Work pension - allocation quandry

noclaf

My work pension is currently invested 100% Equities albeit heavily weighted to US Equities,  split between 4 funds in the below ballpark allocations, total value currently £73k and contributing monthly...another 15ish years to go to retirement based on 57/58.

US Equities L&G passive (OCF 0.14) 31%
Sharia (80% US Equities)(OCF 0.46) 31%
L&G Global Equities Environmental fund passive (OCF 0.15%) 30%
JPM UK smaller companies Active (OCF 0.68%) 7%

Last year was v good for US equities and the first two funds listed did a lot of the heavy lifting in terms of returns...the JPM UK fund performance dropped off sharply towards the end of last year. 

I am stuck as to whether I keep it heavily weighted to US Equities on basis the US is a powerhouse and will likely continue to doninate in tech and other areas and have 15 years to ride out the peaks and troughs or....simplify to a single L&G Global Equities fund (3rd fund listed) given it's cheap OCF, more sensible 60% US allocation and the simple one fund strategy means I can just leave it to do it's thing. Downside is I may miss out on more potential gains if US Equities can push through the current noise and continue to bring big/decent returns.

FWIW the L&G fund is labelled as an Environmental fund and references Solactive indices rather than FTSE or MSCI if that should influence my decision.
Any thoughts/suggestions welcome.

As an aside I have noticed that L&G seemed to of increased their OCF's for retail investor funds and ETF'S...not sure if that was recent but they definitely seem a fair bit higher across the board.

tacpot12

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I would simplify, but keep the some Sharia fund if this has done well. I'm a fan of the NEST Sharia fund, so I'm disposed towards that style of investing. 

noclaf

tacpot12 said:

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I would simplify, but keep the some Sharia fund if this has done well. I'm a fan of the NEST Sharia fund, so I'm disposed towards that style of investing. 

Makes sense, both the cheap L&G US Equities fund and the Sharia fund have done well though the Sharia has the edge...whilst that likely applies the other way when US markets are going down hoping the pound cost averaging will even out. I may just dump the expensive JPM UK Smaller co fund as that's pricey, volatile ..and I'm unsure the outlook for the next few years......maybe I use the L&G Global Equity fund as my core and thee US Equities/Sharia funds as the satellites.

Hoenir

tacpot12 said:

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I'm in broad agreement with you. Profits can be manipulated. I'm also uneasy about executive share option schemes and buyback's. Cash generation remains a key investment criteria reinforced by the payment of a reasonable dividend yield. 

noclaf

Hoenir said:

tacpot12 said:

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I'm in broad agreement with you. Profits can be manipulated. I'm also uneasy about executive share option schemes and buyback's. Cash generation remains a key investment criteria reinforced by the payment of a reasonable dividend yield. 

Question on the divi's point - is this still a consideration when my current focus is accumulation/growth? 
Or is this about concern that not all is what it seems with some of the US companies re cash generation and the risks that poses for investors?

Linton

tacpot12 said:

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I would simplify, but keep the some Sharia fund if this has done well. I'm a fan of the NEST Sharia fund, so I'm disposed towards that style of investing. 

AIUI US companies tend to return money to investors with share buy-back rather than dividends as the former is more tax-efficient for US citizens. Nothing to do with profitability.  Whether share buy-back is a good use of shareholder's money may be open to question.

Unless your investments are constrained by religious reasons Sharia funds are basically just a proxy for high % tech. They also avoid financial services, which may or may not be what you want. I would say choose investments on their underlying allocations, not on past performance.

noclaf

Linton said:

Unless your investments are constrained by religious reasons Sharia funds are basically just a proxy for high % tech. They also avoid financial services, which may or may not be what you want. I would say choose investments on their underlying allocations, not on past performance.

The fund options in my work pension are fairly limited, the Sharia fund was chosen based on the high tech % and not for religious reasons as there is no other funds available that has a similar composition.

Current thought process is that I should keep some exposure to US/US tech as it may still continue to do well longer term ...no guarantee of course and whilst it could go the other way as I am actively contributing monthly then can take advantage of the drops too.....So likely will shift my allocations to 50% in the global tracker as it's cheap and performance has been reasonably good last year albeit driven by US and then 25% each to the Sharia and US Equities fund, will dump the UK Small cap fund.

The other options in my work scheme are either L&G regional passives or other active funds. The two active global equity funds are BG (global alpha) and CT (responsible global equity) options respectively as well as an active JPM EM fund..they are much pricier in OCF ranging from 0.51-0.855 and the two global funds are lagging in performance....it's possible the active funds could perform better next few years but again no idea if that will happen....

GazzaBloom

Hoenir said:

tacpot12 said:

I'm not a fan of US equities, mainly because the don't seem to pay dividends as well as other shares, which makes me think that they aren't making much money. 

I'm in broad agreement with you. Profits can be manipulated. I'm also uneasy about executive share option schemes and buyback's. Cash generation remains a key investment criteria reinforced by the payment of a reasonable dividend yield. 

I have to call Bullshido on this.

US companies have a long history of paying low dividends. The S&P500 has gained over 2100% since 1995 while paying low dividends and its constituents have made plenty of money along the way. Has that all been manipulation?

You are obviously aware of the hundreds of billions of dollars cash reserves the Mag 7 and other companies like Berkshire Hathaway have accumulated. Are Berkshire not worth investing in because they don't pay a dividend? 

Avoid US equities all you like  but be honest as to the reasons why and save us the nonsense like "because they don't pay big dividends or make much money" 

DRS1

L&G Global Equities Environmental fund passive (OCF 0.15%)

I have to admit I have never heard of this fund nor does Google show anything with that name.  You ask about the Environmental element and whether it should bother you.  I think you should dig a little into what the investments are.  Environmental makes me think it is "saving the Earth" but I also think it could just be one of those tags which are designed to sell it to the youth of today. without actually investing in anything out of the ordinary.
I did find some L&G funds with ESG in their name.  Could it be one of them?
Hopefully you will find that it does not invest solely in wind farms and solar panels.

noclaf

DRS1 said:

L&G Global Equities Environmental fund passive (OCF 0.15%)

I have to admit I have never heard of this fund nor does Google show anything with that name.  You ask about the Environmental element and whether it should bother you.  I think you should dig a little into what the investments are.  Environmental makes me think it is "saving the Earth" but I also think it could just be one of those tags which are designed to sell it to the youth of today. without actually investing in anything out of the ordinary.
I did find some L&G funds with ESG in their name.  Could it be one of them?
Hopefully you will find that it does not invest solely in wind farms and solar panels.

I suspect this fund variant/sub-fund is specific and limited to my work pension scheme. There is a fund fact sheet within my pension portal but no fund ISIN included. I didn't select it based on the 'Environmental' badge and didn't put much thought into it's ESG credentials....am not an expert but am a realist and very much aware that a lot of so called 'ESG' badged products are nothing of the sort albeit the regulation is tightening e.g: consumer duty. This fund may have some criteria applied to be fair.

I did look under the hood before I selected this fund, top 10 and regional/country allocations look v similar to other typical all world equity trackers ..61% US, mainly developed markets but a little exposure to China. Based on the fund fact sheet it returned +20% in 2024, OCF of 0.15% and no other global trackers offered apart from the pricey active options previously mentioned and an equal-weight global equity passive tracker that I am not overly keen on. 

DRS1

Well an obvious comparison has 67% in the US
Legal & General Global Equity Index (Class C) Accumulation Geographical Analysis
So some sort of filter is being applied
Although as the performance of this one in 24/5 is +20.8% It doesn't seem to be making much difference.