Nest workplace pension poor investment?

penners324

Linton said:

BlackKnightMonty said:

Hi,

Take a look at the NEST Sharia fund. I switched into this fund when I joined NEST as it had been the best performing. It still is thr best performing. Although tech stocks are a bit toppy right now.

I would be very concerned about  the NEST Sharia fund's lower diversification than a standard global index fund.  NEST seem rather coy about its sector allocation, but the top 10 underlying holdings are similar %s to those of  HSBC's Islamic Global Equity Index fund.

That fund is 36% Tech,  16% Healthcare ( eg pharma) and 11% Communications (mobile phone, networks etc). Generally it is heavily wieghted (62%) towards growth companies.

This allocation can be compared with a typical global equity index fund: 25% Tech, 12% Healthcare, 7% Communications with an allocation to Growth companies of  36%.

It is HSBC's Islamic global equity fund

DavidAC

If you were in the default it would be the NEST Retirement Date Fund. Which one depends on your selected retirement date. Unless you are near to retirement it should perform close to NEST 2040 Retirement Pn Fund factsheet | Trustnet. This has shown good growth over the last year, far above the 1.8% contribution and 0.3% AMC.

Change the Timescale in Chart Tool | Trustnet to the last 2 years. It shows a growth of over 5%, much better than its sector. The Shira fund is much higher return for much higher higher risk.

You make me rather concerned. I was contemplating transferring my pension to them.

BlackKnightMonty

I switched to the Sharia fund in Sept 2018 and the return to date has been fantastic.

It’s average annual return (since 2011) is around 14%.

Although recognise tech is a bit toppy right now.

I can’t remember how long it takes to switch NEST funds. Not long I don’t think.

So sit and wait for a market fall then buy in; or take the risk and jump in now.

ewaste

The Sharia fund has had fantastic returns but as Linton has mentioned it's important to be aware that it's holding are extremely concentrated i.e. the top 10 holdings amount to over 40% of the fund with the top 4 holdings being around 25% of the fund. They also happen to be, as mentioned previously, predominately in the same sector i.e. Tech. You wouldn't really want to have much allocated to that fund nevermind all of your pension savings. The Ethical or 'Higher Risk' funds are better diversified.

It's too late now but if you were a member of The Peoples Pension before the 4th of November 2021 you would have had a Protected Pension Age (PPA) of 55.

https://thepeoplespension.co.uk/minimum-pension-age-change/

I'm primarily posting this in case it's of benefit to anyone else who finds this thread in future.

BlackKnightMonty

Hi Ewaste,

I appreciate your wisdom. These are only my personal views.

Yes there is quite a large holding in a few tech stocks with NEST Sharia. But these are’t just any old stocks they represent the largest and most successful businesses globally!

Apple, Microsoft (top 2 biggest companies with mountains of cash reserves), NVidia (huge demand huge growth), Meta (transforming into a quite mature business nowz), Alphabet, Amazon etc.

Of course the risk is higher (Tesla’s in there and hasn’t done too well lately). But if you want the potential highest return then the Sharia fund wins hands down. The other NEST funds don’t come close!

dunstonh

The Sharia fund has had fantastic returns but as Linton has mentioned it's important to be aware that it's holding are extremely concentrated 

And it's worth noting that it would have had truly awful returns had it existed at the start of the millennium.   The assets it is heavy in happen to have done well in this last cycle.  It doesn't mean they will do well in the next.

Yes there is quite a large holding in a few tech stocks with NEST Sharia. But these are’t just any old stocks they represent the largest and most successful businesses globally!

But you are not taking into account the extremely high volatility that exists with tech.    The top companies today can become unwanted tomorrow.  All it takes is some bad product launches or a competitor becoming more innovative and the company can turn into Atari, Yahoo, Kodak, Compag, Blackberry, Compaq, Blockbuster, Nokia, Xerox.

Tech is high growth, high loss.  During positive periods, it is the place you want to be.  During negative, it is the worst place to be.    

But if you want the potential highest return then the Sharia fund wins hands down. The other NEST funds don’t come close!

Of course, had they existed from 2000, you would be saying the opposite from 2000-2012.

BlackKnightMonty

You’re right about tech. NEST Sharia could easily halve. But it’s the only one to double every 5 years or so too ;-)

DavidAC

Can anyone explain why people with the default NEST retirement funds are saying the performance is bad? They are beating their sector (PN Flexible Investment) by some margin over 1 year, 3 year, 5 year. They are beating most other sectors as well. The only sectors I see performing much better are heavy in US tech, like the Shira fund.

BlackKnightMonty

Google “NEST quarterly investment report”

Sorry I can’t share the link because I’m new to the forum.

dunstonh

Can anyone explain why people with the default NEST retirement funds are saying the performance is bad? They are beating their sector (PN Flexible Investment) by some margin over 1 year, 3 year, 5 year.

PN Flexible Investment is not a benchmark. It is a sector.  Its a catchall for all flexible investment funds of all risk levels.   So, the sector average is dragged down low because of the low equity funds that are in there.

You would never use that sector average for benchmarking purposes.