SIPP investment - Japan...and China?

older_and_no_wiser

underground99 said:

At some point once you have done all that and skewed your asset mix away from what HSBC global strategy tried to give you (increasing the proportion of your portfolio that's in equities, shifting the regional asset allocation from their volatility-managed product towards unhedged global equities and then towards emerging markets and then to Australia and HK and then to Japan and China...) you might think to yourself - why have I gone so far away from what HSBC tried to give me, should I not add back some UK allocation (which is where I live) or some Europe allocation (which is our nearest international trading partner) or some more bonds or non-equity assets (because all the three to five funds I added on top of the HSBC mixed asset fund were in the equities space and I've ended up with something quite a bit more volatile than the mixed asset fund I was originally looking at).

Yes I fully agree after reading your comments. Perhaps the mantra of "a little knowledge is a dangerous thing" is true with me! I've spent so much time recently researching on YouTube, forums, plan portfolios/facts etc. There's so much information (knowledge?!) going around in my head now. I'm waking up at 6am and researching the funds I've been finding out about from YouTube videos the night before. This is all after having zero knowledge 2 months ago. I have learnt that my pensions were underperforming and needed a re-jig. I did speak to a financial advisor who pointed in the right direction with my plans.

Maybe I should just go with HSBC Global Strategy and nothing else. It's diverse and has a good track record (although I know that's no indication of the future) - and low fees - which is not everything but these can eat into your pot over years. But will I miss out on China (and Japan)? No, stop, too much thinking! I'm skewing my pot again! FOMO?

Thrugelmir

swleventhal said:

underground99 said:

At some point once you have done all that and skewed your asset mix away from what HSBC global strategy tried to give you (increasing the proportion of your portfolio that's in equities, shifting the regional asset allocation from their volatility-managed product towards unhedged global equities and then towards emerging markets and then to Australia and HK and then to Japan and China...) you might think to yourself - why have I gone so far away from what HSBC tried to give me, should I not add back some UK allocation (which is where I live) or some Europe allocation (which is our nearest international trading partner) or some more bonds or non-equity assets (because all the three to five funds I added on top of the HSBC mixed asset fund were in the equities space and I've ended up with something quite a bit more volatile than the mixed asset fund I was originally looking at).

Yes I fully agree after reading your comments. Perhaps the mantra of "a little knowledge is a dangerous thing" is true with me! I've spent so much time recently researching on YouTube, forums, plan portfolios/facts etc. There's so much information (knowledge?!) going around in my head now. I'm waking up at 6am and researching the funds I've been finding out about from YouTube videos the night before. This is all after having zero knowledge 2 months ago. I have learnt that my pensions were underperforming and needed a re-jig. I did speak to a financial advisor who pointed in the right direction with my plans.

Having a lot of knowledge won't help you from dropping a clanger. Stock market investing is risky for good reason. You'll never stop learning. 

In what way were your pensions underperforming?  Performance is relative. Chasing returns based on past performance alone isn't a sensible approach. 

older_and_no_wiser

In what way were your pensions underperforming?  Performance is relative. Chasing returns based on past performance alone isn't a sensible approach. 

I should maybe retract the "under performing" quote. My Standard Life work SIPP has recently been transferred into a new plan (BlackRock Consensus 85 via Hargreaves Lansdown) due to my employers being acquired by another company. I used the opportunity to merge the two plans into the HL Consensus fund as I had no visibility of the old plan (no online access) and discovered the fees were quite high. Now with HL, I have access to so many funds and have moved some of the BlackRock pot across into a Baillie Gifford fund and the Marlborough UK Micro Cap fund (yes - I know - I'm skewing again!)

My personal AVC (SIPP) was with ReAssure and again I had no visibility of it. After investigation, I found out that again the fees were quite high and I wasn't getting great returns. I found ReAssure very difficult to deal with. They wouldn't even tell me on the phone what their fees were and I struggled to find the investment funds online. So I've decided to go it alone and transfer into Interactive Investor for self managing. 

dunstonh

Following on from the above, I'm wondering if Japan is worth a small input. I don't have much exposure there with my proposed portfolio. I realise that now isn't a great time for Japan as they are behind with the Covid vaccination and will take a blow with not having spectators at the upcoming Olympics. However I have almost 10 years till retirement and will be retaining my portfolio for drawdown after that (albeit with a lower risk list of funds by then!)

When you build a portfolio, you can either hit and hope by putting random percentages in different countries/regions or you have a structure and process in place.   Random hit and hopes rarely result in the best returns over the long term as it usually means the person doesn't know enough about what they are doing.

The multi-asset funds, like HSBC GS, use actuarial data, analysis, research and a dose of opinion to decide their weightings.   

So, what you are doing that makes you think you can do a better job than HSBC?

Thrugelmir

How many funds do you hold in your portfolio?  

Albermarle

My Standard Life work SIPP has recently been transferred into a new plan (BlackRock Consensus 85 via Hargreaves Lansdown) 

I think you will find that the Blackrock Consensus range is not the best of the multi asset funds on offer , not based on past performance anyway . ( Easy to check on Trustnet against approx equivalent HSBC global strategy , Vanguard Life strategy etc )

IN the last couple of years Blackrock have brought out the Mymap series , which could be worth a look although past performance data is rather short .

dunstonh

My Standard Life work SIPP has recently been transferred into a new plan (BlackRock Consensus 85 via Hargreaves Lansdown) 

Thats a shame as the SL SIPP is cheaper than HL and being a SIPP, it is whole of market.  So, you could have picked over 30,000 investment options.... unless it wasn't the SL SIPP but an SL GPPP or GSHP.

green_man

In my opinion if you are a relative novice investor, then going with something like Global Strategy is a great shout. It should then house the vast majority of your funds.  The main area that Global Strategy is deficient is in smaller companies so adding a fund or two to fill this gap (probably no more than 10% of your total funds) is a sensible approach.

if you then have a strong feeling that say Japan is going to outperform then sure add a Japan fund, but be aware that it is already covered by Global Strategy so you are skewing their researched allocation.

