Assistance with improving my pension fund choices

ColdIron

danlightbulb said:

Instead of putting 70% in the 50/50 fund, I could put a third in each of the 50/50, 60/40 and 70/30 funds for example. Its still equities, and its still various sectors, and probably in many cases the same underlying companies.

What would it achieve? An equal split of 50/50, 60/40 and 70/30 would create a messy 60/40 fund, why not just buy a 60/40 fund in the first place? If that's what you wanted why did you buy the one fund that you wanted and two that you didn't want? If you wanted 60/40 why did you go 50/50?

Would you go into a supermarket and buy mince with 5% fat,10% fat and 15% fat and whiz them all up, or would you just buy the one with 10% fat?

danlightbulb

ColdIron said:

danlightbulb said:

Instead of putting 70% in the 50/50 fund, I could put a third in each of the 50/50, 60/40 and 70/30 funds for example. Its still equities, and its still various sectors, and probably in many cases the same underlying companies.

What would it achieve? An equal split of 50/50, 60/40 and 70/30 would create a messy 60/40 fund, why not just buy a 60/40 fund in the first place? If that's what you wanted why did you buy the one fund that you wanted and two that you didn't want? If you wanted 60/40 why did you go 50/50?

Would you go into a supermarket and buy mince with 5% fat,10% fat and 15% fat and whiz them all up, or would you just buy the one with 10% fat?

Well I guess that was the question I was asking? But the funds do have a different mix of companies and other assets in them beyond more than just the 50/50, or 70/30 split.

So by splitting into all these funds I'm getting a greater level of diversity than just implied by the change in the UK /global split number?

ColdIron

There is pretty much 100% overlap in the companies and bonds across the funds, just different allocations. You are not adding diversification, just messing with the allocations, as you would be with mince and fat

Prism

Do you have access to either

Aegon BlackRock MSCI World Index (BLK) Pn W

or

Aegon Russell World Equity (BLK) Pn D

danlightbulb

@ColdIron hmm. So just looking at some recent performance, the 50/50 fund Im in has -4.6% for the most recent year, but the 60/40 fund only has -0.9%. Being in only one of those funds means I have taken the full hit of -4.6% whereas if I was in both funds equally I'd have taken only a hit of approximately half way between the two?

So i get your point about the diversity but it still seems beneficial to be in more than one fund even if they are similar in makeup?

danlightbulb

Prism said:

Do you have access to either

Aegon BlackRock MSCI World Index (BLK) Pn W

or

Aegon Russell World Equity (BLK) Pn D

MSCI no (although I have seen MSCI mentioned in a couple of funds that seem to use it as a benchmark).
Russel world equity yes, looks to have done quite well but the fee is quite high.

Prism

danlightbulb said:

@ColdIron hmm. So just looking at some recent performance, the 50/50 fund Im in has -4.6% for the most recent year, but the 60/40 fund only has -0.9%. Being in only one of those funds means I have taken the full hit of -4.6% whereas if I was in both funds equally I'd have taken only a hit of approximately half way between the two?

So i get your point about the diversity but it still seems beneficial to be in more than one fund even if they are similar in makeup?

What is the full name of the 60/40 fund? The reason I am asking is that Aegon seem to have two naming conventions. In the case of your 50/50 fund it is a 100% equity fund with a 50% allocation to the UK. Most people however when you say 60/40 would tend to assume that was a multi asset fund that holds 60% equities and 40% bonds. 

I general I would be looking for a 100% equities fund that doesn't have an artificial 50% allocation to the UK. Then like you mentioned above a simple low cost gilt or bond fund to go with it.

danlightbulb

@Prism there are several different ones but yes where they have used a convention like 60/40 or 50/50 they seem to be always referring to UK vs overseas equity splits.

For example there is;
* Aegon Blackrock 60/40 Global Growth (BLK)
* Aegon Blackrock 60/40 Global Equity Index (BLK)
* Aegon Blackrock 40/60 Global Equity Index (BLK)
* Aegon Blackrock World (ex-UK) Equity Index (BLK)
* Aegon BNY Mellon Real Return (BLK)
* Aegon HSBC Islamic Global Equity Index (BLK)

There's more, I haven't finished cataloguing them all yet.

All of the above funds have a similar mix yet have performed slightly differently. Why wouldn't I diversify across them? Why stick to just one?

On my spreadsheet (when completed) I will be able to sort by average returns and variance, with the aim of looking for a) good returns but also b) consistency.

Also the last one on that list, the Islamic (Sharia compatible) fund, has done very well compared to the other global equity funds. But I wouldn't want to make it my sole equity fund would I?

Prism

danlightbulb said:

@Prism there are several different ones but yes where they have used a convention like 60/40 or 50/50 they seem to be always referring to UK vs overseas equity splits.

For example there is;
* Aegon Blackrock 60/40 Global Growth (BLK)
* Aegon Blackrock 60/40 Global Equity Index (BLK)
* Aegon Blackrock 40/60 Global Equity Index (BLK)
* Aegon Blackrock World (ex-UK) Equity Index (BLK)
* Aegon BNY Mellon Real Return (BLK)
* Aegon HSBC Islamic Global Equity Index (BLK)

There's more, I haven't finished cataloguing them all yet.

All of the above funds have a similar mix yet have performed slightly differently. Why wouldn't I diversify across them? Why stick to just one?

On my spreadsheet (when completed) I will be able to sort by average returns and variance, with the aim of looking for a) good returns but also b) consistency.

Also the last one on that list, the Islamic (Sharia compatible) fund, has done very well compared to the other global equity funds. But I wouldn't want to make it my sole equity fund would I?

Given all those choices, if it was me I would be looking to reduce the UK allocation down a bit. You could do that in a number of ways using the (ex-UK) fund or the Islamic Global fund. Certainly not everyone would agree and its partly why these split UK/World funds even exist but for me its all about global which the UK plays its part in - just not 50%

Linton

Index funds dont do well or badly, they do almost exactly how their index does.

 The two funds  listed are different, investing in different ways. The MSCI World Index is split 86% large companies, 14% Medium, 0% Small ,  The Russell World Equity fund is 67% large, 25% medium and 5% small.  Looking at geographic spread,  MSCI is 66% US, the Russell fund 40% US.  So it would seem the Russell fund is significantly broader in its coverage than the MSCI fund. Small companies tend to be more volatile than large but at least over the past 10 years or more have outperformed large ones.

As regards the fees - dont forget that the fees are already included in the performance figures.  So if fund A performs better than Fund B which has lower fees fees it shows that Fund As performance more than justifies its higher fees.

So when you are considering funds I suggest you look at what they are investing in.  Morningstar is good for this sort of info, trustnet has it but is patchy in ts coverage both in the funds about which it has data and what data is givenj.