UK based funds - brexit and onwards

DireEmblem

I think only the OP can answer their questions - what made them split their funds the way they did, and are they still happy with the allocations.  Next question is are they happy with their fund choices.  Morningstar should be a good resource to find comparable funds, that have cheaper fees, and likely better long term track records.  None of that is guaranteed other than costs.

Personally, I think there is a lot of potential in UK assets, especially given the market has been dragging behind others due to what I would call pricing in 'risk' or investor sentiment.  A lot of the big UK companies actually do business globally, so some could be seen as 'cheap' in comparison to others.  The UK FTSE100 especially, similar to the DAX30, is however not very diverse in terms of the companies that make up the index.  As a result, not the best to compare against other indices directly that have different market sector weightings.  A lot of people also look purely at the index, and not the total return which includes the dividend payout figures.

All in all, its up to you to make a decision of what you would like to invest in, how to split your funds, and then where to place your trust.

When you invest in a fund, you invest in the funds philosophy, and trust that the Investment Managers of the fund act in the best interests of that, and have a keen eye for the best stock picks to include in your chosen strategy.

Albermarle

 Should we be looking at putting money in to UK stocks/funds now brexit has been settled

Personally I would say that the effects of Brexit remain very uncertain in the short , medium and long term , despite the trade agreement . Which anyway is only for goods , not services.

Then if you add the damage from coronavirus, you can not say that we are at some kind of turning point for UK stocks as we are still in the middle of Brexit and virus issues.

bowlhead99

VXman said:

dunstonh said:

Don't particularly want to go fully DIY. Never have done. I'm aware HL aren't the cheapest but this is just a part of my portfolio.

you are picking the platform.  You are picking the investment funds.  You are making the decisions.   Currently, by using HL own brand funds you are paying more than you need to.   

I'm not using a model, but I'm also not chucking money in risky stocks. Actually returns on my investments have been an average of 10% over all over the last couple of years so I'm happy with that. No doubt I could do better but I know my limits.

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   If you do not have a strategy then you should stick with multi-asset funds or a global (inc UK) tracker.   

Well, thanks for your unsolicited advice. Was't actually the point of my post.

Take a step back from being offended and imagine yourself in the shoes of a third party that has come across this thread and wonders what kind of replies it might get. The gist of your opening post was that:

1) You had seen your selected UK fund go down or stay flat while others went ahead. Despite regretting owning it and not wanting to own it, you resolved to keep it, but with the intention of selling it when its value got back to some arbitrary point ('a little above what I had paid for it') at which point it would be the right time to no longer own it and to buy something else.   

2) Then you decided to change that plan to just be an idea of holding it indefinitely to see what happened to it.

3) Now you've heard that Brexit has been settled (and of course it was always going to be settled one way or another) you're pondering a third (and final?) plan for this fund which is to buy more of it, but only if enough of the anonymous forum users think the long term will be positive for UK companies. Though presumably what counts for adding to the portfolio is not whether we think the long term will be positive, but whether the long term will be more positive than the market has currently factored in to the share prices of the types of companies to which your particular fund will choose to be exposed.

The unsolicited advice from the IFA in the room was that:

(a) if you are looking to take exposure to the UK equities sector via funds, HL's own branded funds are a poor place to do it; depending which way you have gone about it, you will either be using their Multi Manager UK Growth Fund at 1.3% OCF plus 0.45% annual access fee (which spreads your money into other managers' funds and charges you more than they would have charged you) or their HL Select UK Growth Fund at 0.6% plus 0.45% annual access fee whose track record doesn't even go back as far as the Brexit referendum.  Neither of those are funds in which we'd generally have expected people here to have recommended you invest in in July 2019 when you started your £10k dalliance, and they are not funds that people would think you should add money to now, being expensive and/or unproven.

