Assistance with improving my pension fund choices

AnotherJoe

danlightbulb said:

@AnotherJoe
Ive examined all 83 funds I can select from, and what I have said above (which the chaps above have confirmed) is true.

All the x%/y% labelled funds refer to the uk/global mix.

I cant select any specific sector funds except for gold. There isnt one for health for example.

I do have options to select more active funds vs passive funds and ive noticed the performance is no better, and that many articles suggest active funds are not worth the premium, so Im happy to stick to passive.

Almost all of the funds with UK stocks in them have a relatively high proportion, between 40 to 70% UK. There are a couple with only a low UK percentage but these have very high US percentage. I can choose from some regional funds (or ex-Uk funds) but would then have to specify my own proportions to get the mix I want.

Currently Im 35% UK equities, that was chosen for me when the scheme was set up.

Thats a shocker OP. BUt you did have some global funds you could choose right?

* Aegon Blackrock World (ex-UK) Equity Index (BLK)
* Aegon HSBC Islamic Global Equity Index (BLK)

Go with those or similar.

Anything thats 30% (Or higher) UK is likely to be poor and why be concerned about US being "high" when you are happy to have half that (30% in the UK) when the UK is 5% global and this thats 5x overrepresented whereas US is maybe only 1.5x overrepresented.

danlightbulb

AnotherJoe said:

danlightbulb said:

@AnotherJoe
Ive examined all 83 funds I can select from, and what I have said above (which the chaps above have confirmed) is true.

All the x%/y% labelled funds refer to the uk/global mix.

I cant select any specific sector funds except for gold. There isnt one for health for example.

I do have options to select more active funds vs passive funds and ive noticed the performance is no better, and that many articles suggest active funds are not worth the premium, so Im happy to stick to passive.

Almost all of the funds with UK stocks in them have a relatively high proportion, between 40 to 70% UK. There are a couple with only a low UK percentage but these have very high US percentage. I can choose from some regional funds (or ex-Uk funds) but would then have to specify my own proportions to get the mix I want.

Currently Im 35% UK equities, that was chosen for me when the scheme was set up.

Thats a shocker OP. BUt you did have some global funds you could choose right?

* Aegon Blackrock World (ex-UK) Equity Index (BLK)
* Aegon HSBC Islamic Global Equity Index (BLK)

Go with those or similar.

Anything thats 30% (Or higher) UK is likely to be poor and why be concerned about US being 60% when you are happy to have half that (30% in the UK) when the UK is 5% global and this thats 5x overrepresented whereas US is maybe only 1.5x overrepresented.

Hi. Yes you're right I do have a couple of global funds to choose like the ones you've shown. But to get a UK allocation I would also have to invest in a UK specific fund as well or design a mix with my existing 50/50 UK/global fund to drag down the percentage of UK.

Just to clarify though - you're not suggesting I move the whole investment from the current 50/50 fund into one of the above? That would seem like a dangerous thing to do in one hit? Those two above funds are both badged as high risk funds.

So it leads me then onto how I proceed?

• Given that there are no funds directly available that have the right mix, and very few multi asset funds - do I need to specify my own mix across worldwide regions and then invest in several region specific funds?
• Or do I use a combination of say a 50/50 fund and an ex-UK fund to get the mix roughly where it needs to be first, and maybe fine tune it with specific regional funds later? 
• Do I make this change in one hit or incrementally (i.e by moving say 5% per month or per quarter) so as to lower the risk of buying/selling at the top/bottom?

It feels to me that I should incrementally adjust my fund mixes over time rather than in one go, to de-risk the changes?
I.e maybe the first thing I do is start moving small amounts from my current 50%UK/50%Global fund into a single other ex-UK fund until I get the proportions broadly better. Then fine tune later into more specific regional funds as needed. I could do the equities side of thing first, and the bonds side of things later or simultaneously?

Albermarle

Just remember all the posters comments are their own opinion ( albeit backed up with  experience in most cases ) and investing is not an exact science.
You are heading in the right direction,  so no point keep agonising over the finer details too much , as there is no absolute right and wrong and nobody knows what the future holds anyway. Maybe the FTSE 100 will surprise everybody and perform well in future . Probably not but you never know. 

danlightbulb

@Albermarle thanks, i think i have the outline of a plan developing, I just want to make sure I am not making any big mistakes.

