World index funds

Matt_22

I currently hold hsbc ftse all world index with one platform about 60k. The last couple of years I have invested with a different platform mainly in tech. I am looking at adding to a world index fund again I don't no whether to start putting in to hsbc again with this platform. Am worried one is only covered by so much if one goes bust? Around 85k. Or look at a vanguard tracker or fidility but I think there's large cap only.

masonic

The real value of having FSCS protection is that it covers your share of administrator fees should your platform go bust, and your share of missing assets, should there be an imbalance. If you stick to major platforms and fund houses, there is no chance of the per-investor cost of administration being anywhere near £85k, and unless a high percentage of the HSBC FTSE All World Index fund held across all investors in the platform went missing, your share of any missing units is similarly not going to be anywhere near £85k (very likely none of the assets will be missing).

Vanguard and Fidelity will have funds tracking either FTSE All World, FTSE Developed World or MSCI World (last two do not include emerging markets). All of these funds are cap-weighted, so they will be mostly large cap. Vanguard has a 'Global All-Cap' index fund, which includes a higher weighting to smaller companies.

Matt_22

Can you explain the 85k fscs protection please? I thought with having around 60k in hsbc already I am close to that? Or am I thinking wrong. That's for the knowledgeable reply.

ChilliBob

Someone else can explain better perhaps, but in essence, say HL or II, iweb etc don't own the investments you have made.

So, if your provider goes bust as I understand it the customers and their investments will be placed with another provider. 

So, there is a chance you cannot access your funds for a while, but a v low chance they are gone. 

If you had larger amounts then perhaps diversifying across more than one platform, and with more than one fund manager might be sensible. 

I'm pretty sure there are some on here holding six figures with one fund manager on one platform 

Secret2ndAccount

Your HSBC fund belongs to you, and not to your platform provider - they are just storing it for you. That's the good news.
Now for some bad news. If your provider goes bankrupt you might find there is nobody there to call in order to sell or transfer your holding to get at your money. In time, your holding will be moved to a provider who isn't bankrupt, so you will then have access again.
Also, if your provider has 10,000 customers who hold HSBC fund, they don't hold 10,000 little pieces. They have one lump of 50 million (or whatever) of HSBC, together with a list of how much belongs to whom. It's possible, with an organisation that went bankrupt, that the last bit of buying or selling or bookkeeping wasn't completed correctly, and that there isn't an exact match of the amount of HSBC with the amount listed per customer. Any shortfall is shared out by the administrator. So your holding could come up a bit short. This is where the FSCS steps in and your 85k protection is used to top up the missing part so that you get back to the full holding you expected. So if you've got 85k of investments in one place, I wouldn't worry. If it's 850k, maybe you could think about worrying. Probably, imo, there are still better places to allocate your worrying time

masonic

I've nothing to add to the above comprehensive replies.

deltrotter

As long as there hasn't been fraud and they do actually hold the funds they say they do...

Matt_22

Are you protection for the value of your investment or just the cash value orginally thanks

masonic

Matt_22 said:

Are you protection for the value of your investment or just the cash value orginally thanks

The value of your investments and any cash on the platform. In the case of missing investments, during the administration a date would be set towards the end of the process where the investment will be valued on the market and you'll be able to claim this from the FSCS. There would be some unavoidable time out of the market while you wait to be paid, but much less than if they took a snapshot when the platform went bust.

deltrotter said:

As long as there hasn't been fraud and they do actually hold the funds they say they do...

The protection includes where there has been fraud, but the likelihood and impact of fraud will be greater in the lesser known and smaller providers. As a case in point, a few of those investing in a particular FTSE250 company with SVS Securites had to take a 30% haircut to account for missing shares, due to the low number of shares held in aggregate by the platform. This illustrates the risk of using an obscure broker/platform, and holding obscure investments within it.

Where the platform is a fraud, there is no protection, just like there is no protection if you save money with a fake bank advertising on facebook.

But there is an important difference between FSCS protection for savings, where all you need to do is make sure the bank is genuine and covered, and investments. For investments, it is more important to be choosy and if exceeding the FSCS compensation limit, stick with the major providers with a track record, reputation and lots of assets under management. That will reduce your platform risk several orders of magnitude below the typical investment risk you'd be taking on.