Am I out of the market while switching funds?

Victorwelldue

On 17th Jan I switched funds in my workplace pension from the L&G default multi-asset fund to:

50% world ex-uk index
7.5% UK index
7.5% EM index
35% UK GOV bonds index (Gilts) - chosen to hopefully provide some balance to equity volatility

The switch took around 4 days to complete and pot value dropped 4% which is the first time I'd really seen the value go down since the Covid dip in 2020 as I contribute a decent amount every month that usually cancels out any small dips along the way (in terms of overall pot value).

Now I'm aware there's a lot of this going on at the moment so I assume its just bad luck that the date I decided to switch more or less coincides with the recent market fall but it got me thinking does the act of switching funds in itself cause pot value to fall? In other words was I "out of the market" for those 3 or 4 days while switch took place which maybe didn't help with the decline?

Another nagging thought I had was that I had made bad choices but then I can see the multi-asset fund I left is also down around 3% in same time period so I guess its just horses for courses. I'm not really concerned about the drop in value and I understand its likely to get worse, It's more about understanding the mechanics of switching in case I decide to tweak my funds again.

eskbanker

The issue of transaction timescales is a question for your pension provider really, but I wouldn't expect you to be out of the market for four days - have they issued any documentation relating to the transaction(s) that clarify exact dates?

El_Torro

From what you say it sounds like you were invested for most of those 4 days. If you had been out of the market you might have saved yourself a fall of a couple of percent. 

I'm not sure there's any way to know for sure, other than by ringing your platform and asking them this same question. It may differ between providers. I would have thought there would be some lag between selling the old fund and buying the new fund, though that's just guesswork on my part.

Thrugelmir

Have you looked at the contract notes that would have issued for the transactions?

GeoffTF

Vanguard quotes 4 to 7 business days to switch funds on its platform:

https://www.vanguardinvestor.co.uk/need-help/answer/how-long-does-it-take-to-switch-from-one-fund-to-another

You can avoid that problem by having some cash in your account, and doing a purchase and sale at the same pricing point. Vanguard does not charge for trades, so you can do the switch a little at a time.

dunstonh

The switch took around 4 days to complete and pot value dropped 4% which is the first time I'd really seen the value go down since the Covid dip in 2020 as I contribute a decent amount every month that usually cancels out any small dips along the way (in terms of overall pot value).

You missed a drop last year then.

Am I out of the market while switching funds?

Some platforms/providers will pre-fund switches so you are not out of the market.  Some will not and will wait until settlement on the funds you sell before they will purchase the new funds.

Victorwelldue

Thanks all. I think it gave me the detail of how they would do it onscreen just before I confirmed and I should have paid more attention to this. The emails & letters they sent me prior to and after the switch don't go into this level of detail, they just confirm basic details of the switch but I can contact them to ask as suggested.

Thrugelmir

Victorwelldue said:

Thanks all. I think it gave me the detail of how they would do it onscreen just before I confirmed and I should have paid more attention to this. The emails & letters they sent me prior to and after the switch don't go into this level of detail, they just confirm basic details of the switch but I can contact them to ask as suggested.

These basic details will include a dealing date. Contract notes are very basic. There's little to be said. Simply a paper record  confirming the action taken.