Rating various Fidelity pension funds

[TheMotorcycleBoy]

Hi,

So I'm looking at all the various funds on offer by Fidelity that can comprise my plan. I'm curious as to how people think I should interpret some of the performance figures.

As an example of my current misunderstanding, this is one of many entries in the clickable table of funds:

Fund                                                             Unit Price
FIDELITY MONEYBUILDER DIVIDEND PENSIONS FUND - CLASS 10             232.60p

When I click to navigate to the fact sheet. I see the top holdings as follows:

ASTRAZENECA PLC
BP PLC
ROYAL DUTCH SHELL PLC
GLAXOSMITHKLINE PLC
HSBC HOLDINGS PLC
UNILEVER PLC
DIAGEO PLC
BRITISH AMERICAN TOBACCO PLC
RECKITT BENCKISER GROUP PLC
INTERNATIONAL CONS AIRLS GROUP

so no surprises there, given the word dividend in the fund's name. However the performance for the past few years is given as below.

2014-2015 | 2015-2016 | 2016-2017 | 2017-2018
     4.3% |    12.30% |      3.8% |     -0.1%

Given the holdings, I was surprising by the low performance ratings. I then speculated are the figures really a reflection of total returns (i.e. capital and dividends) or they just a measure of the movement of the fund's unit price?

Since presumably the "unit price" of the fund would merely be the current market price of each holding multiplied by each holding's weighting in the whole fund divided by the total number of units?

So I'm thinking that, if I had held this fund over the last year and not contributed into it, then the value of my fund would not be -0.1% down, since presumably the dividend returns would have increased the total value too, somewhat.

Is there anyone out there who knows about how these figures are stated? I appreciate I could phone Fidelity, but getting a decent answer from the phone staff can be a different matter altogether.

thanks Matt

[TUK020]

Don't know the answer to your question, but it would be interesting to compare this to the total return of CTY

[TheMotorcycleBoy]

Don't know the answer to your question, but it would be interesting to compare this to the total return of CTY

Hi TUK

What is CTY?


Matt

[Alaric]

I then speculated are the figures really a reflection of total returns (i.e. capital and dividends) or they just a measure of the movement of the fund's unit price?

What you see is the movement in the unit price. Presumably these are "accumulation" units, meaning that the price always includes dividends. To compare it to an index look for those described as "total return".

A unit price is calculated by noting each holding, multiplying that by the market price to get market value of assets, adding cash, adjusting for accruals and then dividing by the number of units in issue.

[Howard]

Don't know the answer to your question, but it would be interesting to compare this to the total return of CTY

Hi TUK

What is CTY?


Matt

CTY is City of London IT which holds similar shares.

One place to look at the returns is:

https://citywire.co.uk/funds_insider/in ... undID=2832

regards

Howard

[TheMotorcycleBoy]

I then speculated are the figures really a reflection of total returns (i.e. capital and dividends) or they just a measure of the movement of the fund's unit price?

What you see is the movement in the unit price. Presumably these are "accumulation" units, meaning that the price always includes dividends. To compare it to an index look for those described as "total return".

A unit price is calculated by noting each holding, multiplying that by the market price to get market value of assets, adding cash, adjusting for accruals and then dividing by the number of units in issue.

Thanks for this Alaric,

I still think I need an example to actually visualise what's happening in terms of any hypothetical holding that I might have in a fund.

Suppose I purchased 1 unit of a similar fund which has dividend paying shares back in November of 2017, and that the overall capital growth of the shares in this fund was 0%, but the average dividend yield of all the shares comprising this fund was 5%.

Further supposing that when I purchased this single unit in Nov. 2017, it's unit price was 100p, by what you said here: "accumulation" units, meaning that the price always includes dividends, can I then state the published unit price (if indeed it's an accumulation unit) is now 105p? And then the analogous % figure published between 2017-2018 for the fund's "performance rating" in this case would be +5%, as they indeed reflect a movement in unit price (not the summation of weighted standalone shares market price valuation)?

Sorry to cry out for confirmation, but such an illustration helps me clarify what's actually going on,

many thanks
Matt

[TUK020]

Don't know the answer to your question, but it would be interesting to compare this to the total return of CTY

Hi TUK

What is CTY?


Matt

As Howard already explained it is the City of London Investment Trust.

CTY hold a diversified range of FTSE higher yielding shares. They pay dividends quarterly (current historic yield a whisker over 4.5%), and have raised their dividend in nominal terms every year for the last 50 years. Total expense ratio is 0.4%.

It is, in effect, a professionally managed version of a HY Portfolio, with cash income reserve, and a benchmark to beat over the long term for HYP investing.

