Pension fund performance - do you monitor yours, how is it doing, do you actively change it?

[danlightbulb]

I transfer as much as I can from my workplace pension once a year to my Vanguard SIPP where it’s invested into the same index funds as my S&S ISA and Lifetime ISA. Some workplace pensions aren’t too bad on fees but some are awful so ymmv.

I didn't know this could be done.

 

[danlightbulb]

This might be interesting to some researching this subject.

I just watched that along with a few of his other videos. Essentially he is saying do a global equities index with low fees.

Which is almost what I have now but the mix is probably a bit off, plus I have some bonds still. I think I will pivot to more equities and see what passive global trackers i can choose from in my scheme.

He quotes 10% p a though as a global average. Not many of the funds I've been looking at have done that well.

 

[danlightbulb]

Ive continued analysing my available funds.

Here are the top 10 funds in my scheme over the past 5 years:

Note that only the top 7 funds have achieved over 10% p.a average returns. Are claims of consistent above 10% returns therefore a bit overstated? Especially in a balanced portfolio - which none of the top 10 funds by themselves are.

Edit to add - when I looked at this in October 2020, 23 funds had achieved more than 10% growth over 5 years as an average. So performance this time is down compared to back then. Does this suggest equities are starting to struggle?


30% of my portfolio is in fund 9 on this list, which did well so that's good. But the other 70% is way down the list in a fund in 41st place, this is because that fund is mixed assets and also contains bonds/gilts as well as equities with a higher proportion of UK equities.

Question is though whether bonds/gilts will start to come good again, theory is they should if interest rates start to fall.

A video I watched last night said that all of the global funds are deriving their growth mainly from US equities, and even more than that, the US market is deriving most of its growth from just 7 big technology companies.

The top fund on that list is badged as an islamic fund (sharia compliant) but on inspection it still contains the same big 7 US companies as other equities funds do. So not sure why its done better and whether that will continue.


I did a risk ranking on myself and watched a few videos on it. Out of four categories 'cautious' 'balanced' 'growth' and 'adventurous' I landed between balanced and growth. The video then said to go up a category if you're investing for 11+ years like I still am in my pension scheme. So that would put me in the growth category.

So on this basis my investment choices might need to be more biased towards the higher risk categories than they currently are.

 

[danlightbulb]

@danlightbulb just so you know it might be worthwhile ringing them to see what the stipulations are on moving your pension to a private SIPP to Vanguard and Co so you have all your options covered.

I don't think I need to - I have options for various equities and bond funds in my current scheme. The bigger factor is deciding on the strategy.

 

[danlightbulb]

Any investors have views on bonds/gilts please? Ive read some articles that seem to suggest it could be a good time for bonds soon, assuming interest rates have indeed peaked. I looked back at the data I'd collated from my scheme and indeed prior to 2020 the bond funds did reasonably well, 7-10% p.a average returns. That wasn't as good as equity, but if equity struggles then 10% on bonds would be nice.

So this is indicating to me I should retain some exposure to bonds in my portfolio.

But the performance of equities despite the economic conditions we have faced lately suggests going harder on equities is better.

There is a risk that if I drop the bonds now and equities underperform then Ive lost out. Or I could stick with some bonds and if equities (especially in the US) continues to do well, and Ive lost out.

 

[danlightbulb]

I wouldn't be day trading your pension fund. Bonds/gilts are not as good as they were and getting worse; but there was a short term tax effective peak a few months back.

Im not - I have 20% bonds now as this was what was considered diversified when I evaluated things in 2020. If I keep them, I keep them for a few more years at least. Just not sure what the reason is to keep them or not. The traditional view is they offset poorer equity performance.

Some articles online suggesting bonds valuable part of portfolio still. But then look at how many people have replied here and said they are all in global equity funds.

 

[danlightbulb]

Yes, a few years back I dumped all of my pension funds (like yours, madly UK overweighted and not enough equity) into a SIPP and went 100% VUSA (Vanguard S&P 500 tracker). It's done very well.
As I get older I will gradually switch from equity to bonds etc.

I have zero faith in the UK stock market, we've had stagnant productivity gains for years now. Yes some have overseas earnings but still... USA has broadly the best companies in the world, specifically big tech which has the biggest room for growth. If there's any sign of the US losing it's huge advantage I'd switch to VWRL. Keeping it simple, no need to get bogged down in funds or specific stocks, that's what play money's for.

Thanks for your input. You wouldn't be able to call that a diversified portfolio though would you, by any scale, 100% US equities would be considered very high risk.

