Assistance with improving my pension fund choices

Sailtheworld

That looks like a faff if you need 6 funds to not achieve what you want. Would you be be tempted to keep tinkering when those percentages changed due to natural market movements - this is going to happen from day one of the change.

I prefer UK gilts but wouldn't worry about the overseas government bonds. On the one hand they're not the lowest risk asset because there will be a currency risk; on the other hand you could argue they add some diversification.

PParka

danlightbulb said:

...  I have occasionally logged in (but not for a couple of years now) and looked at the other fund options available as if I want to I can configure my own mix of funds. There are around 80 different funds to choose from.....

Hi,  
Have you checked with Aegon that you only have access to 80 funds?
The reason I ask is because I could only access a few funds initially.  Aegon explained I could log on and open the next ‘gate’. This increased my fund choice to over 2000.

AnotherJoe

danlightbulb said:

Sailtheworld said:

danlightbulb said:

My initial allocation wasn't entirely arbitrary, I attempted to get a close match to the bonds side of the Vanguard Life Strategy 80/20 fund, using the funds I had available to me.

Why not leave the workplace pension as is? Pay in the minimum you need to ensure you get the employer contribution and just forget about It for the next couple of decades. There's nothing wrong with what you're doing and you get access to 'free' money - what's not to like?

Then rather than trying to replicate VLS80 with a hotchpotch of funds set up a SIPP and buy VLS80.

@anotherjoe I don't think I'd be comfortable going 100% equities. I should have done that 20 years ago, not now. However the bonds funds have had substantial growth as well, as much as the equity funds in some cases, which I'm confused by. 

Thats because youve got rubbish equity funds. The ones you were worried about getting out of too quickly 

coyrls

danlightbulb said:

I still don't like that it has 5% sat in cash, as that won't be doing anything.

Where are you getting the 5% cash from?  The breakdown in the factsheet you linked to from June 2020 stated -0.16 cash.  Maybe the tool that you are using to get the asset allocations classifies short term bonds as "cash"?

danlightbulb

coyrls said:

danlightbulb said:

I still don't like that it has 5% sat in cash, as that won't be doing anything.

Where are you getting the 5% cash from?  The breakdown in the factsheet you linked to from June 2020 stated -0.16 cash.  Maybe the tool that you are using to get the asset allocations classifies short term bonds as "cash"?

It also has 5.19% in 'Aegon Blackrock Cash (BLK)' about halfway up the list. That's a cash fund.

 PParka said:

danlightbulb said:

...  I have occasionally logged in (but not for a couple of years now) and looked at the other fund options available as if I want to I can configure my own mix of funds. There are around 80 different funds to choose from.....

Hi,  
Have you checked with Aegon that you only have access to 80 funds?
The reason I ask is because I could only access a few funds initially.  Aegon explained I could log on and open the next ‘gate’. This increased my fund choice to over 2000.

Nothing I can see in the online dashboard however I've fired them over a question to ask, thanks for the suggestion.

Sailtheworld said:

That looks like a faff if you need 6 funds to not achieve what you want. Would you be be tempted to keep tinkering when those percentages changed due to natural market movements - this is going to happen from day one of the change.

I prefer UK gilts but wouldn't worry about the overseas government bonds. On the one hand they're not the lowest risk asset because there will be a currency risk; on the other hand you could argue they add some diversification.

Yeah I agree its a bit of a faff especially with needing such small percentages in a couple of funds to tweak the mix. But if I don't do that, I end up with 15% in overseas government bonds. I was thinking of rebalancing quarterly?

If UK gilts are fine then what was wrong with my previous portfolio suggestion? A poster said it was 'unsatisfactory':

danlightbulb said:

I am therefore proposing to invest directly into two funds which only have bonds. The first only has UK government index linked bonds, and the second has global corporate bonds. Here are these two funds and their top 10 holdings:

I am suggesting to put 15% in the UK government bonds fund and 10% in the corporate bonds fund.

That will leave the final 5% to put in a specific emerging equities fund, as without the multi-asset fund I will have no emerging markets in my other equities funds.

