Pensions

[Crany]

I have a pot of money that is invested in the UK stock market, it was originally in a fairly passive fund for 3/4 years, the returns were very poor - 3 or 4%

So I took the decision to move to an actively managed fund, generally this has done fairly well, but I have a fairly large chunk (for me) of around 20% of my pot that has made nothing for a year or so, my FA wants me to sit tight.

I have had a look round for a plan B and s company called Fisher Investments has caught my eye (based on past results !) any thoughts or comments ?

I am in the place where I can see that we should be achieving better, but I don't have enough knowledge / confidence to jump !

Thanks in advance, Mark.

[sidicks]

Crany said:

I have a pot of money that is invested in the UK stock market, it was originally in a fairly passive fund for 3/4 years, the returns were very poor - 3 or 4%

So I took the decision to move to an actively managed fund, generally this has done fairly well, but I have a fairly large chunk (for me) of around 20% of my pot that has made nothing for a year or so, my FA wants me to sit tight.

The important comparison is what the passive fund did over the same period, or else you aren't comparing like with like.

Crany said:

I have had a look round for a plan B and s company called Fisher Investments has caught my eye (based on past results !) any thoughts or comments ?

I am in the place where I can see that we should be achieving better, but I don't have enough knowledge / confidence to jump !

Thanks in advance, Mark.

What was the 20% invested in (and why)?

Putting 20% of your pension in one single company would be highly risky.

[Ginge R]

Crany said:

I have a pot of money that is invested in the UK stock market, it was originally in a fairly passive fund for 3/4 years, the returns were very poor - 3 or 4%

So I took the decision to move to an actively managed fund, generally this has done fairly well, but I have a fairly large chunk (for me) of around 20% of my pot that has made nothing for a year or so, my FA wants me to sit tight.

I have had a look round for a plan B and s company called Fisher Investments has caught my eye (based on past results !) any thoughts or comments ?

I am in the place where I can see that we should be achieving better, but I don't have enough knowledge / confidence to jump !

Thanks in advance, Mark.

Mark,

Just because the fund did badly, it doesn't mean it was a bad fund. It may have been superbly run, but its index or niche may just out of favour with the market at the time. Similarly, because it did well, it may not mean that it's a good fund - the manager may have just sold off the fund family silver and be left with nothing. And achieving 3 or 4% is where you might only need or want to be. Before you despair that you're not shooting the lights out, have you worked out if 4% is in or out of synch with your objectives and need/capacity/inclination for risk/loss, anyway?

You're inexperienced - if you like, post the details of the two funds and I'm sure some sagely heads will look at its vital stats to give you a good idea. Actives aren't by default, bad, and there are some superb active managers who do add value. But they do need to justify themselves more and more, and the silence from the beleaguered teams, when you press them for data, is invariably and increasingly deafening. In the interests of due diligence, I sent nearly a dozen pages of questions and points for clarification to an active fund manager recently and have heard nothing back.



Edit: spelling.

Edited by Ginge R on Wednesday 28th December 23:18

[Crany]

OK so some detail, my three funds with poor performance (my view point) are -

1. CF Woodford Equity income fund C
2. Henderson UK Absolute Return Fund
3. Trojan income O Acc

I have circa £56k across these three funds.

With these parts making little or nothing, we have managed circa. 13% growth over the last twelve months.

Should I accept that there will always be winners and losers in my portfolio and have some patience ( not a strong point) or chase some improvement ?

Any comments reference moving my complete portfolio to Fisher Investments UK ?

Mark.

Edited by Crany on Sunday 1st January 14:36

[sidicks]

Crany said:

I have a pot of money that is invested in the UK stock market, it was originally in a fairly passive fund for 3/4 years, the returns were very poor - 3 or 4%

So I took the decision to move to an actively managed fund, generally this has done fairly well, but I have a fairly large chunk (for me) of around 20% of my pot that has made nothing for a year or so, my FA wants me to sit tight.

I have had a look round for a plan B and s company called Fisher Investments has caught my eye (based on past results !) any thoughts or comments ?

I am in the place where I can see that we should be achieving better, but I don't have enough knowledge / confidence to jump !

Thanks in advance, Mark.

What 'past results' are you referring to?

[Ginge R]

Crany said:

OK so some detail, my three funds with poor performance (my view point) are -

1. CF Woodford Equity income fund C
2. Henderson UK Absolute Return Fund
3. Trojan income O Acc

I have circa £56k across these three funds.

