The Lemon Fool

Want to put together a portfolio for £250k with a bias towards capital preservation, though with enough growth assets to hopefully keep up with inflation over the next 5-10yrs should markets allow. Was considering the following:-

30% Vanguard Life Strategy 40
25% L&G Multi Index 4
25% C&G Absolute Return \ Capital Gearing Trust
20% Troy Trojan O \ Personal Assets Trust

Chose the 4 funds as a bit of a hedge as whilst they are all well diversified and have similar risk scores, each fund would appear to take a slightly different approach to what they do e.g. VLS being a fixed allocation and L&G MI being risk targeted. The other two appear to have a good record for capital preservation whilst having some variation in asset allocation.

I wanted to avoid too many funds if possible as the product transaction charges are an eye watering £43.75 per trade (£87.50 per fund swap) which will likely influence the amount of re-balancing that is done. Does the above look sensible?

Yes, looks sensible if your aim is capital preservation with modest growth.

Your purchase charges do seem very high compared to the norm, however I wonder if your particular platform is therefore making no further annual charges on the value of the portfolio, in which case you can probably stomach as one off set up costs.

It's an offshore investment bond in trust. The product\platform charge is £820 pa and so not too outrageous, though it's a pre RDR product and so the IFA who sold it also gets 0.5% pa trail commission.

It's currently invested with an approx 80/20 equity/bond split with the vast majority of the equities being UK & European. Investment horizon is an uncertain 0-10yrs max and so we would like to try and lock in some of the previous gain until such point we decide to bring it onshore, at which point the taxation issue will need to be addressed.

EviesDad wrote:It's an offshore investment bond in trust. The product\platform charge is £820 pa and so not too outrageous, though it's a pre RDR product and so the IFA who sold it also gets 0.5% pa trail commission.

Are you not paying out more in charges than the saving in tax against bringing it onshore ?

Alaric wrote:Are you not paying out more in charges than the saving in tax against bringing it onshore ?

More than likely, especially as average fund charges for the IFA selected portfolio are an additional 1.42% and so all in all it's an expensive way to invest. The product was sold to my mother 20yrs ago with a view to IHT mitigation (probably not now needed), however she doesn't really understand the product, what it is invested in or the impact the charges have on the returns.

From my point of view as a beneficiary, there is a strong case for bringing it onshore as quickly as possible as the political risk of a potential Corbyn\McDonnell government viewing offshore trust funds as the preserve of the rich and taxing them accordingly simply isn't worth taking. However as with many families things are rarely straight forward and so whilst all parties concerned discuss how best to proceed, it would seem sensible to remove some of the risk from the portfolio until we can agree the next course of action.

Careful on RIT, I think.

I haven’t looked at in detail for a while, but you may wish to if you are considering it.

From memory, it is more positioned for growth rather than the more absolute protection of the likes of PNL and CGT.

So it would not surprise me that it has a stronger performance since the 2008 crash - I suspect it would have fallen further than CGT and PNL during the crash.

thebarns wrote:Careful on RIT, I think.

I haven’t looked at in detail for a while, but you may wish to if you are considering it.

From memory, it is more positioned for growth rather than the more absolute protection of the likes of PNL and CGT.

So it would not surprise me that it has a stronger performance since the 2008 crash - I suspect it would have fallen further than CGT and PNL during the crash.

Agreed, during my research I had ruled out RIT for being too growth orientated.

Regarding the unequal weighting of the suggested four funds, this was no more than personal preference. I like the Life Strategy funds and feel this would do best of the four in a rising market and so I had given a slight tilt towards optimism

Oh c**p, just realised that the C&G Absolute Return fund isn't available on the platform and there also doesn't appear to be an accumulation version of the fund anyway. CGT is available on the platform but the high transaction charges mean that re-investing dividends probably isn't going to be cost effective.

I don't have a downer on RIT, i just don't think it's appropriate for us in this instance. As previously mentioned we have an uncertain investment horizon and so a long term buy & hold likely wont apply, The objective here is to try to preserve some capital until such time we decide to bring the investment onshore, whilst also having the possiblity of some upside to protect against inflation should the process take longer than expected.

RIT bombed in the 2008 2009 crash. While it is mixed asset it certainly wasn’t defensive then, which is not to say that it may be positioned well for the next crash. CGT, PNL and RICA all did better in the last crash, but of course have been performing worse recently because of their bearish positioning.

EviesDad wrote:I like the Life Strategy funds and feel this would do best of the four in a rising market and so I had given a slight tilt towards optimism

Surely the opposite is true. A fund which is 40% bonds is defensive. It will do WORST in a rising market, but should protect value better in a falling one.

Personally, I am not a fan of lifestyle funds. Equities have ALWAYS outperformed bonds over the long run. So a lifestyle fund is certain to underperform over the long term. Lifestyling WAS ideal for those approaching retirement annuity/cashing out. But now compulsory annuity purchase has gone, they only really suit low risk/low return. MAY be suitable if your investment outlook is only 10 years. But is it really?

Gryff

gryffron wrote:

EviesDad wrote:I like the Life Strategy funds and feel this would do best of the four in a rising market and so I had given a slight tilt towards optimism

Surely the opposite is true. A fund which is 40% bonds is defensive. It will do WORST in a rising market, but should protect value better in a falling one.

Personally, I am not a fan of lifestyle funds. Equities have ALWAYS outperformed bonds over the long run. So a lifestyle fund is certain to underperform over the long term. Lifestyling WAS ideal for those approaching retirement annuity/cashing out. But now compulsory annuity purchase has gone, they only really suit low risk/low return. MAY be suitable if your investment outlook is only 10 years. But is it really?

Gryff

Sorry Gryff but I think you have mis-understood. ALL 4 funds are defensive, I just think that the VLS fund may do slightly better in a rising market as it has the highest equity allocation. Also VLS40 is not a lifestyle fund, it's a fixed 40% equity allocation and there is no progressive switch out of equities into bonds.

As previously mentioned, the investment horizon is unknown, unlikely to be more than 10yrs but could be as short as 1-5 years.