NEST Sharia pension - stick or twist?

Sulaco86

I have a NEST pension scheme through my employer, and a while back I moved my investments from the standard fund to the Sharia fund, as it had much better performance.

Now I know that they changed the fund last year to include Sukuk and make it no longer 100% equities. This was annoying, but my expectation was that while the returns might not be as high as before, it would still be competitive. 

But what I am seeing is that it is massively underperforming compared to the other funds, even the regular one, never mind Nest's 'high risk' fund. Until a week or two ago it was actually showing a loss on a 1 year basis, compared to several percent growth on the other two.

My question is whether this is due to over-exposure to tech stocks, which took a battering a few months ago but could well bounce back, or is this a structural change due to the introduction of Sukuk. 

Basically, should I stick with the Sharia and ride out the downturn, in the expectation it will catch up and overtake the other funds. Or is this now permanently poorer performing, in which case I should probably take the hit to transfer over to another fund before I lose any more returns.

Hoenir

Chasing winners is a sure fire way of making less ( or even losing ) money over the much longer term. A well diversified portfolio that reflects your risk appetite. Should require minimal changes and be in essence leave and forget. 

LHW99

A problem with Nest is it has a limited number of funds.

While no use changing for the sake of it, I suggest looking into exacly what the two funds you mention invest in, and see which portfolio matches your needs / preferences / opinions best.

QrizB

You need to ask yourself whether you want a tech-stock-heavy investment fund, or not.

If you're happy nailing your flag to tech stocks, boom or bust, the Sharia fund might be your best option.

If you want more diversity, look at what else is available.

Sulaco86

Worth pointing out that the three funds illustrated are the only ones available and I can’t move out of Nest without giving up the employer contribution. What I want from a fund is the best return and I don’t mind a fair bit of risk. For the last five years that was the Sharia fund by a mile, it grew 85% in five years (and that includes this years drop) nearly double the others. But it is now in the doldrums. If that is just riding the market then I’ll wait it out. But nine months ago they diversified the fund 30% into Sukuk (i.e. effectively Bonds) and if that has permanently impaired the return to the level seen recently then this is no longer the fund for me.

dunstonh

Now I know that they changed the fund last year to include Sukuk and make it no longer 100% equities. This was annoying, but my expectation was that while the returns might not be as high as before, it would still be competitive. 

But what I am seeing is that it is massively underperforming compared to the other funds, even the regular one, never mind Nest's 'high risk' fund. Until a week or two ago it was actually showing a loss on a 1 year basis, compared to several percent growth on the other two.

Dollar has been falling against sterling. 

What I want from a fund is the best return and I don’t mind a fair bit of riskThe fund you have is extremely high risk when measured by volatility.   70% loss potential.

For the last five years that was the Sharia fund by a mile,US tech boomed and Sterling fell significantly against the dollar.

But nine months ago they diversified the fund 30% into Sukuk (i.e. effectively Bonds) and if that has permanently impaired the return to the level seen recently then this is no longer the fund for me.The change probably improved the return in that short term period.