I plan to gradually increase my holding over the next couple of decades - it is the core of my 'long term gaga plan' for when I am no longer able or interested in managing my own portfolio. It also forms the core of my kids ISAs, as a means of getting instant diversity for a smaller investment pot.

[TheMotorcycleBoy]

Don't know the answer to your question, but it would be interesting to compare this to the total return of CTY

Hi TUK

What is CTY?


Matt

As Howard already explained it is the City of London Investment Trust.

CTY hold a diversified range of FTSE higher yielding shares. They pay dividends quarterly (current historic yield a whisker over 4.5%), and have raised their dividend in nominal terms every year for the last 50 years. Total expense ratio is 0.4%.

It is, in effect, a professionally managed version of a HY Portfolio, with cash income reserve, and a benchmark to beat over the long term for HYP investing.

I plan to gradually increase my holding over the next couple of decades - it is the core of my 'long term gaga plan' for when I am no longer able or interested in managing my own portfolio. It also forms the core of my kids ISAs, as a means of getting instant diversity for a smaller investment pot.

And thank you for the tip - I plan on researching ITs as part of our own investment strategy.

I've not taken the plunge in adding ITs yet, since I've not researched the field to my satisfaction as yet. This CTY trust sounds like a good one to own, and would, for me, form a good way of getting balanced access to biggish firms without needing to do research into each individual firm - i.e. the rigmarole for going through each one's accounts, which is my current modus operandi.

Matt

[Mike88]

I know people are fans of ITs and overall they perform better than UTs but my own experience of owning ITs has not been favourable. Over the years I have held several ITs and lost money on nearly all of them due to the shifting of the discount to NAV and not to the underlying performance. Personally I prefer the relative stability of UTs but I understand most will disagree.

[TheMotorcycleBoy]

I know people are fans of ITs and overall they perform better than UTs but my own experience of owning ITs has not been favourable. Over the years I have held several ITs and lost money on nearly all of them due to the shifting of the discount to NAV and not to the underlying performance. Personally I prefer the relative stability of UTs but I understand most will disagree.

For the benefit of us newbies, what (briefly) are the differences here?

An IT = investment trust and a UT = unit trust....correct?

UTs - are they generally just called funds nowadays? That is, UTs=passive funds + active funds.

Furthermore, ITs can borrow money from external sources, but UTs(aka funds) can only just accumulated reserves?

And finally, for now at least, when you refer (i.e. your experience of own) to UTs, would you be in general referring to "active" ones?

Sorry for the wall of questions....I'm a noisy newbie.......but would love to hear other people's remarks on my above utterances.

Matt

[Alaric]

Suppose I purchased 1 unit of a similar fund which has dividend paying shares back in November of 2017, and that the overall capital growth of the shares in this fund was 0%, but the average dividend yield of all the shares comprising this fund was 5%.

Further supposing that when I purchased this single unit in Nov. 2017, it's unit price was 100p, by what you said here: "accumulation" units, meaning that the price always includes dividends, can I then state the published unit price (if indeed it's an accumulation unit) is now 105p? And then the analogous % figure published between 2017-2018 for the fund's "performance rating" in this case would be +5%, as they indeed reflect a movement in unit price (not the summation of weighted standalone shares market price valuation)?

It should be there or thereabouts.

By comparison to the private investor, suppose you had shares worth £ 10,000 a year ago and there was no overall growth, but the dividend yield was 5%. What you would have today is shares still worth £ 10,000, but an additional £ 500 in the bank or reinvested.

If you run a collective investment fund, it can be run as open ended, in other words there's regular money in and out, or closed, where specific action has to be taken to add or pay back money. UK examples of open funds are ETFs (Exchange Traded Funds), OEICs (Open Ended Investment Companies), their legal predecessors Unit Trusts and the unitised funds run by Insurance Companies. UK examples of closed funds are Investment Trusts.

The dealing mechanism for Investment Trusts is at arms length. In other words you buy and sell on market terms rather than directly with the managers. This protects the managers from having to sell assets when they least want to, but leaves investors exposed to discounts and premiums.

Another practical difference is that ITs and ETFs trade continuously whereas to buy or sell OEICs you have to join a queue for your investment action to take place at the next pricing point.

[Mike88]

A simplistic addition to the above is that UTs trade at asset value and ITs trade more like shares at a discount or less frequently at a premium to Net Asset Value depending on supply and demand.

[EssDeeAitch]

Hi,

So I'm looking at all the various funds on offer by Fidelity that can comprise my plan. I'm curious as to how people think I should interpret some of the performance figures.