Nebulous2

underground99 said:

swleventhal said:

making sure I diversify as much as possible. This will be a combination of 4 funds including HSBC Global Strategy, iShares Pacific (ex Japan), emerging markets and a global index tracker. 


Following on from the above, I'm wondering if Japan is worth a small input. I don't have much exposure there with my proposed portfolio.

I have almost 10 years till retirement and will be retaining my portfolio for drawdown after that (albeit with a lower risk list of funds by then!).

I would think of it this way:

You want to diversify as much as possible so you are making a good start with HSBC Global strategy which is a mixed asset basket of holdings, allocating your money across global developed and emerging equity markets, government and corporate bonds and some property.  

OK, job done.

But then for some reason you are going to get another 'global index tracker', which takes some more of your money and allocates it across global developed and emerging equity markets, increasing the volatility of your portfolio that the HSBC Global Strategy team had already created for your needs, by putting another slice of your money into equities only rather than bonds and property.

And then you are going to get another fund on top, and with this slice you are going to put the money into emerging markets equities, again changing the mix of the portfolio which HSBC Global Strategy team had tried to build for you and which you had edited by adding extra global equity index. You edit your portfolio mix again by adding more emerging markets than the combination of HSBC's mixed asset fund and your global tracker wanted to give you.

And then, despite already being diversified with fingers in a lot of pies by this point, you want to take another slice of your cash and put it into more equities: 60% in Australia and 37% Hong Kong/Singapore and 3% misc other - so you buy a pacific-exJapan tracker, further distorting the allocation that HSBC Global Strategy team had given you in the mixed asset product and which you had edited by adding a global equities-only tracker and edited again by adding an emerging markets equities-only tracker and are now editing again by adding an Australia/HK/SG fund.

And then you think, hold on, why have I added this Australia / HK equities fund and ignored Japan whose stockmarket capitalisation is twice the size of the one tracked by the iShares pacific-ex-Japan tracker. So you ponder adding more equities there too. You also ponder adding a dedicated China fund because although you already have money allocated to China in the HSBC mixed asset fund and the global equity tracker and it's likely to be the biggest component of the emerging markets fund, you wonder if a dedicated fund manager on the ground could find better stocks than just buying the biggest ones in the Chinese indexes.

At some point once you have done all that and skewed your asset mix away from what HSBC global strategy tried to give you (increasing the proportion of your portfolio that's in equities, shifting the regional asset allocation from their volatility-managed product towards unhedged global equities and then towards emerging markets and then to Australia and HK and then to Japan and China...) you might think to yourself - why have I gone so far away from what HSBC tried to give me, should I not add back some UK allocation (which is where I live) or some Europe allocation (which is our nearest international trading partner) or some more bonds or non-equity assets (because all the three to five funds I added on top of the HSBC mixed asset fund were in the equities space and I've ended up with something quite a bit more volatile than the mixed asset fund I was originally looking at).

Presumably you know in your own mind why you want to start with a core HSBC mixed asset fund that gives you a decent diversified portfolio and then wreck those allocations by 'undiversifying' it into particular tilts towards more equities and specific regions that you like the sound of.  However, without that knowledge of what is going on in your own mind and why you feel you are better at constructing a portfolio than HSBC's global strategy team, it is difficult to give you pointers about how you might like to do something different.

As you mentioned, you 'don't have much exposure to Japan with your proposed portfolio' because you started off with something global and then tried to 'diversify' it by adding other parts of asia and emerging markets and are thinking about adding some extra China but had ignored Japan. It's a large economy and doesn't make sense to ignore it; but then likewise it doesn't make sense to ignore UK and Europe either, but you haven't chosen to add in those areas.  Perhaps you have other investments elsewhere (e.g. ISAs or workplace pension) where you have a more balanced approach or could at least manage this SIPP in conjunction with a broader portfolio of other assets making up your overall retirement fund. Without knowing that, again it's quite difficult to comment.

FWIW, I have a number of holdings with some sort of Japan exposure but across my main SIPP and ISA the ones with the greatest exposure to Japan as Baillie Gifford Japan, Atlantis Japan Growth, Matthews Asia Dividend (about 30% Japan) and iShares World Size Factor ETF (about 20% Japan). I don't have any individual Japanese stocks (having sold Softbank after a 'good run' last year).

Thank you for that very detailed post. 

I recently posted about buying a Japanese fund, was generally advised against it - although I did it anyway. 

I didn't understand what was happening until I read your post.

You are describing my decision-making process.

I do a huge amount of research, read everything I can find - including for investing, daily emails from trustnet, interactive investor and fidelity. Then I add a major chunk of whim. 

I set out to buy a bungalow with enough garden / drive to keep a caravan and ended up with a 280 year old 3 storey house with no outside space. 

At my age I'm unlikely to be able to completely tame my impulses, but your post has helped me understand them. 

Albermarle

Thats a shame as the SL SIPP is cheaper than HL and being a SIPP, it is whole of market.

The SL SIPP available to the general public is not cheaper, and is more restricted than HL as far as I know . ( only branded SL as actually owned by Phoenix) 

I presume you refer to the superior products available to IFA's from SL directly .