(b) Whether you really need the 50k that's split between HL's UK growth and global growth funds or not, if you're investing on a DIY basis you should have a strategy in place to determine what proportion of your money gets invested where, within your overall allocation. Deciding that the UK allocation should be entirely sold if only it can get back to a little better than break-even, and then upgrading its status to decide it should be held indefinitely out of curiosity to see what happens, and then upgrading its status again to decide that perhaps you should add more to it, but only if some people online say that you should do it - does not seem like much of a model, as you admit yourself.

c) So the recommendation is to rip up your strategy (to the extent you think you have one) and start again with an actual strategy.  That can involve using a 'global (including UK)' fund allocation (rather than holding two separate buckets and attempting to balance them periodically) or it could involve a multi-asset fund containing UK and global equities and other stuff where a fund manager determines the allocations to keep the fund within some volatility range while preserving or growing the overall pot.

A plan involving a haphazard percentage allocation to your home country that changes three times over the course of a year on a whim or based on some psychology (gotta get back to break even / ah never mind I don't need the money / ooh UK shares might shoot up in the coming years now we have a brexit) is not much of a plan, if we're honest.    The HL multi-manager funds are expensive (a premium over buying their underlying fund holdings direct) but don't actually give you any advice on how much to put into each of them, and the premiums you are paying to use those expensive funds (and that expensive platform) would go a long way to actually buying professional advice. 

So, I can understand why the IFA in the room gave you the 'unsolicited' advice that he did ; from laying out the backstory as you did (admitting you don't have a model, that you are flipflopping on whether to sell or hold or buy more of one particular fund, and that you are using a high cost or unproven fund on a high cost platform) you have effectively 'solicited' exactly the sort of answers he offered.

If it helps, I expect the 'deal' with the EU will be broadly positive compared to not having a deal, though some types of businesses will be worse off because financial and business services can be more complex than goods passing through a port (for example financial services firms lose their passporting rights and are at the mercy of the EU's decisions on 'equivalence'); scientific collaboration and strategy on energy and transport may be more difficult, incoming immigration is made more difficult etc. And clearly we need to get a bunch of other deals with other countries too. But there are several other Brexit threads going.

If this pot of money is only 'funding fun' rather than an important part of your standard of living it is easy to downplay the importance of allocating your money sensibly, though presumably you would rather be able to afford more fun than less fun and would not want to take the risk of a poor outcome where you really limit your fun. So, you should still have some sort of a 'model' on how to allocate your money between niches such as 'uk growth', 'global growth' as well as other asset classes and niches (income / value, property, infrastructure, bonds etc).  If you did that, the decision to add more to a UK growth fund may be as simple as 'is it below the current target weight in my model?'. 

If you don't have a model because buying or constructing a sensible model of how to allocate your money feels like homework and would rather invest your money by some sort of 'gut feel'... but you know you have been deliberately holding back from your UK allocation for the last year due to being disappointed that the US-based tech companies' values have grown so much more than UK firms... you could probably stand to add more UK exposure, because you may be 'underweight' if you were to actually try to map what you have in this 'HL pot' against a model, at least compared to where you were when you started the journey in 2019.

If you don't have a model, or you do and you're already at target weight but willing to break it for some 'gut feel' because it's only play money, then a key point on considering adding more to your UK allocation is whether the market is currently pricing UK companies 'fairly' for the risks and rewards. There aren't many market commentators saying they think that UK 'growth' companies are well overpriced for the profits and growth on offer. So we are probably not in a 'it's dangerous to add anything to UK allocation, because it's all a big bubble that's going to pop soon' scenario.  Which means you could probably afford to add a bit to the UK allocation without causing any damage to your objectives, especially if your objectives are only 'a bit of fun' and you know you haven't been adding anything to your UK allocation for the last year while the non-UK allocation has been going gangbusters.

The question then is whether this UK allocation that you are adding should be of the 'UK Growth' flavour or perhaps 'UK Value' flavour or 'UK neutral / bit of both'; and having decided it should be one form or other (depending on your overall model), should it be in the expensive (HL Multimanager UK Growth) or unproven (HL Select UK Growth) fund, or some other fund entirely - either not 'UK Growth', or not HL at all. 

