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    • fjh
    • By fjh 20th Oct 19, 9:25 AM
    • 133Posts
    • 10Thanks
    fjh
    Looking to review holdings
    • #1
    • 20th Oct 19, 9:25 AM
    Looking to review holdings 20th Oct 19 at 9:25 AM
    Looking to review my holdings value is over 600k want a cautious plan, looking to start drawdown in 3 years, aim min maintenance , and ideally reduce fees - may even go to annual IFA review for say 2 years rather than pay .5% fee ongoing .
    Thinking of more ‘trackers’ ? But want to stay min 60% very safe.
    Welcome thoughts/ comments & reasons .
    Thanks

    GBP
    BMO MM Navigator Cautious C Acc 6.24%
    Jupiter Merlin Income Portfolio I Acc 5.82%
    Quilter Investors Cirilium Balanced Portfolio R Acc GBP 5.59%
    Quilter Investors Cirilium Conservative Portfolio R Acc GBP 5.60%
    Threadneedle Managed Equity & Bond ZNA GBP 5.79%
    Vanguard LifeStrategy 40% Equity A Acc 5.94%
    Total 34.98%
    Pension Funds
    Pru PruFund Cautious Fund Pn Ser A 16.06%
    Pru PruFund Growth Fund Pn Ser A 48.96%
Page 2
    • fjh
    • By fjh 20th Oct 19, 3:55 PM
    • 133 Posts
    • 10 Thanks
    fjh
    I would:
    - Definitely keep the Prufunds, and VLS40 as they are doing their job well
    - Probably keep Jupiter Merlin Income as it may provide a bit of diversification
    - Get rid of BMO MM Navigator as its lower performance is not sufficiently matched by lower volatility - see "Sharpe Ratio".
    - Get rid of Cirilium Balanced as it is too close to the better performing Threadneedle equity and bond.
    - rebalance back to the current high level split.
    Originally posted by Linton
    Very helpful- thank you , I had thought of both those holdings purely from a performance aspect not from a ‘balance’.
    • cfw1994
    • By cfw1994 20th Oct 19, 3:58 PM
    • 481 Posts
    • 430 Thanks
    cfw1994
    3% of original pot drawdown inflation adjusted with that portfolio seems reasonable to me.
    Originally posted by Linton
    I appreciate we are in a period now of lower returns....perhaps for some time.....
    ......but if the funds are averaging 6.5% ps, and costs/fees are under 1%, presumably a 3% draw should be VERY comfortable, right?!

    Even 4-4.5% might be safe, notwithstanding some ability to perhaps avoid withdrawals should there be a downturn impacting the pot.

    Perhaps one starts taking out the lowest amount possible for a year or two in order to let the pot build up it's own 'resilience' against a sudden drop....
    • fjh
    • By fjh 20th Oct 19, 4:19 PM
    • 133 Posts
    • 10 Thanks
    fjh
    Did IFA explain his logic of mixing these overlapping funds in strange proportions? What asset allocation was he targeting? Why do you need an income fund given that you are not retired?

    In general, future returns are unknown and it’s ok to have less than 6% return if there is a reason. Fund performance should be compared against an appropriate benchmark. I would be very concerned with an IFA saying that a particular vehicle “promises” to return 6%.

    Over the last 10 years both stocks and bonds performed very well. Furthermore, sterling had a massive drop over that period which would make your sterling denominated assets look better than they really did.

    And yes, 0.5% ongoing costs, while could be worse, are still high given what’s available on the market.

    I would take a little time to read books on risk and asset allocation. Then select asset allocation. Finally pick an appropriate product which minimizes costs and maximizes simplicity.

    P.S. when you say 0.5% ongoing, do you mean IFA charges on top of already expensive funds? Looking at the hotchpotch picked by this IFA, I’d say 0.5% is waste. Also, “growth” figures over a period of a few months are not in any way meaningful.
    Originally posted by Mordko
    Thank you .
    I am learning that I should have challenged/ questioned more the IFA’s recommendations, after the investments in the Pru I can now see it was just 5% into each of the other holdings.
    I now know I am on an expensive platform and that because of the particular Pru holidings I cannot simply transfer time a cheaper/ better platform and whilst I am not happy with that due to poor performance over past 12 maths I am reluctant to incur more costs to sell / reinvest, albeit I can see merit of selling Navigator and Quilter holdings and reinvesting in a simple/ cheap Global tracker.
    Yes the .5% relates entirely to IFA which I feel I could do without and just pay a one off fee for annual review after I sell/buy per above.
    • Linton
    • By Linton 20th Oct 19, 4:25 PM
    • 11,394 Posts
    • 11,825 Thanks
    Linton
    The post I was responding to seems to have been withdrawn. However I will leave this one here just in case.


