Pensions Investments – Gilt Funds
Discussion
Jon,
Which untended large caps did you have in '15 that deviated so far away from the index in the final half of the year, but correlated so closely to it in the first half? I'm curious too, that the gap at the end of the year doesn't correspond with the fusion on display at the outset of the year following it?
Which untended large caps did you have in '15 that deviated so far away from the index in the final half of the year, but correlated so closely to it in the first half? I'm curious too, that the gap at the end of the year doesn't correspond with the fusion on display at the outset of the year following it?
Ginge R said:
Jon,
Which untended large caps did you have in '15 that deviated so far away from the index in the final half of the year, but correlated so closely to it in the first half?
I'm curious too, that the gap at the end of the year doesn't correspond with the fusion on display at the outset of the year following it?
Which untended large caps did you have in '15 that deviated so far away from the index in the final half of the year, but correlated so closely to it in the first half?
I'm curious too, that the gap at the end of the year doesn't correspond with the fusion on display at the outset of the year following it?
Your second point is the easiest to answer.
For performance measurement, I treat each calendar year separately.
The equities total on 31 Dec, plus some notional cash to create a round figure, becomes the start of the new year on January 1st, and therefore starts at 0%. Obviously the FTSE All-Share Index figure on 1st January also begins as 0%. That is why each chart has little to do with the following one.
A simple and logical method I think and as each week goes by, the end of week spreadsheet valuation creates a league table of holdings, in order of percentage gains and losses.
As each year goes along, it is always interesting to see which businesses are at or near the top of my league table. It shows that laggards can come alive and emphasises my firmly held opinion, that trying to forecast the which and when of share prices, is almost impossible and just guess work.
Ref. the variation in performance from Index, during late 2015.
As already mentioned, the only important aspect to me, is whether the green line is above the red line, in other words the overall position. If so, then there is nothing else to consider. Reminds me of the engineers saying about, if it works, leave it alone.
One point which would slightly help my later year performance each year, is the little cheat with dividends. Those amounts when received are included in the fund total, so it gradually becomes a larger amount towards the end of each year. Unless there was very minimal market movement, it would not really make that much difference though.
We do tend to think of the market being up say 5%, but of course that is purely an average. Even in the FTSE 100 Index, there is usually an enormous variation in the performance of the individual businesses. Looking at my end of 2015 league table of holdings (remembering the 100 Index finished at -4·93%), I can see one of the Index companies at +28.5%, and another at -21.9%. If you happen to be lucky, by holding more of the former and less of the latter, your green line would move upwards and away from the Index (red line).
Therefore, as you will know, holding just some of those 100 companies, will create variation. We all want variation to usually be in an upward direction, and in my experience holding defensives certainly does help.
I don't know about the reason during the period you have highlighted, but could it have been that some large institutional investors decided to increase their sales of commodities, and replace them by buying defensives? That would have helped the share values of my fund holdings.
To OP - Sorry to go off topic, but perhaps my comments might be helpful to you.
Edited by Jon39 on Friday 19th February 11:34
Whilst I like the idea of owning gilts I've never been able to convince myself that "it's the right time to buy". As JonRB mentioned earlier, there seems to be a real risk they will take a hammering if inflation gets going.
What I don't like about "fixed interest" is that you still have the downside risk of losing money even though your upside is heavily constrained in comparison with equities (shares). Years ago I focused on equities because I was scared of inflation. As it happens QE inflated asset values while wage/price inflation has remained subdued - which is nice. But even though I understand some of the case for "fixed interest" I'm still not persuaded.
IMO the pension funds which piled into fixed interest, partly due to fashion (that idiot at Boots) and partly due to new regulations, have completely shot themselves in the foot. In other words, the big companies who have to fund pension schemes are facing much higher costs than would have been the case if their pension schemes had stuck with equities.
