Investment income projection

cheerfulcat

dunstonh wrote:

Perhaps the issue here is that you are looking at legacy bonds rather than modern bonds. The charges on old legacy bonds used to be very heavy. Although there are still providers that do those old terms there are sufficient modern charged plans to allow us to use those as a good example.

Many people are still on old style deposit accounts earning 1% if they are lucky. We dont call savings accounts rubbish because of that. We just call those ones rubbish. The same applies to bonds and almost any other product class.

dunstonh, this bond is just under two years old; would you call that an old bond? Have things really changed that much since late 2003?

whiteflag wrote:

Cheerfulcat

Hope you dont think its rude to ask, but who is your bond with?

There are some companies that have "double charging", but then there are sometimes loyalty bonuses, extra allocations etc that have the effect of bringing down the overall charges. Did you benefit from any additional incentives?.

While you are correct in pointing out the extra charges on your bond, I think dunstonh's figures for Norwich Union are relevant.

No, not rude at all - I wasn't sure whether to mention it. The bond is with Skandia. There was a 105% allocation rate - no other bonus. On re-reading the literature I see that there was an initial charge of 5% applied; I take it that the two cancel each other out? However, there is also a .750% annual management charge which I don't think I noticed before :-(

(not so)Cheerfulcat

dunstonh

The skandia product hasnt changed much in years. It was one of the first to offer such a wide range of funds and that made them a leader in that area (as they did with pensions). I think the problem with Skandia now is that the others have caught up and undercut them significantly on charges. If you look at like for like say using Skandia vs Norwich Union and pick the same funds, NU will beat Skandia now. They are still pretty advanced with the electronic side of things as far as reports and fund switching goes. That same Norwich Union property fund on the Skandia bond was about £8000 less in projected values than the best option. Still better than the UT but £8000 is a lot.

Using Skandia is a bit like shopping at John Lewis. The service is great and the product itself wont let you down but you pay extra for it.

timesphere

dunstonh wrote:

Your 100% of 1k is, to be honest, silly talk.

OK I cannot argue with you on that . . . . . because

dunstonh wrote:

I also think that growth of 8.47% since 29th June could not be considered pathetic. And thats in a portfolio weighted towards the cautious side. Many would be happy getting that in a year, let alone 2 months. Indeed, its not far off your 9% p.a. figure in a fraction of the time.

I am more than prepared to be called silly if you can please tell me were I can
get 8.47% in 2 months . . . . . . . please, please, please !!!!!!!

dunstonh

It was a spread of: fidelity special situations, Newton Higher Income, Newton Oriental, Norwich Union property, Norwich Union Property Trust, Gartmore China Smaller Cos, Gartmore Emerging Market Opps and Inv Perp income. Heavily weighted to the lower risk of those funds. Keeping the high risk ones in small percentages.

Its not a guarnateed rate of return but with the weighting being heavy in property, it keeps it relatively stable. There is also 6 monthly rebalancing to make sure that when one of the riskier funds booms, it takes the profit out and when it drops, it puts money in.

whiteflag_3

No, not rude at all - I wasn't sure whether to mention it. The bond is with Skandia. There was a 105% allocation rate - no other bonus. On re-reading the literature I see that there was an initial charge of 5% applied; I take it that the two cancel each other out? However, there is also a .750% annual management charge which I don't think I noticed before :-(

Cheerfulcat -glad to hear you didnt find my request too impertinent!

The trouble is, that what you said about colossal charges does apply to Skandia - they double charge

What I feel is really ironic is that Skandia chose not to take part in the FSA comparative tables ( wonder why ???)yet they have recently announced a large increase in new business.

oceanblue_3

Hello cheerfulcat

Sorry to hear about the Skandia Investment Bond. Again, I don't want to appear impertinent, but is it possible for you to let us know which funds you're invested in? If you've had it for less than two years, then you would be unlucky if you're currently looking at a loss.

EdInvestor

timesphere wrote:

I am more than prepared to be called silly if you can please tell me were I can
get 8.47% in 2 months . . . . . . . please, please, please !!!!!!!

I don't think we can draw much in the way of a conclusion from this figure timesphere - the market was up 5% over the two month period (having slumped earlier this year) and July and August tend to be quite strong months for dividend payouts for income shares and property funds.Dividends tend to arrive in big bunches,worse than London buses - other months there's not a divi to be seen.

