Choosing Pension Workplace Pension Fund

koala719

Hi there,
I am 40 years old and have been revising my pension lately and realised I have far less than my ideal   
I am employed full time and my workplace pension is with Legal and General. All my contribution so far is on the default fund which is "L&G PMC Multi- Asset Fund 3" but the performance is not amazing.
I would like to choose different funds to make my money work harder. I am currently interested in the following funds: 
- L&G PMC Asia Pacific (ex-Japan) Equity Index Fund 3
- L&G PMC European Fund 3
- L&G PMC Global Equity Market Weights (30:70) Index Fund - GBP 75% Currency Hedged 3
- L&G PMC HSBC Islamic Global Equity Index Fund 3
I searched those funds in Morningstar to see its rating but I could not find the information. I wonder if anyone knows about these funds? 
Also I wonder when I should switch my default fund to new funds. At the moment, it seems that the market is unsettling to me, is it because of December? 
Should I wait the switch until January (so that at least Brexit deals will be come clearer)? Anyone has any opinions on this? 
I tried to search as much as I can but there are so much information and is quite overwhelming - I am struggling at the moment trying to decide whats best, and would be great if anyone here could offer their kind assistance!!!

Albermarle

Firstly it is good that you have actually looked into what your pension is invested in - most people never do.
Default funds will never produce 'amazing' results but also will not have too many very steep drops either . If you move to riskier ( higher % equity) funds they should produce better results in the long term, but it will be a more bumpy ride. You have to decide whether you can live with this sort of volatility, or not, as not everybody can ( they get scared when markets lurch down and sometimes even sell at the wrong time in a panic) 
Presumably in the L&G pension you can stay with a multi asset fund but go to 4 or 5 or 6 or even 7 I think ?
Regarding timing the markets are always unsettled and Brexit will make little difference to global stock markets . 

gm0

Agree.  Good to wake up and take the time to think about this.  It's hard - there are so many competing demands on attention in career and home life at that age. 

Try and think through what for your circumstances is the correct asset mix saving every month for you.  Then pick cost effective funds or take a gamble on promising active choices to implement that.  My experience with L&G products in my workplace scheme from 1980s to present day is that the simple products were better than the complex ones in long term performance. And in my scheme were more aggressively priced.  I ended up with passive choices for that reason. This let me implement my choice of asset allocation for regular saving without messing about with transfers and SIPPs alongside.  Because the value of long term hedging is highly debatable on cost (certain) / benefit (uncertain).  A number of the L&G funds have this hedging baked in which screened them out for me.  You need to develop your own point of view on currency FX.  I also dislike the mixed provider half of this and half of that - complex benchmark funds that L&G sometimes offer.  I like things that do one thing which I can easily check up on i.e. mark to market with other public data more easily.  Trusting soul that I am.

For me at the same stage (early forties) I thought that my best asset allocation was 100% equities and proceeded on that basis. But it smarted when the fund halved (or worse) as mine did circa the credit crunch.  I had less saved and was busier in the tech stock crash of the 90s and pension reporting was a letter once a year for many of us then so I barely noticed that time.

But I just kept on buying and eventually the lots of new cheap units zoomed up and the temporarily down old units in the fund grew back in the bull run that followed. At the time I didn't really understand how good for me the volatility could actually be in the end in terms of units bought cheaply.  It's just arithmetic but to many of us it's just not intuitive.  The market may or may not be as kind over the next 20 years.  But the value of buying growth assets regularly through volatility dips around a long term growth trend cannot be overstated

So I just can't see the point of a highly conservative growth asset avoiding allocation in very long term accumulation (20+ years then another 30+ in drawdown). Extreme investment horizon.  So my opinion is that below 40% equities is nuts - compounded returns foregone. I'd say 80% equities and up but that's me. And I know others think differently and more cautiously. 60% funds have a widely used compromise weighting and are used by many.  Backtesting (for drawdown) i.e. deaccumulation caps the "best" % at around 70% before sequence of return and sharp corrections/recoveries cause trouble to the regular seller in retirement for some starting conditions. But in accumulation sequence of return does not matter.  Be more Dory - "Just keep buying".   Good luck working out what is right for you.

tacpot12

I would agree with gm0 there is no point investing in conservative asset allocations for long term accumulation. The L&G Multi Asset fund is not great, but neither is the Global Equity fund, and the HSBC Islamic fund is too new (at L&G) for its quality to be seen yet. The other two funds may be okay, but if you invest in the Global Equity Fund, you are more or less certain to be investing in the same assets as the other two funds.

