HSBC/Vanguard replacement for Prufund Risk Managed 4 Fund Series E



My parents have Prufund Risk Managed 4 Fund Series E as their main pension fund. To me, it seems to have very high fees. I want to suggest some cheaper alternatives to them, but I am struggling to identify either a Vanguard Lifestrategy or HSBC Global Strategy fund of roughly the same risk. Can anyone assist?
Thank you.
Comments
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Well it looks like an annual charge of just over 1% and it's heavy into UK equity and property. Wouldn't be my choice of fund.
Both of the multi asset funds you mention have far lower ongoing charges and a variety of levels to suit any risk appetite. Choose the Vanguard funds if you are a fan of UK potential or HSBC GS if you prefer a more global approach.0 -
There is no exact equivalent fund, as it has unique features and is actually quite a good lower risk choice of fund.
Not bad performance either - 28.5% over 3 years:
https://www.trustnet.com/factsheets/p/o1k5/pru-prufund-risk-managed-4-fund-pn-ser-e
Something like VLS40 would be a rough equivalent, but the risk profile is higher and past performance is worse. It's not all about charges.4 -
older_and_no_wiser said:Well it looks like an annual charge of just over 1% and it's heavy into UK equity and property. Wouldn't be my choice of fund.
Both of the multi asset funds you mention have far lower ongoing charges and a variety of levels to suit any risk appetite. Choose the Vanguard funds if you are a fan of UK potential or HSBC GS if you prefer a more global approach.0 -
Beddie said:There is no exact equivalent fund, as it has unique features and is actually quite a good lower risk choice of fund.
Not bad performance either - 28.5% over 3 years:
https://www.trustnet.com/factsheets/p/o1k5/pru-prufund-risk-managed-4-fund-pn-ser-e
Something like VLS40 would be a rough equivalent, but the risk profile is higher and past performance is worse. It's not all about charges.1 -
It's not all about charges.
Standing alone, it seems reasonable, since customer service quality etc count for something I suppose. But juxtaposed with recent performance, suggesting that higher cost might be justified by better past performance, needs challenging.
If we ignore customer service quality etc which we usually do in these discussions, it’s all about charges if we’re comparing two likes. Investors in aggregate can only receive the returns of the markets they’re invested in, MINUS the costs they pay. So why wouldn’t we encourage investors in total to minimise costs? Similarly, talking about an individual like someone’s parent who might/might not be smarter and luckier than the average investor, our best estimate of their returns is the average of all investors’ returns MINUS costs. Surely it makes sense to give the message ‘it IS all about costs’.
I don’t think there’s any substantial basis for suggesting that past recent performance is a better guide to choosing between likes than costs.
That aside, can someone tell me why this is not meaningless: ‘..fund aims to achieve long-term total return (the combination of income and growth of capital)’? I thought total return (income plus growth) could be negative. Does their aim include negative growth?
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JohnWinder said:That aside, can someone tell me why this is not meaningless: ‘..fund aims to achieve long-term total return (the combination of income and growth of capital)’? I thought total return (income plus growth) could be negative. Does their aim include negative growth?Not quite an answer, but (before the scheme closed) my old employer's DB scheme produced an annual summary of investment performance.During one of the downturns the glossy brochure proudly declared a year-on-year growth of something like -2% and that they had achieved the target return set by the trustees.At the time I wasn't especially interested but I assume that their target was to match or exceed the performance some index, and the index had fallen by more than that!
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My parents have Prufund Risk Managed 4 Fund Series E as their main pension fund. To me, it seems to have very high fees.It does. However, that is because of the capital security element and smoothing. That costs money.I want to suggest some cheaper alternatives to them, but I am struggling to identify either a Vanguard Lifestrategy or HSBC Global Strategy fund of roughly the same risk. Can anyone assist?Are you parents able to handle the increased volatility that they will see with those funds?
You need to be quite serious on this front because the smoothing can hide an awful lot of the volatility and your parents are likely to have only have seen With Profits and smoothed options most or all of their life. Putting them into unit linked funds with no smoothing or capital security means they will need to understand the differences. Otherwise their behaviour with a more volatile option could lead to bad decision making.
You are currently focusing on the charges but not the features and investment style. You could be leading them to a cheaper option but one that is unsuitable for them.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.3 -
hewhohuntselves said:older_and_no_wiser said:Well it looks like an annual charge of just over 1% and it's heavy into UK equity and property. Wouldn't be my choice of fund.
Both of the multi asset funds you mention have far lower ongoing charges and a variety of levels to suit any risk appetite. Choose the Vanguard funds if you are a fan of UK potential or HSBC GS if you prefer a more global approach.
In the last couple of years, low risk funds have performed much worse than high risk ones.
For example the VLS 40 fund mentioned is down 2 % in the last 3 years. That Pru fund is up nearly 30% in 3 years. I wish my investments were !1 -
It does (have very high fees). However, that is because of the capital security element and smoothing. That costs money... it has unique features and is actually quite a good lower risk choice of fund.I see nothing in the product information from the link provided to suggest there is any guaranteed benefit with this pension account/fund. Indeed it says the aims are not guaranteed. If no return, volatility, annual gain etc is assured, I see no justification for higher fees. Does this fund have customer benefits which must flow to customers, which the VLS or HSBC GS type funds don’t have?0
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JohnWinder said:It does (have very high fees). However, that is because of the capital security element and smoothing. That costs money... it has unique features and is actually quite a good lower risk choice of fund.I see nothing in the product information from the link provided to suggest there is any guaranteed benefit with this pension account/fund. Indeed it says the aims are not guaranteed. If no return, volatility, annual gain etc is assured, I see no justification for higher fees. Does this fund have customer benefits which must flow to customers, which the VLS or HSBC GS type funds don’t have?I see no justification for higher fees.I don't like the extra charges you get with the Prufunds. I prefer pure investing. However, older clients in particular have often grown up with With Profits fund that basic hid volatility from them. One statement a year that showed the current value without final bonus which never went down in value.
Those type of people often cannot handle the volatility of even very small amounts. Any experienced adviser will have come across them. The phone call made to the adviser worried about their value going down. However, when asked how much it's gone down by, it's only a 1% drop. And the fact they have never seen their investments fall before, even during the dot.com crash or credit crunch.
Prufunds are aimed at that type of person.
If the parents are not those type of people then you could argue that the Prufund options (and fund and product level - depending on the version and options selected) are not worth the extra cost. However, the OP has mentioned VLS as a cheaper alternative but VLS40 (the closest match) has given lower investment returns net of charges.
So, the OP is going to need to explain to the parents that they should move to a cheaper option but one where they will see all the volatility which is currently hidden from them and it is an option that hasn't done as well, after charges. So, you say you see no justification for higher charges. However, it is quite possible that there is no justification to move to VLS even with lower charges.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.2
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