Soldato
In 2020 during Covid when I had nothing to do, I thought I'd take a look at my pension fund.
I had never really given it a second thought before. It is a defined contribution employer scheme where the funds are taken salary sacrifice, and the provider they chose to run it picked the funds it was invested in, on what they term a 'lifestyle' profile, which means that initially its more invested in stocks and shares, then as you approach retirement age it switches over to safer assets.
Anyway, I looked into the growth I'd had over the 16 ish years Ive been in the scheme, and where it was invested. I was not happy with what I found.
There was a very high proportion of UK equities. I found out that many 'default' funds have this, because the logic was its a UK scheme, for UK employees, and that meant that those people favour UK bias. This immediately seemed crazy to me, as the US has experienced much higher growth. Why would you favour UK equities over faster growing US equities with the US being the biggest economy in the world?
So I started looking into what funds were available. Wow its complex to analyse. Most funds are multi asset so have a mix of all sorts of equities or bonds (or other assets like cash, property) across a mix of jurisdictions. So if you wanted to target a certain percentage of say US equities, or emerging markets, or Japan etc, then there was quite a bit of analysis needed to sort it all out. My scheme had 83 funds to choose from. Each fact sheet gave a performance history, information on what mix of equities or other investments the fund contained and from what jurisdictions, information on the management fees, what baseline the fund was measured against/tracking, and finally a risk score ranging from 1 (safest) to 7 (riskiest).
So I did a whacking great spreadsheet to analyse all this. I listed down every fund I could pick from, and ranked its 5-year performance. My funds were ranked 50th and 79th out of 83 over 5-years.
The funds I was in initially (the default funds from the provider) had given me a total of around 29% fund performance until early 2020 (before the markets crashed when Covid happened). This is 29% over probably 16 years, so an average of less than 2% per year, which I thought was pathetic. The mix of these default funds was 75% equities and 25% cash and bonds. Of the whole portfolio, 32% was UK equities, 12% US, 12% EU and 6% cash.
So I did a bunch of analysis. Initially I was trying to micro manage, by selecting different smaller percentages in a high number of funds. But I pulled back from this idea and settled on a simpler approach with just two funds, both multi-asset funds but one of them is an ex-UK fund, which meant it had no UK equities in it. I could adjust the proportions to get the higher proportion of US equities I wanted.
So I made the switch in October 2020. My new portfolio had 78% equities and 22% cash and bonds, but in contrast to the starting position, now I had 35% US, 19% UK, 14% EU, and only 3.5% cash. The funds I picked were ranked 17th and 29th out of my 83 ranked list.
Since 2020, my portfolio performance has been about 24%, in 3.5 years so nearly 7% a year growth. This is excluding the Covid rebound. But, obviously there were lingering effects of this so its difficult to disentangle it completely.
So why am I posting all this?
The analysis I did was very manual and long winded, because I needed to go into all my provider's factsheets and manually extract all the fund performance data. I need to repeat this exercise now to see if a) my choices were the right ones - have my new funds done better than the ones I moved from in the first place; and b) to see if I need to move to any alternative funds or adjust my mix of assets/jurisdictions.
I wonder if any other people here took a strong degree of control over the pension fund investments and if so, how do you manage it? There are limited tools available on my provider's website hence why I had to do a lot of manual work.
I also remain annoyed at the lack of performance in my scheme over the 16 years prior to my interventions. The missed growth from a poor choice of funds is, in my opinion, bordering on corporate incompetence.
I had never really given it a second thought before. It is a defined contribution employer scheme where the funds are taken salary sacrifice, and the provider they chose to run it picked the funds it was invested in, on what they term a 'lifestyle' profile, which means that initially its more invested in stocks and shares, then as you approach retirement age it switches over to safer assets.
Anyway, I looked into the growth I'd had over the 16 ish years Ive been in the scheme, and where it was invested. I was not happy with what I found.
There was a very high proportion of UK equities. I found out that many 'default' funds have this, because the logic was its a UK scheme, for UK employees, and that meant that those people favour UK bias. This immediately seemed crazy to me, as the US has experienced much higher growth. Why would you favour UK equities over faster growing US equities with the US being the biggest economy in the world?
So I started looking into what funds were available. Wow its complex to analyse. Most funds are multi asset so have a mix of all sorts of equities or bonds (or other assets like cash, property) across a mix of jurisdictions. So if you wanted to target a certain percentage of say US equities, or emerging markets, or Japan etc, then there was quite a bit of analysis needed to sort it all out. My scheme had 83 funds to choose from. Each fact sheet gave a performance history, information on what mix of equities or other investments the fund contained and from what jurisdictions, information on the management fees, what baseline the fund was measured against/tracking, and finally a risk score ranging from 1 (safest) to 7 (riskiest).
So I did a whacking great spreadsheet to analyse all this. I listed down every fund I could pick from, and ranked its 5-year performance. My funds were ranked 50th and 79th out of 83 over 5-years.
The funds I was in initially (the default funds from the provider) had given me a total of around 29% fund performance until early 2020 (before the markets crashed when Covid happened). This is 29% over probably 16 years, so an average of less than 2% per year, which I thought was pathetic. The mix of these default funds was 75% equities and 25% cash and bonds. Of the whole portfolio, 32% was UK equities, 12% US, 12% EU and 6% cash.
So I did a bunch of analysis. Initially I was trying to micro manage, by selecting different smaller percentages in a high number of funds. But I pulled back from this idea and settled on a simpler approach with just two funds, both multi-asset funds but one of them is an ex-UK fund, which meant it had no UK equities in it. I could adjust the proportions to get the higher proportion of US equities I wanted.
So I made the switch in October 2020. My new portfolio had 78% equities and 22% cash and bonds, but in contrast to the starting position, now I had 35% US, 19% UK, 14% EU, and only 3.5% cash. The funds I picked were ranked 17th and 29th out of my 83 ranked list.
Since 2020, my portfolio performance has been about 24%, in 3.5 years so nearly 7% a year growth. This is excluding the Covid rebound. But, obviously there were lingering effects of this so its difficult to disentangle it completely.
So why am I posting all this?
The analysis I did was very manual and long winded, because I needed to go into all my provider's factsheets and manually extract all the fund performance data. I need to repeat this exercise now to see if a) my choices were the right ones - have my new funds done better than the ones I moved from in the first place; and b) to see if I need to move to any alternative funds or adjust my mix of assets/jurisdictions.
I wonder if any other people here took a strong degree of control over the pension fund investments and if so, how do you manage it? There are limited tools available on my provider's website hence why I had to do a lot of manual work.
I also remain annoyed at the lack of performance in my scheme over the 16 years prior to my interventions. The missed growth from a poor choice of funds is, in my opinion, bordering on corporate incompetence.
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