Clearly I have access to only a limited set of funds within my pension scheme so I will have to make the best of what I have available to me. Going from conversations so far, this means that my fund mix is going to be somewhat 'non-standard' compared to what you guys would normally recommend to people. I'm not able to pick one or two do it all funds. I didn't realise coming in to this that this was the case, and perhaps others didn't also, hence the initial confusion about why Im mixing up funds and such. But at least now that issue has been exposed.

How do I get myself into a position to start making changes now that I'm developing an understanding of things?

Perhaps I could try and manipulate my available funds to emulate one or two of the standard ones you would normally recommend? Any you can point me to to have a look at how I could copy it?

danlightbulb

I have been doing some more analysis of the funds.

The below table shows the regional split and sector split for three funds. The 50/50 Blackrock fund is the one Im already in and the other two are the two global equity funds I was interested in adding.



Not only is there a difference in the geographical allocation, there is also a considerable difference in the sector allocation between the funds. The HSBC fund has much more technology in it, whereas the Blackrock ex-UK fund appears to be a more even spread, with less technology and health, and more utilities, financials and industrials.

I'll be able to work out what splits I will have in different allocations between these funds, but what I don't know is what proportions I should be aiming for?

Prism

danlightbulb said:

I have been doing some more analysis of the funds.

The below table shows the regional split and sector split for three funds. The 50/50 Blackrock fund is the one Im already in and the other two are the two global equity funds I was interested in adding.



Not only is there a difference in the geographical allocation, there is also a considerable difference in the sector allocation between the funds. The HSBC fund has much more technology in it, whereas the Blackrock ex-UK fund appears to be a more even spread, with less technology and health, and more utilities, financials and industrials.

I'll be able to work out what splits I will have in different allocations between these funds, but what I don't know is what proportions I should be aiming for?

Taking just the World (ex-UK) and your existing 50/50 fund. Europe, Japan and Asia Pacific are reasonably close between the two funds. Therefore it comes down to your preferred split between US and UK and there is no right answer. The world index puts the UK at around 5% and the US at around 65%. A popular product like Vanguard Lifestrategy puts the UK allocation at around 25% and US at around 46%. I don't think I would go higher than that for UK allocation - some people prefer much closer to the index at around 5% UK.

csgohan4

danlightbulb said:

I have been doing some more analysis of the funds.

The below table shows the regional split and sector split for three funds. The 50/50 Blackrock fund is the one Im already in and the other two are the two global equity funds I was interested in adding.



Not only is there a difference in the geographical allocation, there is also a considerable difference in the sector allocation between the funds. The HSBC fund has much more technology in it, whereas the Blackrock ex-UK fund appears to be a more even spread, with less technology and health, and more utilities, financials and industrials.

I'll be able to work out what splits I will have in different allocations between these funds, but what I don't know is what proportions I should be aiming for?

OP you need to have a solid strategy and stick with it, or justify why you are changing it. 

You say you wanted geographical allocation ? why? why not industry diversification anyways? USA companies also operate in the UK and Vice versa. 

Are you actively managing or passive investment? 

it seems you don't know what you want and xraying your portfolio is making you much more indecisive. 

Sometimes keeping it simple and then let the market do it's job and balancing over the next decade or so is best, unless your retiring soon. 

The general rule of thumb is to increase your glits and reduce your equities the closer you are to retirement to reduce risk. How much by is personal choice. I would hold 100% equities until I am 55, that is my choice, while others would already have 30/70 split by then

https://monevator.com/

Is a good resource too

danlightbulb

@Prism thanks I've had a look at the Vanguard Life Strategy funds. I can see there are versions with different proportions of equities to bonds. Ive looked at the 100% equities one because I will need to have my own separate bonds fund(s) (because I don't have access to many multi-asset funds as you know).

The first thing I notice is that Vanguard Life Strategy 100% is itself comprised of other funds. It seems to have approximately:

• 25% in three specific UK funds (FTSE all share, FTSE100 and FTSE250);
• 35% in two specific US funds (one general equity fund and one S&P500 fund);
• 4% in a specific Japan fund;
• 8% in a specific Europe ex-UK fund;
• 2% in a specific Pacific ex-Japan fund;
• 8% in an emerging markets fund; and finally
• 19% in a general global ex-UK fund (FTSE developed world index, which presumably is US biased as well)

I could replicate this through my available funds, which are not the same ones by name but they have similar contents?

