What is this fund?

[yetanothermike]

Hello All

I was recommended by a friend to look at this forum and I'm glad I've found it !This is my first post so apologies in advance if I've done something wrong.

Anyway, I've "discovered" that my largest investment (in a pension) is with this fund. I have relative to my life earnings, a large amount in this fund. But I don't know what is it. I mean I wouldn't know how to track it on say Morningstar or similar site. There is no identifying reference number.

http://www.aegon.co.uk/content/dam/ukpa ... 5SHMS9.pdf

Also is it good value? Certainly it seems to have grown but I'm guessing a large part of that is due to forex.

Any comments on how to track it, whether its good or whether I should consider getting out would be gratefully received (and of course any "advice" I receive would be never be used against the provider of said "advice" down the line if it turns out to be bad advice. I know most people give advice in good faith on peer checked forums like this)

Edit: Just seen as a new member I can't post links which is understandable. Perhaps someone could post the link to make it easier for others to click ?

Moderator Message:
Edited to show link.

TJH

[Alaric]

Anyway, I've "discovered" that my largest investment (in a pension) is with this fund. I have relative to my life earnings, a large amount in this fund. But I don't know what is it. I mean I wouldn't know how to track it on say Morningstar or similar site. There is no identifying reference number.

I would imagine it's a fund only available o those who have insurance or pension contracts with Aegon.

You probably have to track its performance through the Aegon website.

As to what it is, the document you linked to gives the game away. It quotes the benchmark as being the MSCI World (net div) Index, so it's investing globally in equities, to the extent that it can do so with only £ 27 million to play with.

It goes on to say "Aegon currently invests this fund in a fund managed by MFS" without saying which fund it actually is, or indeed who MFS are.

[tjh290633]

The document indicates that it is a fund managed by Scottish Equitable. Further that is wholly invested in a fund managed by MFS, whoever they are. Google suggests that they are MFS Investment Managers, based in Boston MA.

Google MFS Investment Managers to read more.

TJH

[GeoffF100]

It is an expensive actively managed fund. Passive funds are much cheaper, and are much less likely to under-perform the index. You may be paying other fees too. I suggest that you check your documentation carefully.

[Urbandreamer]

It is an expensive actively managed fund. Passive funds are much cheaper, and are much less likely to under-perform the index. You may be paying other fees too. I suggest that you check your documentation carefully.

With respect:

In the first case it would seem that this fund is part of the pension funds offered by a particular provider. As such it's almost certain that there will be other fees REGARDLESS of if the money is invested in a passive fund.

In the second case the bald statement "Passive funds are much cheaper" is not true!

Most passive funds are cheaper than many actively managed funds.
However if what you claimed were true then the charges of the actively managed SMT (currently 0.3%) would be much higher than Virgin Money's index tracker (currently 0.6%, reduced from 1% this year). Indeed some passive funds (L&G, Halifax, Scottish Widdows) charge more than that!

https://www.morningstar.co.uk/uk/news/1 ... h-for.aspx

I would however agree that it's worth checking the documentation. I had a look at the pdf and it seems a fairly solid fund to me for an actively invested global fund. Beating the MCSI world index by 1.2% over the last 5 years. It is regarded as moderately high risk, but an equivelant global passive fund would be as well. The charge is 0.68%, which isn't high for a small active fund. Large funds gain economies of scale when sharing the costs of what they do (SMT has enough capital to be in the FTSE 100).

Anyway, I've "discovered" that my largest investment (in a pension) is with this fund. I have relative to my life earnings, a large amount in this fund.

May I ask what percentage of your pension it is and what country you intend retiring to?
Global investment is IMHO great, however you mentioned forex.
That is why you might need some UK investments so that your returns are more linked to where you intend to spend the money.
You also need to consider your risk tolerence and how long you expect to need the money for or indeed intend it to grow before you need it. The longer, the more exposure to equities and risk is recommended.

At the end of the day all these choices are personal ones, because we are all different.

[GeoffF100]

It is an expensive actively managed fund. Passive funds are much cheaper, and are much less likely to under-perform the index. You may be paying other fees too. I suggest that you check your documentation carefully.