What I don't like about "fixed interest" is that you still have the downside risk of losing money even though your upside is heavily constrained in comparison with equities (shares). Years ago I focused on equities because I was scared of inflation. As it happens QE inflated asset values while wage/price inflation has remained subdued - which is nice. But even though I understand some of the case for "fixed interest" I'm still not persuaded.
IMO the pension funds which piled into fixed interest, partly due to fashion (that idiot at Boots) and partly due to new regulations, have completely shot themselves in the foot. In other words, the big companies who have to fund pension schemes are facing much higher costs than would have been the case if their pension schemes had stuck with equities.
Ozzie Osmond said:
IMO the pension funds which piled into fixed interest, partly due to fashion (that idiot at Boots) and partly due to new regulations, have completely shot themselves in the foot. In other words, the big companies who have to fund pension schemes are facing much higher costs than would have been the case if their pension schemes had stuck with equities.
As someone who strongly believes in the benefits of long-term equity investment, I agree with all the points that you have made.
However with our own money, each time there is a market collapse, we can just wait (or ideally try to spot something more to buy).
If I was a pension trustee though, and Mr. Blogs was going to retire on a specific day, looking forward to his first pension payment, I might well take a very different view to save my 'skin'. Why would I want to face trouble, if the company equity pension fund value collapsed at the wrong time? History shows that a gilt fund does not beat an equity fund, but as a trustee it would not be my money anyway.
Have not employers overcome this whole problem these days, by making employees buy their own personal pensions, with the only remaining financial responsibility of the employer, being to contribute towards those pension 'premiums'?
Ozzie Osmond said:
IMO the pension funds which piled into fixed interest, partly due to fashion (that idiot at Boots) and partly due to new regulations, have completely shot themselves in the foot. In other words, the big companies who have to fund pension schemes are facing much higher costs than would have been the case if their pension schemes had stuck with equities.
You mean that person who decided to purchase assets that more closely matched the nature of the liabilities in the pension fund? A perfectly reasonable strategy and one which is being mirrored by most DB schemes to varying degrees.The only idiotic thing he did was to trade with Goldman Sachs and face eye-watering costs!
As interest rates have fallen (and liabilities have increased accordingly) those companies who have 'matching' assets have been relatively immune, unlike those funds who were holding 'non-matching' equities whose values have gone down at the same time as liabilities have gone up!
It's interesting to note that Boots would have locked-in to yields of 5-6% for high quality (AAA) bonds, compared to yields of closer to 2-3% today. That effectively more than halves the cost of a long-dated pension liability.
Edited by sidicks on Friday 19th February 15:45
Edited by sidicks on Saturday 20th February 09:50
So, 1 month after changing the funds future payments are invested in to;
"Malc's 5" +1.23%
FTSE100 -0.91%
Dow Jones +4.17%
Reasonably happy with that, numbers were better yesterday but there was quite a drop in UK and US markets yesterday. Obviously not as good as a straight Dow Jones tracker over the period but the majority of the gain there came from recovering the absolute spanking it took in January, up 4% in the first 2 weeks of the month, over the last 2 weeks, its been a lot more stable.
Against the fund my provider was investing me in, which in fairness I have retained as part of the 5 funds;
3 of my choices are beating it by 1% or more
1 is underperforming against it by 0.1%
I'm no Neil Woodford, but pretty much daily price watching is certainly more interesting than vaguely leafing through an annual summary booklet!
"Malc's 5" +1.23%
FTSE100 -0.91%
Dow Jones +4.17%
Reasonably happy with that, numbers were better yesterday but there was quite a drop in UK and US markets yesterday. Obviously not as good as a straight Dow Jones tracker over the period but the majority of the gain there came from recovering the absolute spanking it took in January, up 4% in the first 2 weeks of the month, over the last 2 weeks, its been a lot more stable.
Against the fund my provider was investing me in, which in fairness I have retained as part of the 5 funds;
3 of my choices are beating it by 1% or more
1 is underperforming against it by 0.1%
I'm no Neil Woodford, but pretty much daily price watching is certainly more interesting than vaguely leafing through an annual summary booklet!
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