As an example of my current misunderstanding, this is one of many entries in the clickable table of funds:

Fund                                                             Unit Price
FIDELITY MONEYBUILDER DIVIDEND PENSIONS FUND - CLASS 10             232.60p

When I click to navigate to the fact sheet. I see the top holdings as follows:

ASTRAZENECA PLC
BP PLC
ROYAL DUTCH SHELL PLC
GLAXOSMITHKLINE PLC
HSBC HOLDINGS PLC
UNILEVER PLC
DIAGEO PLC
BRITISH AMERICAN TOBACCO PLC
RECKITT BENCKISER GROUP PLC
INTERNATIONAL CONS AIRLS GROUP

so no surprises there, given the word dividend in the fund's name. However the performance for the past few years is given as below.

2014-2015 | 2015-2016 | 2016-2017 | 2017-2018
     4.3% |    12.30% |      3.8% |     -0.1%

Given the holdings, I was surprising by the low performance ratings. I then speculated are the figures really a reflection of total returns (i.e. capital and dividends) or they just a measure of the movement of the fund's unit price?

Since presumably the "unit price" of the fund would merely be the current market price of each holding multiplied by each holding's weighting in the whole fund divided by the total number of units?

So I'm thinking that, if I had held this fund over the last year and not contributed into it, then the value of my fund would not be -0.1% down, since presumably the dividend returns would have increased the total value too, somewhat.

Is there anyone out there who knows about how these figures are stated? I appreciate I could phone Fidelity, but getting a decent answer from the phone staff can be a different matter altogether.

thanks Matt

Quite a co-incidence as I am looking at this very thing myself.

As far as I can make out, the stated percentages are what the share price growth was within that discrete time period. So, if you started out with £100, then at the end of year one, it would be worth £104.30 (adding the 4.3% growth to the original £100), at the end of year 2, £117.13 (it is compounding the growth in the first year and so on to the end of period), end year 3 £121.58 and end year 4 £121.45. As I have a scheduled call wit the Relationship Manager, I will ask him about this and post any relevant information.

[TheMotorcycleBoy]

Hi,

So I'm looking at all the various funds on offer by Fidelity that can comprise my plan. I'm curious as to how people think I should interpret some of the performance figures.

As an example of my current misunderstanding, this is one of many entries in the clickable table of funds:

Fund                                                             Unit Price
FIDELITY MONEYBUILDER DIVIDEND PENSIONS FUND - CLASS 10             232.60p

When I click to navigate to the fact sheet. I see the top holdings as follows:

ASTRAZENECA PLC
BP PLC
ROYAL DUTCH SHELL PLC
GLAXOSMITHKLINE PLC
HSBC HOLDINGS PLC
UNILEVER PLC
DIAGEO PLC
BRITISH AMERICAN TOBACCO PLC
RECKITT BENCKISER GROUP PLC
INTERNATIONAL CONS AIRLS GROUP

so no surprises there, given the word dividend in the fund's name. However the performance for the past few years is given as below.

2014-2015 | 2015-2016 | 2016-2017 | 2017-2018
     4.3% |    12.30% |      3.8% |     -0.1%

Given the holdings, I was surprising by the low performance ratings. I then speculated are the figures really a reflection of total returns (i.e. capital and dividends) or they just a measure of the movement of the fund's unit price?

Since presumably the "unit price" of the fund would merely be the current market price of each holding multiplied by each holding's weighting in the whole fund divided by the total number of units?

So I'm thinking that, if I had held this fund over the last year and not contributed into it, then the value of my fund would not be -0.1% down, since presumably the dividend returns would have increased the total value too, somewhat.

Is there anyone out there who knows about how these figures are stated? I appreciate I could phone Fidelity, but getting a decent answer from the phone staff can be a different matter altogether.

thanks Matt

Quite a co-incidence as I am looking at this very thing myself.

As far as I can make out, the stated percentages are what the share price growth was within that discrete time period. So, if you started out with £100, then at the end of year one, it would be worth £104.30 (adding the 4.3% growth to the original £100), at the end of year 2, £117.13 (it is compounding the growth in the first year and so on to the end of period), end year 3 £121.58 and end year 4 £121.45. As I have a scheduled call wit the Relationship Manager, I will ask him about this and post any relevant information.

Hi SDH,

I think what you've said is at odds with what Alaric wrote here

viewtopic.php?p=180078#p180078

where he suggests that the unit price is of "accumulated" units i.e. capital growth + divs. Oh, why is this so complicated.....and more to the point why did my employer choose a rubbish fund which has been me and a lot of my colleagues all end up seeing how to reconfigure our plans away from our default plan?

So you've got a Fid works pension too SDH?