With respect:

In the first case it would seem that this fund is part of the pension funds offered by a particular provider. As such it's almost certain that there will be other fees REGARDLESS of if the money is invested in a passive fund.

In the second case the bald statement "Passive funds are much cheaper" is not true!

Most passive funds are cheaper than many actively managed funds.
However if what you claimed were true then the charges of the actively managed SMT (currently 0.3%) would be much higher than Virgin Money's index tracker (currently 0.6%, reduced from 1% this year). Indeed some passive funds (L&G, Halifax, Scottish Widdows) charge more than that!

https://www.morningstar.co.uk/uk/news/1 ... h-for.aspx

I would however agree that it's worth checking the documentation. I had a look at the pdf and it seems a fairly solid fund to me for an actively invested global fund. Beating the MCSI world index by 1.2% over the last 5 years. It is regarded as moderately high risk, but an equivelant global passive fund would be as well. The charge is 0.68%, which isn't high for a small active fund. Large funds gain economies of scale when sharing the costs of what they do (SMT has enough capital to be in the FTSE 100).

There are certainly passive funds much cheaper than 0.68% p.a. plus transaction costs. Yes, if you are foolish you can pay more than you need to for a passive fund. Funds that have beaten the index in the past are no more likely to beat the index in the future than those that did not.

My point is that the OP should also look at his other charges. It may be possible to reduce those too. He could to get them down to 0.15% p.a. by transferring his pension to Vanguard, and it may be worthwhile to do that. Nonetheless, the first step is to understand what he has currently.

[Gan020]

Hello All

I was recommended by a friend to look at this forum and I'm glad I've found it !This is my first post so apologies in advance if I've done something wrong.

Anyway, I've "discovered" that my largest investment (in a pension) is with this fund. I have relative to my life earnings, a large amount in this fund. But I don't know what is it. I mean I wouldn't know how to track it on say Morningstar or similar site. There is no identifying reference number.

http://www.aegon.co.uk/content/dam/ukpa ... 5SHMS9.pdf

Also is it good value? Certainly it seems to have grown but I'm guessing a large part of that is due to forex.

Any comments on how to track it, whether its good or whether I should consider getting out would be gratefully received (and of course any "advice" I receive would be never be used against the provider of said "advice" down the line if it turns out to be bad advice. I know most people give advice in good faith on peer checked forums like this)

Edit: Just seen as a new member I can't post links which is understandable. Perhaps someone could post the link to make it easier for others to click ?

Moderator Message:
Edited to show link.

TJH

I note the objective of the fund is to achieve long term capital apprecation measured in dollars. Now I assume as you will retire in UK what you would prefer is long term capital appreciation measure in pounds so to have your largest investment in your pension in this fund is a bit odd. I'm sure at some point you will have been consulted, ticked some boxes and this is what you selected at the time. Nothing wrong of course in having some exposure to global growth in dollars but a high proportion is not the way I'd go. Of course Sterling has been really weak so the investment in this fund has turned out well and the fund appears to have performed well in excess of the benchmark (although I'm not sure the benchmark is entirely appropriate given the risk rating is only one box away from very high. Perhaps part of the reason it's a large holding is because it's done so well over the last few years compared to your other holdings?

I would appreciate other posters views. The funds base currency is GBP but it's objective to increase in dollars, not Sterling which suggests to me the fund does not hedge forex risk so that remains with the investor. Attitude to currency risk will depend on the number of years to retirement and personal views on movements on resolution (or not) of Brexit


I note comments regarding passive funds being cheaper. This should be taken in context. Passive funds are cheaper but active funds aim to outperform. This fund has both outperformed and shows a return of 12% average over the last three years.

[Urbandreamer]

I would appreciate other posters views. The funds base currency is GBP but it's objective to increase in dollars, not Sterling which suggests to me the fund does not hedge forex risk so that remains with the investor. Attitude to currency risk will depend on the number of years to retirement and personal views on movements on resolution (or not) of Brexit

Since you ask, I personally have no problem having a fairly large proportion in overseas investments that are unhedged. As it happens most of the ones in my pension are in a passive trackers. However as I said, these things do need to be considered on a personal basis.

