Using Wealth Preservation Trust as alternative to cash.

green_man

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

We've already covered the potential downsides of holding too much cash. I'm not clear what problem you are attempting to solve. 
To minimise overall portfolio falls in choppy markets?
To ensure your portfolio outlines you?

I guess the problem you are trying to solve is, not holding too much cash.  Can you hold less cash by holding instead PNL (or similar) .  So you are trying to ensure you don’t have to draw down on equities that have just crashed, without having to hold Too much cash.

The problem with holing something like HSBC Global Strategy (which is my plan) as a core holding is that in the event of a crash you may still need to liquidate some stock including the equity element. So without holding separate equity and bond funds holding a largish cash holding mitigates this. 

I think it would be first worthwhile understanding whether you have a genuine problem before thinking about potential solutions. If you were to stick with your original plan (HSBC or similar), given your retirement plans and required income from the pot, what are the chances of that running out in your lifetime assuming you made periodic withdrawals irrespective of what the market was doing at the time?

Good point.  I don’t THINK I have a genuine problem as such, but you can always think of a scenario that would make you uncomfortable, but if we have 50% crash sustained for 5+ years lots of strategies would struggle and we would all be in annuities.

It might be worth ensuring you are comfortable with 85% equity exposure, especially with potential extra volatility of EM and small cap if we were to have, for example, a 5 year return such as 1916-1920.
Do you need that much equity exposure to ensure you don't run out of money?

https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/

I haven’t got 85% equity exposure in this pot (as far as I can tell)  HSBC GS Balanced has just under 60% equity (60% of 70% weighting is 42%) , add on 15% for those other two equity funds and you are around 57%   Which feels about right to me?

shinytop

green_man said:

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

We've already covered the potential downsides of holding too much cash. I'm not clear what problem you are attempting to solve. 
To minimise overall portfolio falls in choppy markets?
To ensure your portfolio outlines you?

I guess the problem you are trying to solve is, not holding too much cash.  Can you hold less cash by holding instead PNL (or similar) .  So you are trying to ensure you don’t have to draw down on equities that have just crashed, without having to hold Too much cash.

The problem with holing something like HSBC Global Strategy (which is my plan) as a core holding is that in the event of a crash you may still need to liquidate some stock including the equity element. So without holding separate equity and bond funds holding a largish cash holding mitigates this. 

I think it would be first worthwhile understanding whether you have a genuine problem before thinking about potential solutions. If you were to stick with your original plan (HSBC or similar), given your retirement plans and required income from the pot, what are the chances of that running out in your lifetime assuming you made periodic withdrawals irrespective of what the market was doing at the time?

Good point.  I don’t THINK I have a genuine problem as such, but you can always think of a scenario that would make you uncomfortable, but if we have 50% crash sustained for 5+ years lots of strategies would struggle and we would all be in annuities.

It might be worth ensuring you are comfortable with 85% equity exposure, especially with potential extra volatility of EM and small cap if we were to have, for example, a 5 year return such as 1916-1920.
Do you need that much equity exposure to ensure you don't run out of money?

https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/

I haven’t got 85% equity exposure in this pot (as far as I can tell)  HSBC GS Balanced has just under 60% equity (60% of 70% weighting is 42%) , add on 15% for those other two equity funds and you are around 57%   Which feels about right to me?

I'm doing a similar thing; using a mix of HSBC Balanced and Vanguard LS60 with a couple of satellites to generate about 50% equities, 20% cash and the rest other.   Maybe a bit much cash but I can tweak that.  It might not be the best strategy but I doubt it's a terrible one. Covid performance has been OK overall.

BritishInvestor

green_man said:

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

BritishInvestor said:

green_man said:

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

We've already covered the potential downsides of holding too much cash. I'm not clear what problem you are attempting to solve. 
To minimise overall portfolio falls in choppy markets?
To ensure your portfolio outlines you?

I guess the problem you are trying to solve is, not holding too much cash.  Can you hold less cash by holding instead PNL (or similar) .  So you are trying to ensure you don’t have to draw down on equities that have just crashed, without having to hold Too much cash.