 

[danlightbulb]

That's my concern with my current choice. It is high risk. That said I don't know what risk level the original fund I was put into was, which was L&G PMC 2040 - 2045 Target Date Fund 3. Many don't mess with what they're pension is invested in and just trust L&G have put their money in the best place. All I can see from the original one is that nearing the forecast retirement date they'll change from higher risk investments to stable investments like bonds etc.

I never know what to do for the best. All my eggs are in one basket currently so it's probably not ideal. My current fund is heavily invested in the US market so I'd be in the same boat.

Yeah my dilemma too - its very difficult to know what to do.

On the equities side, it seems a reasonably easy choice - a global passive index fund (which would automatically be heavy in US tech stocks anyway, as that's the natural balance of world equity).

However the issue seems to be around what proportion of bonds, if any, I include in my portfolio. Bonds were meant to be safe/stable, clearly that's not been true lately. And they offer lower growth than equities.

Traditional default funds are clearly not making the best choices for people either, so can't just stick with default.

 

[danlightbulb]

onestly - Forget trying to "best guess" the markets.

Shove it in some funds, leave it alone. Don't try and chase sectors etc.

Chasing sectors/bonds/gilts/equities/overseas/US/Far east etc - never going to work. Let something like Vanguard lifestrategy do the job for you. Or any other alike fund. Never the best, never the worst, right in the middle - doing it's job.

Im not trying to second guess markets. The split between equities/bonds is a pretty critical decision point is it not? Deciding what level of risk to take is a fundamental part of this, is it not? Why would I delegate that decision to a third party fund that is designed for pension investors who are happy to leave everything in their default funds and get sub-optimal returns?

 

[danlightbulb]

None of my equity or multi asset funds have specific gold exposure. Is it worth adding in a specific gold exposure fund at say 3% of portfolio? The single gold fund I have access to is ranked 2nd best performer over 5 years.

 

[danlightbulb]

Your attitude to risk is the main thing - then pick a fund/funds that line up with that.

Do a online risk profiler - pick 1/2/3/4 funds that match your current attitude to risk.

Done that. I am in or around the growth/adventurous category. That would be around an 8/10 I would say. Which is ok, Im 25 years out from retirement.

There are 100's of "risk targeted" funds that do the heavy lifting for you

Which I don't have access to in my scheme, hence me having to pick from a selection of funds to get the equity/bond and UK/overseas balance I should have.

For example, I cannot select a single fund that represents worldwide equity. I can select for example a 70/30 equity fund, which is 70% global and 30% UK. So to get that UK proportion down I would then need a second fund ex-UK to get the mix right.

The 'balanced' funds all have a high proportion of UK equities too. Hence if I want bonds, I either need to select multiple funds to get the mix right or choose some specific bonds funds with no equities in them.

Again - size of fund? Is it worth it?

£130k. Up from £84k in 2020 when I did my last configuration change.

Gold funds tend to be massively high risk....as they are single sector/single commodity

Yes its a 7/7 on the risk scale, but over the past 7 years has been placed 1st or 2nd on the ranking out of all the funds. Will that continue, who knows - question is should I be in it?

 

[danlightbulb]

Who's the provider? Seems very limited.

Aegon Blackrock. There are around 80 different funds in total, most of them equity funds of various configurations, plus a handful of 'balanced or mixed asset' funds, and some standalone 'fixed income' (bonds) funds.

Gold if you really want it is just a small part of a portfolio. The risk rating is probably just indicative of it being a bet on a single commodity. Honestly though, you know that saying about past performance that is plastered all over investment websites... I'd listen to that, people tend to chose yesterday's winners investing in hindsight.

The question Im asking myself is whether it is worth being a little in gold. I have looked at the past performance, because that is the only data I have. Is the future likely to be different from the past, I don't know. That's the whole point of diversifying isnt it, which suggests I probably should have a little bit of a gold fund. Im not overly bothered by it though, as it will only be small. So that logic doesn't get me to an answer.

people tend to chose yesterday's winners investing in hindsight.

I completely agree with you. I can't know what will happen in the future though. Are equities on the brink of collapse and bonds will take over the world for five years. Who knows. You can go online and read an article supporting either position.

The only data I have is historic.

 

[danlightbulb]

The thing with gold is you have to ask why you want it. I.e as an inflation hedge a few % isn't going to be doing much. If its because you are worried about end of days holding physical bars is much nicer.