I've noted there has been a surge in capital values in my own commercial property investments also in the last couple of months.Undoubtedly property is having a terrific run, the prevailing view was that the market peaked last year at +18% but it looks like it's on target for a repeat performance this year. How long can it last?

It would be interesting to see an annual performance figure for this collection of funds, though IMHO it is a case of "past performance is not a guide...". This commercial property boom is being caused by a lot of institutional pension fund and lifeco money coming out of equities/with profits and seeking a better return than bonds where yields are now depressed.

We are seeing a big expansion to what was formerly an under-rated asset class. But it will come to halt sooner or later.The saving grace is that the yield on property funds at 5-7% is pretty stable because it's based on rents signed under long term contracts which state that they can only go up [Who invented that excellent idea, I wonder?]

cheerfulcat

oceanblue wrote:

Hello cheerfulcat

Sorry to hear about the Skandia Investment Bond. Again, I don't want to appear impertinent, but is it possible for you to let us know which funds you're invested in? If you've had it for less than two years, then you would be unlucky if you're currently looking at a loss.

Hello, oceanblue,

No problem. I am pursuing this in the hope that discussion will clarify things for other people, as well as for me, so am quite willing to go into detail! The bond taken out at the end of October 2003 and initially invested as follows:



Skandia Property Fund 25%
Framlington UK Select Opportunity 11%
Framlington Equity Income 12%
Norwich Property Trust 10%
Liontrust First Income 12%
New Star High Yield Bond 5%
Newton International Bond 8%
Threadneedle Strategic Bond 17%

A year later, the Newton and Threadneedle funds were switched to Newton International Growth.

I have taken the 5% "income" option. Overall, the returns including withdrawals have been ~10% per annum which is not bad but I suspect that holding the underlying funds without the wrapper would have produced far better returns...

Cheerfulcat

oceanblue_3

Hello cheerfulcat

As far as the Skandia product is concerned, I would agree with you - there are less costly ways to hold most of these funds, and take an "income".

Nevertheless, there are some useful funds here, although I have never been a big fan of the Skandia Property Fund; they now offer access to the Norwich Union/Morley equivalent as well.

The two Framlington funds have done very well since October 2003, and I really like them, although the Equity Income fund is now closed to new business.

I'm not sure about the Norwich Property Trust - is that something like the New Star fund?

I recommend that you visit the Trustnet website to re-examine the performance of the Newton International Growth fund; I think it's done pretty well but, like dunstonh, I tend to use small percentages of specialised high-risk funds.

Liontrust First Income has not really latched on to the market opportunities of the last 24 months; I get the feeling that its manager operates in a fairly rigid way, and isn't always able to take advantage of market inefficiencies. Unfortunately, Liontrust don't subscribe to the Trustnet service; however, it seems to be 4th quartile over one year and 2nd quartile over three years.

Bearing in mind what has been posted on this thread, and from your past comments regarding your SIPP (which prompted me to re-evaluate my own strategy for using collective funds rather than individual equities!), I'm surprised you opted for an Investment Bond.

dunstonh

Nevertheless, there are some useful funds here, although I have never been a big fan of the Skandia Property Fund; they now offer access to the Norwich Union/Morley equivalent as well.

I quite like the Skandia Property fund. It hasnt performed as well as the NU property fund in the past but has lower charges. Charges being an absolute and performance being unknown, it doesnt do any harm having a bit of Skandia Property in there.

However, i have never done a skandia bond. I have done a number of Skandia Pensions which has the same fund range but a more competitive charging structure (on single premium business only).

I'm not sure about the Norwich Property Trust - is that something like the New Star fund?

Skandia have just made the Britannic property fund available through them as well. So now you can have Skandia, Norwich, New Star and Britannic property funds. On a single platform, that does make the Skandia bond have a decent range of property funds around. Transact has a far greater range on its wrap though if you really want property funds and diversification of providers but on a single platform. Something like 15 property funds are available on their negotiated terms. Including a couple which can be placed inside ISAs.

Liontrust First Income has not really latched on to the market opportunities of the last 24 months; I get the feeling that its manager is operates in a fairly rigid way, and isn't always able to take advantage of market inefficiencies. Unfortunately, Liontrust don't subscribe to the Trustnet service; however, it seems to be 4th quartile over one year and 2nd quartile over three years.

Perhaps an excellent example of why past performance is no guide to the future. Once a top regarded fund and now having problems. I wonder how much of Liontrusts "other" problems are impacting on the management of the income fund. That being said, it can often be a good time to invest in a fund, of a high profile manager, when it is underperforming.