The problem with holing something like HSBC Global Strategy (which is my plan) as a core holding is that in the event of a crash you may still need to liquidate some stock including the equity element. So without holding separate equity and bond funds holding a largish cash holding mitigates this. 

I think it would be first worthwhile understanding whether you have a genuine problem before thinking about potential solutions. If you were to stick with your original plan (HSBC or similar), given your retirement plans and required income from the pot, what are the chances of that running out in your lifetime assuming you made periodic withdrawals irrespective of what the market was doing at the time?

Good point.  I don’t THINK I have a genuine problem as such, but you can always think of a scenario that would make you uncomfortable, but if we have 50% crash sustained for 5+ years lots of strategies would struggle and we would all be in annuities.

It might be worth ensuring you are comfortable with 85% equity exposure, especially with potential extra volatility of EM and small cap if we were to have, for example, a 5 year return such as 1916-1920.
Do you need that much equity exposure to ensure you don't run out of money?

https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/

I haven’t got 85% equity exposure in this pot (as far as I can tell)  HSBC GS Balanced has just under 60% equity (60% of 70% weighting is 42%) , add on 15% for those other two equity funds and you are around 57%   Which feels about right to me?

Ah, missed the multiple pots.
If we take a rudimentary retirement approach such as a portfolio of lobal equities and global high-quality bonds (hedged) and with periodic withdrawals taken at the same time as the portfolio is rebalanced, and ensured the asset allocation was in line with how much equity exposure we needed, and were happy taking, it would be useful to understand what adding each extra layer of complexity brings:
Multiple pots, potentially with different asset allocations
Tilts towards EM/small caps
Cash buffers
(not directed at you BTW, just a general question )

[Deleted User]

I see no risk mitigation advantage in holding a large variety of government bonds. These are not stocks of various companies. In fact, the safest way to hold government bonds is to buy them directly rather than via a fund - assuming you have enough pounds to invest.   

Audaxer

green_man said:

BritishInvestor said:

green_man said:

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

We've already covered the potential downsides of holding too much cash. I'm not clear what problem you are attempting to solve. 
To minimise overall portfolio falls in choppy markets?
To ensure your portfolio outlines you?

The problem with holing something like HSBC Global Strategy (which is my plan) as a core holding is that in the event of a crash you may still need to liquidate some stock including the equity element. So without holding separate equity and bond funds holding a largish cash holding mitigates this. 

I agree as I also hold some HSBC Global Strategy as well as VLS funds. I like these types of multi asset funds, and this year they have performed better than my income portfolio of active funds and ITs. However the only downside I see with the multi asset funds in retirement is that if I did need to sell some of these funds at the time of an equity crash, I obviously wouldn't be able to sell just the bond element. So maybe just having a global equity tracker fund and a separate global bond tracker fund would be a better option, as there then may be less need to keep a higher cash percentage?  

shinytop

Audaxer said:

green_man said:

BritishInvestor said:

green_man said:

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

We've already covered the potential downsides of holding too much cash. I'm not clear what problem you are attempting to solve. 
To minimise overall portfolio falls in choppy markets?
To ensure your portfolio outlines you?

The problem with holing something like HSBC Global Strategy (which is my plan) as a core holding is that in the event of a crash you may still need to liquidate some stock including the equity element. So without holding separate equity and bond funds holding a largish cash holding mitigates this. 

I agree as I also hold some HSBC Global Strategy as well as VLS funds. I like these types of multi asset funds, and this year they have performed better than my income portfolio of active funds and ITs. However the only downside I see with the multi asset funds in retirement is that if I did need to sell some of these funds at the time of an equity crash, I obviously wouldn't be able to sell just the bond element. So maybe just having a global equity tracker fund and a separate global bond tracker fund would be a better option, as there then may be less need to keep a higher cash percentage?  

That was my worry too but I've stuck with multi asset plus cash mainly because I trust the fund manager better that myself which bond funds to use.  It's also a bit of laziness too tbh.