[TheMotorcycleBoy]

A simplistic addition to the above is that UTs trade at asset value and ITs trade more like shares at a discount or less frequently at a premium to Net Asset Value depending on supply and demand.

Thanks for this Mike,

So to clarify when we talk of the NAV of an IT's unit, is it the share price of all of the individual holdings that comprise the NAV....as opposed to the NAV meaning the actual assets of the firms (i.e. their tangible and intangible assets on their balance sheets)?

So as an example if an IT is has a 33% contribution from a firm A, 33% from firm B, 33% from firm C, and the share prices of these 3 are =

A=£2
B=£3
C=£4

Then the NAV of this IT is £3......is that correct? And if it was trading at £2.70 then we would say that this is at a 10% discount to NAV....is that about right?

thanks
Matt

[EssDeeAitch]

Hi,

Hi SDH,

I think what you've said is at odds with what Alaric wrote here

viewtopic.php?p=180078#p180078

where he suggests that the unit price is of "accumulated" units i.e. capital growth + divs. Oh, why is this so complicated.....and more to the point why did my employer choose a rubbish fund which has been me and a lot of my colleagues all end up seeing how to reconfigure our plans away from our default plan?

So you've got a Fid works pension too SDH?

It does conflict with what Alaric wrote regards the inclusion of dividends but I have asked Fidelity to confirm by email how "Performance" which is stated by discrete year, and "Annualised Performance" are calculated and whether they include dividends reinvested or not.

Disappointing that their Relationship Manager or Wealth Desk staff cannot answer these questions off the top of their head. I shall post their response when I receive it

I don't have a pension with them but have my ISA/SIPP investments through them.

Simon

[TheMotorcycleBoy]

It does conflict with what Alaric wrote regards the inclusion of dividends but I have asked Fidelity to confirm by email how "Performance" which is stated by discrete year, and "Annualised Performance" are calculated and whether they include dividends reinvested or not.

Disappointing that their Relationship Manager or Wealth Desk staff cannot answer these questions off the top of their head. I shall post their response when I receive it

I don't have a pension with them but have my ISA/SIPP investments through them.

Simon

Hi Simon,

I'm on the phone with a Fid rep. currently........cheap fees.... you get what you pay.....receiving very poor information on available funds...

looks like another wasted evening

Matt

[Alaric]

It does conflict with what Alaric wrote regards the inclusion of dividends but I have asked Fidelity to confirm by email how "Performance" which is stated by discrete year, and "Annualised Performance" are calculated and whether they include dividends reinvested or not.

If you are talking OEICs or equivalent, then more often than not there will be at least two classes of units. A standard designation is that "Income" or "Distribution" units show the price with dividends and other income distributed, whilst "Accumulation" units show the price inclusive of dividends etc.

In its simplest form you measure performance using "price now" divided by "price then". You solve for growth by finding the "g" that satisfies the equation (1+g) ^ n = "price now" divided by "price then". n is 1 if it's a discrete year and the whole period between "now" and "then" if you are seeking annualised performance.

[Alaric]

So to clarify when we talk of the NAV of an IT's unit, is it the share price of all of the individual holdings that comprise the NAV....as opposed to the NAV meaning the actual assets of the firms (i.e. their tangible and intangible assets on their balance sheets)?

Rather than consider the percentage of each share, it's simplest to use the concept of portfolio valuation.

That consists of three columns
First Column is the number of shares owned
Second Column is the price of the share
Third Column is the product of the first two

You then sum the third column to get the portfolio value.

Adjust for accruals and cash and that's the NAV that the IT will quote from time to time. You measure discount or premium by comparing this total to the product of the number of shares issued by the IT and its price.

No Company accounts need to be consulted to establish this value.

ITs can be used where assets are difficult to value exactly because there isn't a daily market. In those circumstances, the NAV is a Director's estimate.

[TheMotorcycleBoy]

So to clarify when we talk of the NAV of an IT's unit, is it the share price of all of the individual holdings that comprise the NAV....as opposed to the NAV meaning the actual assets of the firms (i.e. their tangible and intangible assets on their balance sheets)?

Rather than consider the percentage of each share, it's simplest to use the concept of portfolio valuation.

That consists of three columns
First Column is the number of shares owned
Second Column is the price of the share
Third Column is the product of the first two

You then sum the third column to get the portfolio value.

Adjust for accruals and cash and that's the NAV that the IT will quote from time to time. You measure discount or premium by comparing this total to the product of the number of shares issued by the IT and its price.

No Company accounts need to be consulted to establish this value.

ITs can be used where assets are difficult to value exactly because there isn't a daily market. In those circumstances, the NAV is a Director's estimate.

Thanks Alaric - makes sense. Looks like I wasn't too far off the mark with my previous example.