    WP funds have been around for decades. Most WP funds have fallen by the wayside, but Prudential's ones have been doing their job for year after year for many many years. I have held a PruFund since 2001 and have detailed figures from soon after that date. Since buying the fund there has been an average annual return of 5.3%. The value of the investment was published annually. In my case:

    4/2007: £14133
    4/2008:£15152
    4/2009:£14429
    4/2010:£15208
    4/2011:£16312


    The .com crash was similar.


    As to whether VLS40 is a conservative fund and the Prufund isnt - look at the long term graphs.
    Last edited by Linton; 20-10-2019 at 4:40 PM. Reason: The post I was responding to has disappeared.
    • SonOf
    • By SonOf 20th Oct 19, 4:33 PM
    • 1,774 Posts
    • 2,033 Thanks
    SonOf
    Thanks- no all held on the Prudential platform.
    Originally posted by fjh
    Check to see if its an intrinsic adviser though. See the bottom of their letterhead to be sure. If so, you have a restricted FA. Not an IFA. Instrisic used to be an IFA network but for much of the last 7 or so years they have been encouraging their advisers to restrict. They had multiple levels of restriction. The more the adviser restricted, the better the terms the adviser got. Most of the funds you have are on the middle restriction but the cirrilium funds are on the most restrictive version.
    • Linton
    • By Linton 20th Oct 19, 4:38 PM
    • 11,394 Posts
    • 11,825 Thanks
    Linton
    I appreciate we are in a period now of lower returns....perhaps for some time.....
    ......but if the funds are averaging 6.5% ps, and costs/fees are under 1%, presumably a 3% draw should be VERY comfortable, right?!

    Even 4-4.5% might be safe, notwithstanding some ability to perhaps avoid withdrawals should there be a downturn impacting the pot.

    Perhaps one starts taking out the lowest amount possible for a year or two in order to let the pot build up it's own 'resilience' against a sudden drop....
    Originally posted by cfw1994

    Dont forget inflation. The pot needs to increase by inflation each year to sustain an inflationary increase in amount drawn down.
    • Mordko
    • By Mordko 20th Oct 19, 4:39 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    Thank you .
    I am learning that I should have challenged/ questioned more the IFA’s recommendations, after the investments in the Pru I can now see it was just 5% into each of the other holdings.
    I now know I am on an expensive platform and that because of the particular Pru holidings I cannot simply transfer time a cheaper/ better platform and whilst I am not happy with that due to poor performance over past 12 maths I am reluctant to incur more costs to sell / reinvest, albeit I can see merit of selling Navigator and Quilter holdings and reinvesting in a simple/ cheap Global tracker.
    Yes the .5% relates entirely to IFA which I feel I could do without and just pay a one off fee for annual review after I sell/buy per above.
    Originally posted by fjh
    Advisers are just that. It’s your money, your decision, your family’s future. Ok to use an adviser if you have to and lack confidence but as a minimum you should educate yourself enough to ask the right questions and make an informed decision.

    If I were you, I wouldn’t rush into changes, but read up and formulate an investment policy. Then you can decide to either keep you investments or make changes. Changes, if needed, should be done even if there are costs involved. Once you formulate a strategy, stick by it and ignore monthly return figures. Comparisons should be against benchmarks and I would say a period with at least one bear and one bull market is the minimum for meaningful comparisons vs benchmarks.
    • Linton
    • By Linton 20th Oct 19, 4:44 PM
    • 11,394 Posts
    • 11,825 Thanks
    Linton
    Advisers are just that. It’s your money, your decision, your family’s future. Ok to use an adviser if you have to and lack confidence but as a minimum you should educate yourself enough to ask the right questions and make an informed decision.

    If I were you, I wouldn’t rush into changes, but read up and formulate an investment policy. Then you can decide to either keep you investments or make changes. Changes, if needed, should be done even if there are costs involved. Once you formulate a strategy, stick by it and ignore monthly return figures. Comparisons should be against benchmarks and I would say a period with at least one bear and one bull market is the minimum for meaningful comparisons vs benchmarks.
    Originally posted by Mordko

    This is worrying - I dont disagree.


    However comparisons against benchmarks are not too helpful if you are a very cautious investor - maximum returns are a secondary concern.
    • Mordko
    • By Mordko 20th Oct 19, 4:51 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    The post I was responding to seems to have been withdrawn. However I will leave this one here just in case.