With these parts making little or nothing, we have managed circa. 13% growth over the last twelve months.

Should I accept that there will always be winners and losers in my portfolio and have some patience ( not a strong point) or chase some improvement ?

Any comments reference moving my complete portfolio to Fisher Investments UK ?

Mark.

Edited by Crany on Sunday 1st January 14:36

Woodford has struggled a little of late ("they all do that from time to time sir"), but if you're reinvesting income, you won't have been helped this year. He has taken a pretty strong conviction on smaller caps (I like that) but it doesn't mean it's the right fund for everyone all the time. He is running a negative Alpha, denoting poor performance/underperformance against expectations or his 'Beta'.

Trojan has quite a high Alpha so the fund manager isn't asleep at the wheel, but is it the Absolute fund you have? Generally, right now, an unloved niche. But will it always be so? To an extent, same applies to Henderson, but it's the priciest of the lot.

Forget patience, forget chasing. What's your threshold for risk/sleepless nights, how long do you have until retirement, what do you want or need your fund to make for you? If you have time on your side, consider a cheap personal pension or SIPP. Henderson has made 1.5% this year, but two thirds of that growth has gone in various fund management costs. It's made 15% over three years, but costs you 1% pa.

Therefore, something like 20% of your growth has gone in costs and charges over the past three years. If you want to, or have to, go down the Active fund management route then you have to accept that fund management does cost, but it has to justify itself. You'll always have good and bad moments, but if you get the basics right, you aim to capture more in the good times, and lose less in the bad.

[Hainey]

You make a point there Ginge that it's taken me years to realise. Fund managers get paid no matter how dire a year they have. As an investor you out up 100% of the capital and take 100% of the risk, but they get paid handsomely anyway.

My investment strategy for 2017 will differ from my previous years, that's for sure.

[sidicks]

Hainey said:

You make a point there Ginge that it's taken me years to realise. Fund managers get paid no matter how dire a year they have. As an investor you out up 100% of the capital and take 100% of the risk, but they get paid handsomely anyway.

My investment strategy for 2017 will differ from my previous years, that's for sure.

The management fees received are a function of assets under management and hence are heavily linked to the investment performance. Clearly many of the costs of fund management are fixed and hence are incurred regardless of performance.

Further, you need to measure performance relative to the benchmark they are managing against, not absolute performance (unless of course you have given them an absolute return / cash benchmark).

[sidicks]

Crany said:

3. Trojan income O Acc

This fund has realised 9.4% return over the last 12 months (and appears to be the top performing fund in its peer group over the last 3 years) - just exactly what were you expecting?!

[Crany]

Sidics,

Thanks for your comments / questions.

These are the Fisher figures.


Ref Trojan, my money has only been in this fund for six / seven months. I must have bought at a peak, as although the full year is showing 9.4% I am at 1.9%.

Perhaps it's my patience that needs working on.

Mark.

[Ginge R]

Performance this year, punchy, as you'd expect from near neat equity allocation - does it give you any idea of the initial and ongoing costs?

[Crany]

Fisher Investment costs are 2.25% set up followed by 1.6% pa

How does this feel for the results that they are generating ?

This was explained to me on the back of my existing (mainly hidden) costs of :-

1. FA 0.75%
2. Scottish Widdows 0.25%
3. Individual Funds 0.8%

Do these numbers ring true, as the only one that is visible to me is the FA figure.

Mark

[Ginge R]

Crany said:

Fisher Investment costs are 2.25% set up followed by 1.6% pa

How does this feel for the results that they are generating ?

This was explained to me on the back of my existing (mainly hidden) costs of :-

1. FA 0.75%
2. Scottish Widdows 0.25%
3. Individual Funds 0.8%

Do these numbers ring true, as the only one that is visible to me is the FA figure.

Mark

Your current costs then, c.1.8%? New ones 2.6% with 2.25% upfront.

That's a hefty uplift, without even taking the initial 2.25% into account. It's almost pure equities, so it's not only a different type/level of return than you're currently aiming for, but also a different asset allocation and style of management. The 1.8% sounds about right, it's impossible to state here, with certainty though.

My gut instinct, and this isn't advice, is it's probably a needless change. If you have 20% doing nothing for the moment, your adviser could be perfectly correct. It may have been invested in a sector that's only temporarily unloved. Don't forget, if you haven't made as meteoric gains as others have last year, you may be better positioned to capitalise, this.