Although L&G have only been offering the HSBC Islamic fund for a year or so, HSBC has been managing the fund for at least five years so you can look at other providers that offer access to the HSBC Islamic fund to get an idea of its performance history. It's outperformed the L&G Global Equity by about 100%! The L&G Global fund grew about 60% over the last 5 years, the HSBC Islamic fund grew by about 120% over the same time period! 

If I were you I would put 50% of your savings to date into the Global Fund and 50% into the HSBC Islamic fund, and keep your eye on the Islamic fund and if it continues to outperform the Global fund, move everything to it, unless you can find another global fund that L&G offer that has performance comparable with the Islamic fund. 

Linton

Before investing too much in the Islamic fund I suggest you look into the underlying investments.  The HSBC Islamic Global Equity Index Fund, which I think is the same as yours without the L&G label, is 31% Tech, 71% US, and its top 10 holdings represent 35% of the total with 25% of the entire fund in Microsoft, Apple, Facebook and Google.  

It may have helped the performance figures but I see this this sort of allocation as frightening.  If you really want something very adventurous there are better choices,  

koala719

Thank you all for taking time to reply to my post - I really appreciate your input! 

Presumably in the L&G pension you can stay with a multi asset fund but go to 4 or 5 or 6 or even 7 I think ?

Unfortunately there are no multi asset fund 4 (or higher number) available. And other multi asset funds performance seems very similar to Multi asset fund 3  

Before investing too much in the Islamic fund I suggest you look into the underlying investments.  The HSBC Islamic Global Equity Index Fund, which I think is the same as yours without the L&G label, is 31% Tech, 71% US, and its top 10 holdings represent 35% of the total with 25% of the entire fund in Microsoft, Apple, Facebook and Google.  

Yes - I would like to spread my investments geographically and different sectors. It is a little scary for me to put all money in HSBC Global Equity Index Fund though the performance seems amazing so far.
What do you guys think to spread the money into those 3 funds?: 
- L&G PMC HSBC Islamic Global Equity Index Fund 3
(Geo: Primarily US, Sector: Tech, Health Care, Consumer goods etc.)
- L&G PMC Asia Pacific (ex-Japan) Equity Index Fund 3 
(Geo: Australia, Taiwan, Korea, HK,Singapore, Thailand, Malaysia etc. Sector: Finance, Tech, Industrial, Basic Materials etc.) 
- L&G PMC European Fund 3
(Geo: France, Switzerland, Germany and other EU countries, Sector: Consumer Goods, Tech, Industrial, etc.) 

gm0

These issues with "what is in it" with some of the funds offered does not combine well with it being relatively hard to xray these not on the public sites funds together as a portfolio to explore what a given asset mixture actually is once overlaid. 
% by geography and top 20 holdings can give some idea of overlaps but it's scanty but it will have to do to guide selection.

US and Tech concentration is definitely an issue to grapple with.  Expecting .com crash 2 and being "out" on tech did not go well for Woodford as the turn failed to turn up in time for others to repent and for his private equity bets on pharma to come good meanwhile. That does not mean however that he was entirely wrong about excess exuberance and that it cannot happen and anti-trust and privacy rebalancing and taxation changes could start to deflate the future earnings expectation market cap bubble for some of these mega stocks.  Intangible value (of network effect/monopoly or very dominant position) is a tricky thing indeed.

I find "at weight" global equities is stuffed with at least as many tech stocks as I want. I don't want to skew even more towards them reducing my diversification and increasing my exposure to tech revaluation.  I feel like I have to hold them.  But I don't want to "only" hold them. 

Be careful of this fund overlap issue.  Another argument to keep things simple and to know what your underlying assets are or the clear boundaries of the active trading space the hired fund manager is roaming in for those units.

Albermarle

 Although plenty of debate about what UK % to have , zero or near zero is not the norm .
Another possibility would be to keep some % in the default fund . Then if there is a big market slump you will not get hit quite as hard.