NEST Sharia - changes to fund.

dunstonh

Well the next crash can only be a great news for anyone, who is drip feeding every month ( almost every employee ).

if you have enough time that is the case.    However, do remember that a 90% crash will need a 900% recovery to get your money back.

Also I doubt there'll be many, who want to be on this fund with less than 5-7 years investment horizont. 

A lot more than 5-7.  Ideally you would want more than 15 years with that fund.

Ivkoto

dunstonh said:

Well the next crash can only be a great news for anyone, who is drip feeding every month ( almost every employee ).

if you have enough time that is the case.    However, do remember that a 90% crash will need a 900% recovery to get your money back.

Also I doubt there'll be many, who want to be on this fund with less than 5-7 years investment horizont. 

A lot more than 5-7.  Ideally you would want more than 15 years with that fund.

I agree mostly with you, but do you really think 90% crash is possible? I am not experienced investor, but in your long experience, who are the investors, who wants to sell at big losses (not all will be loosing, but most ) for the prices to go so much down ( this is if I understand the investing game correctly )?

dunstonh

I agree mostly with you, but do you really think 90% crash is possible?

Tech dropped 90% in one period in the last 25 years.     Tech is generally highly volatile.      So, a fund that is highly weighted towards tech could suffer. 

The previous 90% drop was when tech valuations ballooned way above the rest of the market and the growth didn't materialise to match the valuations and when investors were punting silly money onto anything tech whether it was viable or not.

Currently, valuations have again ballooned way above the rest of the market.   And there are "suggestions" that some silly money is being punted on tech (AI this time around).     So, there are seeds that have been sown that could lead to a similar outcome but maybe this time, tech will fulfill expectations and the companies will grow into their values.  Only time will tell.

I was around before the dot.com crash and it was very similar to how it is now with people pro tech and tech could do no wrong.   So, to me, it does have a Deja Vu feeling to it.   However, nothing is ever the same twice in terms of outcomes but we do have a habit of repeating past mistakes.

BlackKnightMonty

dlevene said:

Just got an email from Nest informing me that they're changing the Sharia fund from 100% equities to up to 30% "sukuk" (Sharia-compliant bonds).

This removes what made the Sharia fund such an attractive choice and leaves those of us who have to use Nest for workplace pensions without a 100% equities, long term growth option.

I've complained but don't hold out much hope...

I’m not happy about this either. It would be preferable to be able to adjust the amount of suk.

BlackKnightMonty

penners324 said:

Have already switched funds out of the Sharia fund.

Which fund have you switched to?

BlackKnightMonty

dunstonh said:

I agree mostly with you, but do you really think 90% crash is possible?

Tech dropped 90% in one period in the last 25 years.     Tech is generally highly volatile.      So, a fund that is highly weighted towards tech could suffer. 

The previous 90% drop was when tech valuations ballooned way above the rest of the market and the growth didn't materialise to match the valuations and when investors were punting silly money onto anything tech whether it was viable or not.

Currently, valuations have again ballooned way above the rest of the market.   And there are "suggestions" that some silly money is being punted on tech (AI this time around).     So, there are seeds that have been sown that could lead to a similar outcome but maybe this time, tech will fulfill expectations and the companies will grow into their values.  Only time will tell.

I was around before the dot.com crash and it was very similar to how it is now with people pro tech and tech could do no wrong.   So, to me, it does have a Deja Vu feeling to it.   However, nothing is ever the same twice in terms of outcomes but we do have a habit of repeating past mistakes.

The tech crash was an emerging market crash rather than mature businesses.

Google, Microsoft, Apple crashing 90%; not going to happen.

Linton

Ivkoto said:

Linton said:

dlevene said:

MSE_ForumTeam5 said:

@dlevene - we've merged your post into the ongoing thread on this topic

Apologies for starting a new thread inappropriately - I did have a look for an existing thread but didn't see one recently (and I only just got the email from them)

dunstonh said:

It actually makes the fund much more attractive to the average person as it was far too high risk for mainstream provider with limited fund choice.

You are an outlier.   Most people would not come close to your risk level and Nest is geared for the mainstream and not outliers.

Clearly there are a number of people in this thread and in other forums that agree with me!

Being much more strongly geared towards equities is typical for many people earlier on in their career.

The problem with the Sharia fund as was is not that it invested 100% in equities but rather that the allocation to different types of equities was skewed towards the higher risk sectors in the market far more than you would normally find with say a global index fund.

That looked fine and would have attracted naive investors during the past few years when tech outperformed everything else but come the next crash there would many complaints when the fund seriously underperformed.

Well the next crash can only be a great news for anyone, who is drip feeding every month ( almost every employee ). Also I doubt there'll be many, who want to be on this fund with less than 5-7 years investment horizont. So the choice of how everyone wants to invest their money must be down to the people, not the pension provider!

That is a sophisticated investor reasoning.  Though if that is your point of view, buying a Shariah fund seems a half hearted approach.  Why not go 100% into Scottish Mortgage?

When the markets fall 10-20% we get people asking whether they should sell their pension investments or move into bonds for protection.

