somewhere near the top of the cycle is a brave move !

chriss1979

Thansk Albermarle, this is the fund currently invested in -

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/s/schroder-managed-balanced-class-i-accumulation

squirrelpie

Your current selection, and all of your choices for possible future investment, are 'funds'. That means that HL's charges on them are uncapped. You might do better finding similar investments that are wrapped as ETFs or ITs (investment trusts), since HL's charges on those are capped.

I would tend to agree that increasing your equity exposure at present looks fairly risky. An allocation of 50% to the US markets looks especially brave (spelled foolhardy ) but I'm just an amateur [STRIKE]gambler[/STRIKE] investor.

Lokolo

Having done an x-ray of your portfolio, I think its OK. Not suited for me.

You have

21% Great Europe
-- 16% UK
-- 2.7% West Europe - Euro

61.5% Americas
-- 60% USA

17% Asia
-- 10% Japan
-- 5.5% Emerging Ex 4 Tigers

Large Cap -- 81%
Mid Cap -- 15%
Small Cap -- 3%

Now personally mine is less USA and more Western Europe. And I have less large cap, more mid, and more small (my small cap is 9%).

You also have 30% defensive stock, compared to my 20%. I have 40% sensitive compared to your 30%. So my portfolio is quite a bit higher risk. Mine is more comparable to Morningstar's Blend Cap Global Equity.

Personally I think you should have less America (USA specifically), more Europe Euro, less large cap (more smaller companies type fund). But that's just my opinion on a portfolio.

Prism

I don't use regional funds (or allocations) at all for the large cap companies. It makes very little difference from a country point of view as all of these companies are global. The 10% allocation to the UK Index has no real bearing on how much you have invested in the UK economy but does increase your exposure to the types of company listed in the UK - so oil, finance, mining etc. The same for the US - its basically a proxy for Tech.

So I would simplify it a lot and just go for a global all world tracker as your main fund and then if you have an opinion on what might do better (such as your Lindsell Train fund) then allocate some to that. The same for emerging markets like you have done and maybe more smaller companies exposure

Here is a paper that I used as a basis https://www.msci.com/www/research-paper/the-new-classic-equity/015403216

AnotherJoe

That's what I've been doing the last few years but without the consistent methodology. Good to see there's some method behind my madness.

chriss1979

All thoughts so far greatly appreciated and certainly giving me some things to ponder over, not going to be making any drastic decisions with it.

I've got a one to one booked through work with one of the HL pension guys in 2 weeks so will turning up to that with a lot to talk about!