Which Multi-Asset Fund for drawdown?

Audaxer

Albermarle said:

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.

I agree, it's preferable to hold the 2 years cash outside the pension, but if it has to be held in the pension, I would take the inflation hit and keep it as cash, rather than invest it in a low risk or wealth preservation fund or IT which is still likely to fall a bit in an equity crash. Ideally some low risk funds would form part of your pension portfolio anyway, but I would also want to keep at least 2 years cash buffer.

Mickey666

Prism said:

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.

Obviously an equity fund will stay invested in equities, otherwise it wouldn’t be an equity fund would it?
Perhaps I’m misunderstanding what a ‘multi-asset’ fund means - I was assuming it would be invested in various instruments, not just equities.  Gold for example (not all of it obviously).

Prism

Mickey666 said:

Prism said:

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.

Obviously an equity fund will stay invested in equities, otherwise it wouldn’t be an equity fund would it?
Perhaps I’m misunderstanding what a ‘multi-asset’ fund means - I was assuming it would be invested in various instruments, not just equities.  Gold for example (not all of it obviously).

It is, but it would be unlikely to do much during a crash as pretty much nobody sees it coming and when its going to end. There is some flexibility in most multi asset funds to move allocations a bit during an economic cycle but it doesn't make a huge difference.
Some smaller company equity funds shift partially into cash to deal with redemptions,

[Deleted User]

Mickey666 said:

Prism said:

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.

Obviously an equity fund will stay invested in equities, otherwise it wouldn’t be an equity fund would it?
Perhaps I’m misunderstanding what a ‘multi-asset’ fund means - I was assuming it would be invested in various instruments, not just equities.  Gold for example (not all of it obviously).

Doubt there are too many funds holding gold. Gold has no earnings, is expensive to store and the long term value goes up with inflation, so it underperforms stocks and bonds.

A typical multi-asset fund holds stocks and bonds. Now imagine fund managers all have the magic powers you assigned them and they all know that the stock market will crash on Friday. What will they do? The’ll sell stocks on Thursday. All of them. What happens when everyone tries to sell and nobody’s buying? A crash. So their magic powers would have been useless because it would just cause the crash to happen early and the funds would still suffer. 

Now... There could be a few market managers who have the magic powers while everyone else does not. That could theoretically work. The trouble is you don’t know which ones. And timing is very hard. You have to guess right multiple times for it to work. Nobody had achieved it over significant periods of time. Lots have tried and lost money.  

cfw1994

JamesP8 said:

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.

Yup....sounds like my goal too!
That said....my funds have performed quite well over the past 15 years, hence why I asked how yours had.  

Which funds do you have?  It may be that they are doing fine anyway.  

Do you have any feel for how they have performed this year, through the trough of March?   I tracked mine very closely through that, was a useful process for me personally to see how they behaved.

It is hard to remove volatility without being at risk of losing out to inflation, which I feel is a fairly big issue for those retiring....

Our “emergency funds” live mostly in premium bonds.  Lousy investments, but we scrape around 1% on them, so similar to Marcus and NS&I (with a teeny tiny chance of a decent win!).  You can get your hands on the cash within a couple of days, & a couple could have £100k stashed in there (more than enough for us, if we reach that!)