USS - growth fund

J_USS

I started with the USS investment builder in 2016.  My main aim was to preserve child benefit by being under the income threshold and also get some additional pension.

I put the funds, plus employer contribution to DC, in USS growth fund which was marked as high risk, but potential high return and seemed an easy choice.  There has been some growth but not that much in comparison.  I have read it seems to be underperforming and is not really a high return option.

My situation is I have about 30k in the USS growth fund and want to get a better return.  Timescale is 5-10 years or so as I am 52.  I have many years in the DB scheme.  I know it is risky whatever you do and past performance does not guarantee future performance but I was thinking of moving it to the Global Equity Fund.  I also have the issue that is one largish amount, so drip feeding is not possible.  Am putting future monthly contributions into Global Equity Fund and Sharia.

I have benefitted anyway from preserving child benefit, not spending the money and there is no loss, just not much growth in comparison

I am seeing a financial advisor but any ideas welcome. Thanks.

2nd_time_buyer

I did the same. The growth fund only has around 50% in equities. And those are disproportionately weighted towards the UK. 

My rationale for transferring the whole pot (and future contributions)into the global equity fund was:

1) I have sufficient DB to be able to take more risk 
2) I didn't want to second guess myself by investing in specific regions/sectors (I don't know enough)

The test will be, how I will feel if/when the stock markets take a big hit e.g. 25% and whether I will hold my nerve.

swindiff

I have all my DC pot in the Sharia fund and the Global Equities fund.  I put 50% into each.  Its currently about 55% Sharia and 45% GE, mainly due to the better performance of the Sharia fund.  Very happy with how both have performed thus far.

Simes122

It’s not all or nothing.  You can rebalance your holdings by percentage across whatever funds you choose - for existing and future contributions. 

deltrotter

Exactly the same as swindiff for me

rafa2000

I had all my investment builder pot in the Ethical Equity fund, but it has been lagging some of the other funds. I therefore split future contributions into a third Ethical Equity, a third Sharia, and a third Global Equity. The Sharia fund is the best performing, but also has investments in oil companies, so wanted to avoid putting all my money in that. The equity funds have all outperformed the USS growth fund over the last 5 years by 30% plus, so would seem more likely to give higher returns over the next 5-10 years . . . But the growth fund is more diversified so you might think it was a safer bet if there was a downturn.

Asimovs_nightfall

Just a question, but do we know why the Sharia fund is performing well in comparison?

2nd_time_buyer

Asimovs_nightfall said:

Just a question, but do we know why the Sharia fund is performing well in comparison?

It is comparatively tech heavy compared to the Global Equity and has less holdings in banks/finance.

But keep in mind the Global Equity itself is dominated by US shares (around 70%) and around 30% of the S&P 500 is accounted for by the Magnificent 7 (Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia). Indeed those 7 account for around 17% in the Global Equity fund. 

So a Global equity fund whilst "diversified" would be very sensitive to a US tech slowdown/crash; the Sharia fund more so. 

FIREmenow

Asimovs_nightfall said:

Just a question, but do we know why the Sharia fund is performing well in comparison?

The Sharia fund is rare in USS as the underlying fund is one single passive index tracker - HSBC Islamic global equity fund. The index it tracks is the Dow Jones Islamic Market Titans 100 Index of the 100 largest global stocks that comply with Islamic investment guidelines.  Being invested in just 100 Large cap companies means it is not diversified, is high risk and very volatile. It's on a good run because of a good performance of US tech, which makes up about 40% at the moment.

I have switched new investments to the Sharia fund for a couple of months but I am 20+ years from retirement and feel well aware of the risk of this fund. The rest of my pot is in Ethical Equity, which is the second-best performing since launch (after Sharia), but this is made up of two underlying funds, one of which is actively managed and underperforming its benchmark. 

As the Sharia fund is truly passive and Islamic principles crossover somewhat with ethical equity ones (no weapons, gambling, tobacco, and currently less than 4% is in the energy sector) it is an imperfect temporary way to know what I am investing in and in what proportions as USS doesn't provide details on the percentage going into each underlying fund.

Back to OP, the Growth fund, it is approx 22% bonds, 52% developed world equity, 6% emerging markets and 20% private markets (seems to be property, infrastructure and credit/debt). USS links recent poorer performance to private markets.

As others have said, you can allocate percentage splits to multiple funds so it's not all or nothing.

J_USS

Thanks for all the comments/suggestions.  I am just thinking about the US shares valuation at the moment.

Appreciate it.