    WP funds have been around for decades. Most WP funds have fallen by the wayside, but Prudential's ones have been doing their job for year after year for many many years. I have held a PruFund since 2001 and have detailed figures from soon after that date. Since buying the fund there has been an average annual return of 5.3%. The value of the investment was published annually. In my case:

    4/2007: £14133
    4/2008:£15152
    4/2009:£14429
    4/2010:£15208
    4/2011:£16312


    The .com crash was similar.


    As to whether VLS40 is a conservative fund and the Prufund isnt - look at the long term graphs.
    Originally posted by Linton
    What are you talking about? Half of his money was invested in Prufund Growth which was launched on 25/11/2008. The only other fund with meaningful allocation is to Pru Cautious, which was launched on 25/08/2009. Why are you quoting arbitrary numbers for something else?

    Neither fund has any track record for bear markets.

    And no, 10 years’ of artificially smoothed returns over a bull market do not demonstrate conservatism. That’s a fallacy.

    Underlying assets have less than 10% in UK fixed interest. Another 10% is in US fixed interest. No idea how much of that is in junk bonds. The rest is in volatile assets (mostly stocks but also some property and Asian bonds). These are the kind of assets which tend to suffer during a crisis.
    Last edited by Mordko; 20-10-2019 at 4:56 PM.
    • Mordko
    • By Mordko 20th Oct 19, 4:55 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    However comparisons against benchmarks are not too helpful if you are a very cautious investor - maximum returns are a secondary concern.
    You look at how your fund responds to different market conditions, e.g. maximum drawdown vs a benchmark.
    • fjh
    • By fjh 20th Oct 19, 4:57 PM
    • 133 Posts
    • 10 Thanks
    fjh
    Check to see if its an intrinsic adviser though. See the bottom of their letterhead to be sure. If so, you have a restricted FA. Not an IFA. Instrisic used to be an IFA network but for much of the last 7 or so years they have been encouraging their advisers to restrict. They had multiple levels of restriction. The more the adviser restricted, the better the terms the adviser got. Most of the funds you have are on the middle restriction but the cirrilium funds are on the most restrictive version.
    Originally posted by SonOf
    Thanks
    Website confirms IFA and talks about being fully independent .
    • fjh
    • By fjh 20th Oct 19, 5:02 PM
    • 133 Posts
    • 10 Thanks
    fjh
    The Pru Growth fund has been achieving over 6% for almost every one of the past 10 years. In the past 12 months it was 6.2%. The past year or so has been particularly difficult for investors thanks to Trump and China. Your 3 months experience means nothing.
    Originally posted by Linton
    Yes significant drop last November and every quarter since no move forward , last quarter (August) advised that they had reduced the ‘EGR’ , waiting to see what happens at next quarter review which is next month albeit I know Brexit will impact .
    • Mordko
    • By Mordko 20th Oct 19, 5:11 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    Yes significant drop last November and every quarter since no move forward , last quarter (August) advised that they had reduced the ‘EGR’ , waiting to see what happens at next quarter review which is next month albeit I know Brexit will impact .
    Originally posted by fjh
    They are “smoothing” that’s all. The mechanism is described in the article I linked. They do it quarterly, so there is a lag. What it means in practice is that money from some investors is being reallocated to others, depending on the timing of investment.
    • fjh
    • By fjh 20th Oct 19, 5:12 PM
    • 133 Posts
    • 10 Thanks
    fjh
    The fund was established in November 2008. Market peaked a year earlier and was close to the lowest point when the Pru fund was launched. The largest single day drop happened in October 2008. It reached the bottom in March 2009 and has been trending up ever since. That’s why the Pru fund only “twitched”. Someone born in 1945 can’t claim to have suffered during WW2.

    The timing of funds launch was lucky. It never experienced a bear market. While the approach will provide delay or a “lag”, the value of the fund will drop by the same amount as the rest of the stockmarket in a bear market.

    Investors who are sold this fund on the pretext of the “with profits” concept will be severely disappointed. It’s a marketing ploy.

    P.S. there is nothing “cautious” about the fund asset make-up. Can’t be compared to VLS 40, which really is a conservative fund.
    Originally posted by Mordko
    The risk review and instruction to IFA has always been cautious so surprised / concerned at comment - which holdings do you consider not to be cautious? - just seeking help.
    I have spent 12 months really trying to learn via books and podcasts - ANdy Bell DIY investor and investing Demystified by Lars Kroijer plus following podcast and Monevator and this forum which has been outstanding for help / guidance .
    • Linton
    • By Linton 20th Oct 19, 5:13 PM
    • 11,394 Posts
    • 11,825 Thanks
    Linton
    What are you talking about? Half of his money was invested in Prufund Growth which was launched on 25/11/2008. The only other fund with meaningful allocation is to Pru Cautious, which was launched on 25/08/2009. Why are you quoting arbitrary numbers for something else?