I believe that there is far more opertunities outside the UK than limited to it. Over the long term I expect better returns. However, I also expect greater volatility and forex risk. Over the short term, I need to ensure that I'm not reliant upon those investments.

Yes, if you are foolish you can pay more than you need to for a passive fund. Funds that have beaten the index in the past are no more likely to beat the index in the future than those that did not.

If you accept bald statements like

Passive funds are much cheaper,

then arguably you might be foolish enough to pay more. After all, you have been told that you won't pay more than you need to because passive funds are cheaper!
I'm not going to bother with the second statement. It would drag the thread off topic without benefit.

[GeoffF100]

I note the objective of the fund is to achieve long term capital apprecation measured in dollars. Now I assume as you will retire in UK what you would prefer is long term capital appreciation measure in pounds so to have your largest investment in your pension in this fund is a bit odd. I'm sure at some point you will have been consulted, ticked some boxes and this is what you selected at the time. Nothing wrong of course in having some exposure to global growth in dollars but a high proportion is not the way I'd go. Of course Sterling has been really weak so the investment in this fund has turned out well and the fund appears to have performed well in excess of the benchmark (although I'm not sure the benchmark is entirely appropriate given the risk rating is only one box away from very high. Perhaps part of the reason it's a large holding is because it's done so well over the last few years compared to your other holdings?

I would appreciate other posters views. The funds base currency is GBP but it's objective to increase in dollars, not Sterling which suggests to me the fund does not hedge forex risk so that remains with the investor. Attitude to currency risk will depend on the number of years to retirement and personal views on movements on resolution (or not) of Brexit

I note comments regarding passive funds being cheaper. This should be taken in context. Passive funds are cheaper but active funds aim to outperform. This fund has both outperformed and shows a return of 12% average over the last three years.

Currency movements are very unpredictable. For an unhedged fund, it does not really matter whether the objective is appreciation in dollars, sterling or some other currency. Hedging equity funds has been discussed recently:

viewtopic.php?f=55&t=18948

The usual advice is to hedge bonds but not equities, but the Vanguard paper referenced in that thread goes into rather more detail than that.

Active fund managers do aim to outperform, but they usually fail to do so after costs. Nobody has found a method of identifying the fund managers who will outperform with a better than chance success rate.

[GeoffF100]

If you accept bald statements like

Passive funds are much cheaper,

then arguably you might be foolish enough to pay more. After all, you have been told that you won't pay more than you need to because passive funds are cheaper!
I'm not going to bother with the second statement. It would drag the thread off topic without benefit.

It would have been better if I had wrote "There are passive funds that are much cheaper." I am aware that there are passive funds that charge more, but I would not consider buying them. The message here is that the OP can save a lot of money.

[yetanothermike]

Wow - what a great set of interesting replies! Thanks so much.

This is one of only around 7 funds in total offered by my current pension provider (a work based pension) and one of only two that are equities based. I have 75% in this and 25% in the other one (a passive one). Until a year ago I had 100% in this.

I would like very much to at least have the choice of other funds but it seems to do that I would need to transfer to a SIPP and to do that I would need to pay an FSA several thousand pounds. That is because my pension includes a tiny DB underpin that is based on just 5 months at work at the very start of my career when my salary was much lower even in real terms. Whereas the DC element (which this fund is the majority) was based on 25 years of working contributions.

On the plus side, as far as I know, there are zero annual management fees charged by my current pension provider but I suspect the saving here is small when e.g. II seem to charge a flat fee as low as £240 per annum.

[GeoffF100]

Moving your fund probably does not make sense. If your employer is making contributions, you certainly want to keep those, and you do not want to pay big IFA fees without a very good reason.

What is the passive fund and what does it cost? More to the point, what are all your options? How old are you? Does 100% equity make sense?

[yetanothermike]

Moving your fund probably does not make sense. If your employer is making contributions, you certainly want to keep those, and you do not want to pay big IFA fees without a very good reason.

What is the passive fund and what does it cost? More to the point, what are all your options? How old are you? Does 100% equity make sense?