The only reason I am interested is because its been doing comparatively well against other funds. What reason is there to think that would change?

 

[danlightbulb]

But just choosing gold because it has done well recently doesn't necessarily make much sense - since as mentioned, it doesn't bring in any revenue.

The gold fund I have access to is actually a gold equities fund - it is an equities fund that invests only in companies that mine gold or other precious metals. It is not specifically a gold buying fund - I don't have one of those to choose from.

 

[danlightbulb]

I used to work for a company who paid part of the salary in RSUs (stock). I always thought that was a bit sketchy because it made all employees have to figure out how trading/investing worked, and most ppl just aren't up to the task.

I'm getting similar vibes with pensions. Most people trying to DIY will make mistakes. But usually letting some company do it for you is also bad.

Very flawed system.

It just seems to me that there is a bit of a grey area in the middle around proportions.

For example:

100% US only equities - clearly extremely high risk, and not at all diverse, but has paid off for the past few years.
100% global equities tracker - high risk in the sense its all equities, but that might be ok.
80/20 equities bonds or some other percentage - this is where the grey area is, how much bonds?
>50% bonds or cash investments - low risk clearly (although you'd have got screwed last year if this was your strategy because of the way bonds went), and you'd have sub-optimal growth against equities.


What is causing me problems is whether to keep the c.20% bond allocation or just go all equities. Equities have given larger returns but there are perhaps signs this will pull back. Is 20% of bonds worth bothering with at all even, its hardly enough to offset a massive stock market shock where 80% of your funds still would be held.

My current bond fund is comprised of UK gilts and overseas government bonds, rather than corporate bonds. There are separate corporate bond funds available. I assume government bonds are the safer of the two types, so perhaps another grey area is instead of picking government bonds, pick corporate bonds.


What gets me is you look at the fund performance, and on the one hand I have in front of me a bunch of global (US heavy) equity funds that have done great (>10% p.a average), and then my balanced fund which has only done 5% p.a average. A UK only equities fund is lower still, c.4% p.a average. It is difficult to choose a fund when I am seeing that poor return on screen, even if it's for diversification reasons.

 

[danlightbulb]

You could make a reasonable argument for anything in that range. At some point you'll worry about risk and want more bonds, but maybe you're just too young to feel that worry yet.

If I had enough pension fund already, then I guess I'd be looking to protect it, but as it's nowhere near high enough, I need to go for growth.

I do get very scared when I see people chasing returns based on past performance. But I am going to keep out of this mainly as its a little too close to the day job.

Its going to be a bit like is always the case with this sort of thing that some people will FOMO into all sorts of thing.
Then see a drop (in real or relative terms).

In response to you and slinxy, I'm not chasing based on past performance. I'm well aware it's not an indication of future performance and things could change. Thing is, unless there is a signal for that, some indication of a different future, then it's just guesswork either way. In which case maybe looking at the best performing areas in recent past and following that IS an ok approach. I'm not talking about dropping out of equities for fear of a doom crash, I'm just talking about flexing an already fairly low bond percentage, and making sure I have the right mix of global Vs UK.

Yes the uk market sucks at the moment and only looks like it's going sideways or down... but the other way to look at it is that your buying your shares on the cheap.
The US market itself is moving sideways apart from the big 7 which are all tech companies, buying into them now could mean that you're buying some very inflated shares. Not to sound like a negative nelly but how much room for growth is there left for the big 7?

The speculation is that China are gearing up there stock markets to take on the US and India's stockmarket is at all time highs at the moment, it be interesting to watch what happens

All good points but to change my strategy based on those would be just as speculative as following the short term fund performance.

To be fair I'm interested in improving my India or China percentage but I haven't found any funds in my scheme which mention either of those locales.

 

[danlightbulb]

I know mate, I have spoken to the traders at work.. they don't mess around with their pension and they recommend that I leave mine alone.

Ok if you already have a good asset mix, which it sounds like you do. My default fund was terrible.

 

[danlightbulb]

Saying that, some of the figures posted here from company invested pension schemes are appalling. High fees and low growth, no thanks.

For me the biggest crime is the high UK equity percentage. In what universe should a UK 30 year old be 30-40% in UK equities.

 

[danlightbulb]

Wow that naming doesn't give you much of a clue what the funds even are does it.

 

[danlightbulb]

Compared to a very cheap all world tracker its poor.

What jumps out from that is that most of the growth happened from Oct-17 to Oct-21 (60%). Since then its only gone up a further 10%.

Ps what tool/website is that please?