    Neither fund has any track record for bear markets.

    And no, 10 years’ of artificially smoothed returns over a bull market do not demonstrate conservatism. That’s a fallacy.

    Underlying assets have less than 10% in UK fixed interest. Another 10% is in US fixed interest. The rest is in volatile assets (mostly stocks but also some property and Asian bonds). These are the kind of assets which tend to suffer during a crisis.
    Originally posted by Mordko

    All WP funds operate in the same way, they are very different to OEICs/UTs. The price does not equate to the total value of all underlying assets. It is set by te fund manager at a level he believes can be sustainable in the long term. Perhaps https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/with-profits-funds/ will be of interest. It is smoke and mirrors but smoke and mirrors for a very valuable purpose - to enable risk averse investors to receive a steady on going return, better than cash or safe bonds, at some cost to the long term return. That is what cautious investors want.



    Previous versions of the Prufund were extremely successful during the .com crash and the 2008 crash. There is no reason to believe that the next one will be different. When the next crash happens you will find that the OPs fund will have sufficient assets to maintain the price for some considerable time.
    • SonOf
    • By SonOf 20th Oct 19, 5:34 PM
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    SonOf
    The risk review and instruction to IFA has always been cautious so surprised / concerned at comment - which holdings do you consider not to be cautious? - just seeking help.
    The words "cautious" can mean different things to different people. VLS40 is generally considered cautious or low/medium depending on your phrasing. Mordko considers it conservative but that is more VLS20 IMO.
    • Mordko
    • By Mordko 20th Oct 19, 6:09 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    The words "cautious" can mean different things to different people. VLS40 is generally considered cautious or low/medium depending on your phrasing. Mordko considers it conservative but that is more VLS20 IMO.
    Originally posted by SonOf
    Agreed, it’s helpful to define terminology. Traditionally, a portfolio with 60% stocks and 40% bonds has been considered balanced, but plus minus 10% does not change this too much. Anything with less than 30% in high quality bonds is aggressive in my book. Anything with more than 50% in high quality bonds is cautious or conservative.

    VLS40 holds 35% in equity, the rest is in investment grade corporate or government bonds from the developed world. Some of the bonds are hedged, some are exposed to currency fluctuations.

    Whichever way we want to call it, I would bet on VLS 40 having less of a drawdown than PruGrowth in a bear market.
    • Mordko
    • By Mordko 20th Oct 19, 6:15 PM
    • 607 Posts
    • 323 Thanks
    Mordko
    Previous versions of the Prufund were extremely successful during the .com crash and the 2008 crash. There is no reason to believe that the next one will be different. When the next crash happens you will find that the OPs fund will have sufficient assets to maintain the price for some considerable time.
    Unfortunately, I know very well what a “with profit” fund is. Past performance of a different fund with a different manager but of the same brand has even less relevance to future performance than when people pick a hot fund based on its own past performance.
    • SonOf
    • By SonOf 20th Oct 19, 6:34 PM
    • 1,774 Posts
    • 2,033 Thanks
    SonOf
    Whichever way we want to call it, I would bet on VLS 40 having less of a drawdown than PruGrowth in a bear market.
    Pru are probably the only company that have successfully smoothed returns. They have done it for generations. The current version (prufund) is not one I am particularly a fan of due to its higher charges. The 90s and early 2000s versions could be got with capital security for 1% a year all in.

    We have people that were in it pre dot.com and gone through that and the credit crunch and barely seen any drawdown. So, I would expect VLS to have greater voltility and a higher drawdown in most scenarios. I would expect VLS40 to have a greater upside in growth periods.
    • Thrugelmir
    • By Thrugelmir 20th Oct 19, 7:02 PM
    • 65,412 Posts
    • 57,549 Thanks
    Thrugelmir
    I appreciate we are in a period now of lower returns....perhaps for some time.....
    ......but if the funds are averaging 6.5% ps, and costs/fees are under 1%, presumably a 3% draw should be VERY comfortable, right?!

    Even 4-4.5% might be safe, notwithstanding some ability to perhaps avoid withdrawals should there be a downturn impacting the pot.
    Originally posted by cfw1994
    Fixed income stocks offer no capital growth. Your portfolio maybe challenged to meet these objectives as time passes.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
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