My vote is that if you have deliberately refrained from adding to your UK allocation while you have added to other areas (or you haven't added to those other areas but they have grown significantly anyway with recent market conditions), you should probably top up the UK - as all company types and stockmarkets will have their 'time in the sun' from time to time and certainly the 'global ex-UK' growth equities sector which you have been favouring is one that can be very volatile.

NottinghamKnight

..and of course the IFA isn't giving advice on these boards only opinion.

[Deleted User]

VXman said:

I have have 10K in HL UK Growth funds since June 2019. I initially regretted this purchase as it dipped below my initial purchase cost and hovered around there for a long time. I told myself that as soon as it got a little above what I paid for it I would sell. Particularly as I have invested now around £40K in HL Global growth funds in the same time and they have consistently performed well. 17% since June 2019 but has been up in the 20%'s at points.

In the end I decided to keep the 10K in UK Funds and not increase but to see how it does over time just out of interest. It's now at 11% return since June 2019.

So, the question is: Should we be looking at putting money in to UK stocks/funds now brexit has been settled. Do people think the long term will be positive for UK companies or not?

No. 

You are already heavily aligned with the fortunes of Brexit Britain through your sterling denominated assets - your house, savings and pension - against which the fluctuations of the HL fund are quite insignificant. 
Once you look at your position in the round, you may wish to moderate that concentration in £, without taking any view on Brexit.

masonic

VXman said:

So, the question is: Should we be looking at putting money in to UK stocks/funds now brexit has been settled. Do people think the long term will be positive for UK companies or not?

Since I don't want to risk saying something 'unsolicited' I'll restrict my answer to the precise question posed, with no explanation whatsoever...

Yes

VXman

bowlhead99 said:

Take a step back from being offended and imagine yourself in the shoes of a third party that has come across this thread and wonders what kind of replies it might get. The gist of your opening post was that:......

Thank you for that very lengthy and detailed response. I will read that again a few times to ingest.

On my OP, I wasn't offended but felt I was having a question answered that I didn't ask, and in a critical manner. In a nutshell I was asking-....'from some of my investments I had noticed that performance in UK based funds had improved recently. What is peoples long term thoughts on investing in UK based funds.' Perhaps I should have said this without  giving anymore detail!

Another_Saver

No one knows what the UK is going to do, and Brexit news shouldn't affect your view. Over the very long run the UK and global markets have behaved very similarly except for the last 5 years (or 2007 or 2013 but not consistently, and any long period including the last 5 years). People have all sorts of different opinions and you shouldn't rely on the opinions of others to inform your investing decisions. Also, those funds may behave differently to an equivalent index fund so general opinions about the UK Vs global markets may not be relevant.

Eyeful

VXman nobody can predict the future, so your guess is as good as anyone's. What I can predict is the more money you pay in fees and charges to HL, the less money will end up in your pocket. You mentioned global funds. I suggest you stick that money in a low cost Global Index or ETF tracker and forget about it for the next 10 to 20 years.  Think about these for instance:-
HSBC ETFS PLC MSCI WORLD ETF (HMWO)
VANGUARD FUNDS PLC FTSE ALL-WORLD UCITS ETF (VWRL)

BananaRepublic

Another_Saver said:

As for the UK/global debate, the past 5 years the UK has done crap (or since 2007 and 2013, but not consistently). If you look at any long term period out to 1990 that includes the last 5 years, the UK has done crap even though until the last 5 years, the UK and global market were more or less behaving the same way (comparing large Cap or total market indices on a nominal total return basis in £, just use the indices or sectors on trustnet or compare Barclays UK equity index with S&P 500 total returns data which is widely available) and have performed similarly over the very long term.

The FTSE 100 is a poor index to invest in. But UK investments can and do perform well if you look at small and medium size companies. There are plenty of good funds. But it’s best to diversify across markets so look to the US and Europe too, and maybe Asia. Vanguard VLS 100 is invested about half in US stocks, though US stocks have done very well over the last decade or two. 

I think the advice from dunstonh is sound and it did address your questions. Gift wrapped off the shelf funds are good marketing, and like it or not you’re making investment decisions when buying them.