Nest funds are presumably intended for the general public with virtually no understanding of investment.  The danger is that they will buy purely on the last 5 years peformance, should they see it, and be completely out of their depth when the 60% fall happens.

BlackKnightMonty

Linton said:

Ivkoto said:

Linton said:

dlevene said:

MSE_ForumTeam5 said:

@dlevene - we've merged your post into the ongoing thread on this topic

Apologies for starting a new thread inappropriately - I did have a look for an existing thread but didn't see one recently (and I only just got the email from them)

dunstonh said:

It actually makes the fund much more attractive to the average person as it was far too high risk for mainstream provider with limited fund choice.

You are an outlier.   Most people would not come close to your risk level and Nest is geared for the mainstream and not outliers.

Clearly there are a number of people in this thread and in other forums that agree with me!

Being much more strongly geared towards equities is typical for many people earlier on in their career.

The problem with the Sharia fund as was is not that it invested 100% in equities but rather that the allocation to different types of equities was skewed towards the higher risk sectors in the market far more than you would normally find with say a global index fund.

That looked fine and would have attracted naive investors during the past few years when tech outperformed everything else but come the next crash there would many complaints when the fund seriously underperformed.

Well the next crash can only be a great news for anyone, who is drip feeding every month ( almost every employee ). Also I doubt there'll be many, who want to be on this fund with less than 5-7 years investment horizont. So the choice of how everyone wants to invest their money must be down to the people, not the pension provider!

That is a sophisticated investor reasoning.  Though if that is your point of view, buying a Shariah fund seems a half hearted approach.  Why not go 100% into Scottish Mortgage?

When the markets fall 10-20% we get people asking whether they should sell their pension investments or move into bonds for protection.

Nest funds are presumably intended for the general public with virtually no understanding of investment.  The danger is that they will buy purely on the last 5 years peformance, should they see it, and be completely out of their depth when the 60% fall happens.

Most NEST investors won’t even think to switch funds.

dunstonh

BlackKnightMonty said:

dunstonh said:

I agree mostly with you, but do you really think 90% crash is possible?

Tech dropped 90% in one period in the last 25 years.     Tech is generally highly volatile.      So, a fund that is highly weighted towards tech could suffer. 

The previous 90% drop was when tech valuations ballooned way above the rest of the market and the growth didn't materialise to match the valuations and when investors were punting silly money onto anything tech whether it was viable or not.

Currently, valuations have again ballooned way above the rest of the market.   And there are "suggestions" that some silly money is being punted on tech (AI this time around).     So, there are seeds that have been sown that could lead to a similar outcome but maybe this time, tech will fulfill expectations and the companies will grow into their values.  Only time will tell.

I was around before the dot.com crash and it was very similar to how it is now with people pro tech and tech could do no wrong.   So, to me, it does have a Deja Vu feeling to it.   However, nothing is ever the same twice in terms of outcomes but we do have a habit of repeating past mistakes.

The tech crash was an emerging market crash rather than mature businesses.

Google, Microsoft, Apple crashing 90%; not going to happen.

They said the same about the previous big guns of that era.   

All those companies you mention are just 1 or 2 poor product launches away from heavy crashes or the emergence of new disrupters replacing the old disrupters.

Ivkoto

Linton said:

Ivkoto said:

Linton said:

dlevene said:

MSE_ForumTeam5 said:

@dlevene - we've merged your post into the ongoing thread on this topic

Apologies for starting a new thread inappropriately - I did have a look for an existing thread but didn't see one recently (and I only just got the email from them)

dunstonh said:

It actually makes the fund much more attractive to the average person as it was far too high risk for mainstream provider with limited fund choice.

You are an outlier.   Most people would not come close to your risk level and Nest is geared for the mainstream and not outliers.

Clearly there are a number of people in this thread and in other forums that agree with me!

Being much more strongly geared towards equities is typical for many people earlier on in their career.

The problem with the Sharia fund as was is not that it invested 100% in equities but rather that the allocation to different types of equities was skewed towards the higher risk sectors in the market far more than you would normally find with say a global index fund.

That looked fine and would have attracted naive investors during the past few years when tech outperformed everything else but come the next crash there would many complaints when the fund seriously underperformed.

Well the next crash can only be a great news for anyone, who is drip feeding every month ( almost every employee ). Also I doubt there'll be many, who want to be on this fund with less than 5-7 years investment horizont. So the choice of how everyone wants to invest their money must be down to the people, not the pension provider!

That is a sophisticated investor reasoning.  Though if that is your point of view, buying a Shariah fund seems a half hearted approach.  Why not go 100% into Scottish Mortgage?

When the markets fall 10-20% we get people asking whether they should sell their pension investments or move into bonds for protection.

Nest funds are presumably intended for the general public with virtually no understanding of investment.  The danger is that they will buy purely on the last 5 years peformance, should they see it, and be completely out of their depth when the 60% fall happens.

I doubt, that there is a workplace pension provider, which offers SMT as an option
I don't know the statistics, but pretty sure, that at least 90% of the workers stay in the default fund for their whole working life, because they are not interested in the pensions or they don't know how it works. But it doesn't mean, that the pension providers should not offer more options for some more financially educated people.