It feels like I have a couple of funds that would get me in the right ballpark, then if needed later I can fine tune it with some more specific funds?

@Prism I have two key questions please:

1. Should I make these changes incrementally over a period of time? So perhaps only moving 5-10% of my investment between funds per month or per quarter? It would be sods law that the day I move money is the day one of the funds spikes and the other dips.
2. Should I avoid really small funds? Some of the ones available are single digit millions in size. Some are below a million in size. Is there a guideline?

danlightbulb

csgohan4 said:

danlightbulb said:

I have been doing some more analysis of the funds.

The below table shows the regional split and sector split for three funds. The 50/50 Blackrock fund is the one Im already in and the other two are the two global equity funds I was interested in adding.



Not only is there a difference in the geographical allocation, there is also a considerable difference in the sector allocation between the funds. The HSBC fund has much more technology in it, whereas the Blackrock ex-UK fund appears to be a more even spread, with less technology and health, and more utilities, financials and industrials.

I'll be able to work out what splits I will have in different allocations between these funds, but what I don't know is what proportions I should be aiming for?

OP you need to have a solid strategy and stick with it, or justify why you are changing it. 

You say you wanted geographical allocation ? why? why not industry diversification anyways? USA companies also operate in the UK and Vice versa. 

Are you actively managing or passive investment? 

it seems you don't know what you want and xraying your portfolio is making you much more indecisive. 

Sometimes keeping it simple and then let the market do it's job and balancing over the next decade or so is best, unless your retiring soon. 

The general rule of thumb is to increase your glits and reduce your equities the closer you are to retirement to reduce risk. How much by is personal choice. I would hold 100% equities until I am 55, that is my choice, while others would already have 30/70 split by then

https://monevator.com/

Is a good resource too

Hi thanks for your reply. I would like to address a couple of your points.

Firstly, as this is a workplace pension scheme, the funds were all decided for me by the company and the provider. They created a 'default' fund which everyone was put in to, and then gave us this online dashboard where we could move our investment around if we wished. Most people I know have not touched it since.

I had a look at it a few years ago, and didn't really have the time or understanding to do anything with it. Now I have revisited it and realised unfortunately that the default funds they gave us at the start may not be ideal.

I could just leave it alone. 30% of my investment is in a low risk multi asset fund that typically delivers 4% pa, and 70% of my investment is in equities with a 50% UK weighting. I didn't really know, until now, the significance of this.

If I leave it alone, the plan will automatically move my investments from equities to bonds as I approach retirement. If I intervene with it, I will have to then manage it going forward myself.

The choice of funds available within the plan is not like the ones on the open market. There are not many multi-asset funds, and alot of the mixed equity funds are UK heavy. Honestly, I don't know what the right answer is and that was why I posted here.

You say I haven't got a strategy - that's absolutely right! My strategy was created for me when the pension scheme was created by my workplace and I haven't touched it since. Like I said, I could just leave it all in the default funds provided initially, and that would also be a strategy however possibly not a very good one?

Now that I'm aware of what this all means, I am willing to get more involved. The thing is that I have now built up quite a pot (£82k) having been contributing to the scheme for 16 years so far, so I have quite alot of money in the game here now. Any decisions I take have got to be made with that in mind, its not like I'm starting from scratch with a couple of grand of savings.

You ask about what geographical allocation I might want and why. The answer is I don't know. I wouldn't have known that 50% in UK equities was a bit high until a few here said it. I'm starting from scratch here (in terms of knowledge) and need to learn. In the meantime I have alot of money in investments I don't know much about either. Isn't staying in investments someone else picked for me just as bad as trying to work out my own strategy (with advice of course)?

Albermarle

 Isn't staying in investments someone else picked for me just as bad as trying to work out my own strategy (with advice of course)?
If you want personal detailed financial advice about your investments you have to go to an IFA and pay for it .
What you will get here is free/voluntary informed ( hopefully) guidance and opinion .
I think you have already received a lot of this already ( nearly 60 posts in total ) .