Which Multi-Asset Fund for drawdown?

Prism

Mickey666 said:

Audaxer said:

JamesP8 said:

Hoping to average 5% or more annual gross return over 5 years. 

I think 5 years is too short a timescale to be confident of averaging 5% annual return for any risk level. If there is a equity crash during that period which takes a year or two to recover from, then the return could be a lot lower over that 5 year period, but could still average around 5% over say 20 years or more.

If it’s a managed fund then surely the fund manager(s) would rebalance the fund to move away from equities  if there was such a crash?   Isn’t that the point of a managed fund?

No. An equity fund will stay invested in equities. There is some scope to move some into cash  or for a multi asset fund shift the equity/bond allocation at bit but you wouldn't expect to see a large change. Fund managers can't see a crash coming any better than anyone else.

The main point of a managed fund is that its not invested in the index. Being different is the only way to produce a different performance level - good or bad.

Audaxer

Mickey666 said:

Audaxer said:

JamesP8 said:

Hoping to average 5% or more annual gross return over 5 years. 

I think 5 years is too short a timescale to be confident of averaging 5% annual return for any risk level. If there is a equity crash during that period which takes a year or two to recover from, then the return could be a lot lower over that 5 year period, but could still average around 5% over say 20 years or more.

If it’s a managed fund then surely the fund manager(s) would rebalance the fund to move away from equities  if there was such a crash?   Isn’t that the point of a managed fund?

If it was a managed multi asset fund, and the manager rebalanced following an equity crash, that would mean he/she would buy more equities to rebalance rather than move away from equities. 

Albermarle

If it’s a managed fund then surely the fund manager(s) would rebalance the fund to move away from equities  if there was such a crash?

By then it would be too late, as the crash would have happened. It is like shutting the stable door after the horse has bolted.

If you want a fund that can withstand crashes better than most, they do exist but you need to buy them before the crash happens. The downside they will tend to be low growth /lower risk funds so if the market does not crash and grows instead you will miss some of this growth.

JamesP8

Albermarle said:

Plus the OP should have a cash fund of at least two years income to tide over any bad year(s) in the market .

Thank you, yes I intend to hold a two year cash fund and will also receive a DB pension (in less than five years) supplementing the perceived drawdown income. I have projected the financial position up to 25 years so far, increasing anticipated required income by inflation and have based this on a gross 4% average fund growth over that period, deducting expected drawdown costs from this year on year.

JamesP8

cfw1994 said:

JamesP8 said:

I am currently reviewing initial fund(s) to select for an imminent DIY drawdown (Aviva). Any suggestions as to a medium to higher risk multi-asset fund please? Presume risk/volatility will usually increase with the proportion of equities. Hoping to average 5% or more annual gross return over 5 years. 

What funds are you currently invested in, & how have they performed for you?
I'm with Aviva (I know they have MANY different pensions) with a membersite, and it allows the same funds I was in pre-drawdown to continue post-drawdown.
I am tempted to maintain the same funds as I move towards that - they have served me well for the past 15 years (with the occasional tweak)..

Thanks, equities mainly, which has been ok,  but hoping to attempt to narrow the fluctuation when moving to drawdown, but at the same time cover costs and inflation, with some remaining surplus over the long term. I guess everyone's goal.

peterg1965

JamesP8 said:

Albermarle said:

Plus the OP should have a cash fund of at least two years income to tide over any bad year(s) in the market .

I intend to hold a two year cash fund 

As a matter of interest, what do you have in mind in terms of a ‘cash fund’? I will be in a similar situation in a couple of years and Find this a challenging situation. Leaving It as cash In a drawdown pot with HL/Fidelity etc, means it doesn’t attract the platform service fee, but it is exposed to inflation risk. If you ‘invest’ in a V low risk wealth preservation or cash fund, it will be subject to an OCF and a platform charge which could mean it loses value much quicker than leaving it as ‘cash’.

A conundrum for sure, and I was thinking I may as well put it (2 years future drawdown money) in VLS 20, draw monthly cash from there and hope for the best!

jamesd

If it’s a managed fund then surely the fund manager(s) would rebalance the fund to move away from equities  if there was such a crash?   Isn’t that the point of a managed fund?

A managed fund can have rules that cause or allow the managers to adjust the mixture and some do appear to do this. It's part of the reason why some fund categories have equity percentage ranges.

After a crash, the crash would have reduced the value of the equity holdings. A manager would normally want to or be required by investment rules to buy more equities to raise their percentage. Passives would be compelled to by their rules.

JamesP8

peterg1965 said:

JamesP8 said:

Albermarle said:

Plus the OP should have a cash fund of at least two years income to tide over any bad year(s) in the market .

I intend to hold a two year cash fund 

As a matter of interest, what do you have in mind in terms of a ‘cash fund’? I will be in a similar situation in a couple of years and Find this a challenging situation. Leaving It as cash In a drawdown pot with HL/Fidelity etc, means it doesn’t attract the platform service fee, but it is exposed to inflation risk. If you ‘invest’ in a V low risk wealth preservation or cash fund, it will be subject to an OCF and a platform charge which could mean it loses value much quicker than leaving it as ‘cash’.

A conundrum for sure, and I was thinking I may as well put it (2 years future drawdown money) in VLS 20, draw monthly cash from there and hope for the best!

It certainly is a conundrum, as you say. I'm currently looking into the available options, costs v. potential returns, ease of access etc. Lots to consider, but aiming to devise a plan during the coming week.

Albermarle

peterg1965 said:

JamesP8 said:

Albermarle said:

Plus the OP should have a cash fund of at least two years income to tide over any bad year(s) in the market .

I intend to hold a two year cash fund 

As a matter of interest, what do you have in mind in terms of a ‘cash fund’? I will be in a similar situation in a couple of years and Find this a challenging situation. Leaving It as cash In a drawdown pot with HL/Fidelity etc, means it doesn’t attract the platform service fee, but it is exposed to inflation risk. If you ‘invest’ in a V low risk wealth preservation or cash fund, it will be subject to an OCF and a platform charge which could mean it loses value much quicker than leaving it as ‘cash’.

A conundrum for sure, and I was thinking I may as well put it (2 years future drawdown money) in VLS 20, draw monthly cash from there and hope for the best!

The best way in my opinion is to have the cash fund outside the pension , where it can at least earn some interest .
However that is more for the lucky ones who have been able to accumulate a big pension and a substantial savings pot outside the pension.
However you have to be clear that WP funds and VLS 20 are not cash . For example VLS20 is 80% bonds . It is not guaranteed how well these bonds will hold up during the next market drop.

TBC15

I use a combination of

Marcus for emergency money

BLME 90 day for monthly withdrawal

BLME 1yr deposit for its all gone pear shaped on the investments