Sorry I should have made clear that pension is dormant now. i.e. no more contributions are being made either by me or my past employer.

The passive fund is this one:
www [dot] aegon [dot] co [dot]uk/content/dam/ukpaw/hidden/Standard_B5N41M2.pdf

I'm moving towards 50 .

And yes I dont like the idea of paying huge sums for mandatory advice. Might not have a choice though

[Alaric]

And yes I dont like the idea of paying huge sums for mandatory advice. Might not have a choice though

A couple of options might be available to you.

The first is to leave the DB element behind. The other is that advice on transferring a DB benefit is mandatory only if the value exceeds £ 30,000.

[yetanothermike]

And yes I dont like the idea of paying huge sums for mandatory advice. Might not have a choice though

A couple of options might be available to you.

The first is to leave the DB element behind. The other is that advice on transferring a DB benefit is mandatory only if the value exceeds £ 30,000.

Either of those would be ideal. Unfortunately, around a year ago I had an exchange with the provider who said this (via email) :

Regrettably the presence of even a small Defined Benefit underpin means that we fall into the DB camp and the requirement of appropriate financial advice is a legislative requirement and is compulsory - no receiving scheme will accept the transfer without advice being taken.

They do seem quite happy to keep me locked in

[swill453]

Either of those would be ideal. Unfortunately, around a year ago I had an exchange with the provider who said this (via email) :

Regrettably the presence of even a small Defined Benefit underpin means that we fall into the DB camp and the requirement of appropriate financial advice is a legislative requirement and is compulsory - no receiving scheme will accept the transfer without advice being taken.

You could ask a potential receiving scheme if that's actually true.

Scott.

[swill453]

Another option might be for them to buy out your DB element, if they're amenable.

Scott.

[Urbandreamer]

Sorry I should have made clear that pension is dormant now. i.e. no more contributions are being made either by me or my past employer.

The passive fund is this one:
www [dot] aegon [dot] co [dot]uk/content/dam/ukpaw/hidden/Standard_B5N41M2.pdf

I'm moving towards 50 .

And yes I dont like the idea of paying huge sums for mandatory advice. Might not have a choice though

Do you currently have taxable income, or another pension that you are paying into?

Were I in the situation described (assuming employed) then I would be quite happy to leave the dormant pension alone and regard it as part of a portfolio that I will draw upon when I retire. I would concentraite my attentions on things easier to influence. Current contributions, asset allocation, pension lifestyling regeme if adjustable. For eample since this pension is entirely global equities I would slant other investments towards the UK to moderate the risk profile, accepting lower returns from that part of my portfolio.

Ps, welcome to the boards. You might also be interested in this section viewforum.php?f=30

[Alaric]

You could ask a potential receiving scheme if that's actually true.

You could also ask your MP whether it was Parliament's intention to impose such a lock when they introduce the "advice" requirement.

[GeoffF100]

The NIPP Passive Global Equity Fund benchmark is said to be 30% FTSE All Share Index, 60% Developed Overseas Equities with currency hedging back to sterling and 10% Emerging Market Equities. Annual Management Charge 0.09%. Additional Expenses 0.02%.

This is a low cost fund. You will not do any better than that, and you say that there are no other charges. Hedging currency back to sterling is questionable. It is not likely to significantly reduce volatility and has a cost. Sterling could go up, but it could also go down. The UK bias is a little more than for the average institutional fund at 25%.

What other assets do you have? Are you going to be reliant on this fund during retirement? How much risk can you afford to take? 100% equity is very high for a 50 year old. The old adage of "your age in bonds" would suggest an allocation of 50% bonds and 50% equities. The Vanguard Target Retirement funds would allocate 30% bonds and 70% equities for someone your age. Nonetheless, if you have other secure pensions that you can live off, this may not matter, and could work out in your favour.

The price movements of long term government bonds are negatively correlated with those of equities. That is to say that the prices of these bonds usually move in the opposite direction to those of equities. Bonds usually deliver a lower return than equities, but a mixed band / equity portfolio can generate a profit from rebalancing.

You have not told us about the other funds available to you, but there does not appear to be a case for transferring your pension.