So this would leave me with the following complete portfolio:



To achieve the above I have to use five separate funds as follows:

bowlhead99 said:

To decide that you don't know what you are doing with bonds so you will just arbitrarily put 3/5ths of your bond money in UK index linked bonds and the other 2/5ths in a mix of global corporate investment grade long maturity bonds, because those are two types of funds that happen to exist among your 80+ pension funds available, and you decided the split between them as a coin toss, and you won't bother with anything in the other sectors... seems, I dunno, less than satisfactory... given you have taken some time to figure out what you are doing with the equities side and your bonds allocation is not insubstantial (a third of the size of the equities).

Im stuck between a rock and a hard place. No single fund does what people here would consider a balanced portfolio, yet I seem to be also being criticised for trying to create one from several funds?

Thrugelmir

There's no right or wrong answer. All boils down to a view. Cash is a diversifier in itself. Not being fully invested doesn't mean one is going to miss out. Why invested in European Bonds that have negative yields currently? 

danlightbulb

Thrugelmir said:

There's no right or wrong answer. All boils down to a view. Cash is a diversifier in itself. Not being fully invested doesn't mean one is going to miss out. Why invested in European Bonds that have negative yields currently? 

Ah ok I see what you mean now. Over 5 years the corporate bond fund has outperformed my existing composite fund, but yes I can now see that over the last 3 months the corporate bond fund is negative.

UK gilts also seem to be negative over 3 months. And the overseas government bond index seems to be stagnating over a 3m to 1 year timescale as well.

But I'll already be in similar funds through my existing multi asset fund anyway, so I'm already exposed to this?

Unless I choose to go 100% equities (which I didn't think was a good idea), then aren't I always going to be exposed to bond funds? If bond funds were growing right now then equity funds would likely be falling wouldn't they? Isn't that the point, that I need both?

danlightbulb

Which do you consider better out of these two options? They are both using only two funds which are available to me under my scheme. They are both aiming for approx 75% equities and 25% bonds/cash.

Option A:

• has returned an average of 6.2% per annum over the past 5 years
• over last 3 months has returned 1.8%
• uses the Blackrock 50/50 Global Equity Index (70%) plus the Blackrock Market Advantage (30%)

Option B:

• has returned an average of 9.1% per annum over the past 5 years
• over last 3 months has returned 2.5%
• uses the Blackrock Consensus Index (75%) plus the Blackrock World (ex-UK) Equity Index (25%) to pull down the UK equity share.

Sailtheworld

Sailtheworld said:

That looks like a faff if you need 6 funds to not achieve what you want. Would you be be tempted to keep tinkering when those percentages changed due to natural market movements - this is going to happen from day one of the change.

I prefer UK gilts but wouldn't worry about the overseas government bonds. On the one hand they're not the lowest risk asset because there will be a currency risk; on the other hand you could argue they add some diversification.

Yeah I agree its a bit of a faff especially with needing such small percentages in a couple of funds to tweak the mix. But if I don't do that, I end up with 15% in overseas government bonds. I was thinking of rebalancing quarterly?

If UK gilts are fine then what was wrong with my previous portfolio suggestion? A poster said it was 'unsatisfactory':

There's nothing particularly wrong with your existing portfolio or any of the previous suggestions IMO. If you ask multiple people for an opinion you should expect multiple opinions. I think rebalancing quarterly sounds like another OTT faff. In my workplace pension I picked the closest thing to a world tracker and won't make any changes ever. In my SIPP I don't rebalance either other than with future contributions. Surely once a year (if that) is more than enough?

How far do you take it? Should you change the currency of your mortgage for diversification's sake?

danlightbulb

Sailtheworld said:

There's nothing particularly wrong with your existing portfolio 

• Its too high in UK equities? (32% UK equities), which has dragged back performance.
• One of my funds has performed 79th out of 83 possible funds for the last five years (returning an average of 3.1% per year).

Given that I didn't get to pick what funds I wanted when the scheme was set up, and that it has a sub-optimal mix, and that alot of the funds available to me have done better (I appreciate that is with the benefit of hindsight but what other data do I have), I can't help but feel I can do better than the default portfolio.

I'm not just cherry picking funds either, to make these comparisons. I've ruled out some of the ones at the very top of the list as they are more risky (eg the gold fund).