# AVC Fund Selection (BIAM)



## Beamie (28 Nov 2006)

I would appreciate advice on selection of funds through which to invest AVCs in a company pension scheme. These funds are with Bank of Ireland Asset Management (BIAM).

International Equity Fund
Pensions Managed Fund
Consensus Fund
Cash Fund

I am in my mid-forties and I am thinking of starting with 
50% International Equity Fund
50% Consensus Fund
I don't (currently) expect to retire before 65.

International Equity Fund:
pure equity fund, actively managed by BIAM.
invests in the shares of international (non-Irish) publicly quoted companies (Europe (ex Ireland), UK, North America, Japan and other Far Eastern countries). Currently approximately 25% of the fund is invested in Eurozone equities, 74% in non Eurozone equities and the balance is held in cash.

Pensions Managed Fund:
a balanced fund with an investment objective of achieving capital growth over the long term through investment in equities, bonds, property and cash instruments both in Ireland and overseas. 
actively managed by BIAM. 
The fund invests primarily in Irish and international company shares with the balance in bonds, property and cash. BIAM manages the exposure to equities around a long-term neutral position of 65% depending on market prospects. Currently approximately 77% of the fund is invested in equities, 14% in bonds, 6% in property and 3% in cash.

Consensus Fund
a passive Managed fund.
invests in equities, bonds, property and cash instruments
the fund is designed to mirror the general investment strategy followed by Irish fund managers rather than reflecting the judgment of BIAM. As a result, the fund’s asset allocation reflects the average manager mix of equities, bonds, property and cash. Within each asset class, the fund follows the relevant market index. This strategy aims to eliminate manager risk, which is the risk of being invested with an investment manager who underperforms. 

The fund invests primarily in Irish and international company shares with the balance in bonds, property and cash, and is determined according to the make-up of the average Irish pension fund. Currently approximately 78% of the fund is invested in equities, 14% in bonds, 4% in property and 5% in cash.

Cash Fund
The objective of the Cash Fund is to provide a return in line with wholesale Irish deposit rates.

Fund Annual Management Charge
The International Fund 0.75%
The Managed Fund 0.75%
The Cash Fund 0.30%
The Consensus Fund 0.375%

Thanks for any help.


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## Guest126 (29 Nov 2006)

Beamie

Where is your main pension fund invested (I note the question is in respect of AVCs)?

Do you have many other considerable assets/liabilities that might impact on your investment strategy?

What is your attitude to risk - would you prefer to invest in an asset with a 0% return OR an asset with a 50% probability of a 10% gain and a 50% probability of a 10% loss?


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## Beamie (29 Nov 2006)

Main pension is defined benefit, so I didn't think its funds mattered.  It is managed by BIAM.

No big assets / liabilities - own my house, mortgage cleared.  Got enough savings that I need to be able to access (could be producing a better return than current a/c, but fixing that is a separate job).

My thinking is to put a regular amount into AVC as long term saving - say half of what I can save on average per month.  Other half goes into some saving / investment that I can access before retirement.

Attitude to risk: have been totally anti-risk, but my savings have been eroding in 0% current a/c.  0% nett return (after inflation) is fairly OK by me for short/medium term savings - compared with 50/50 odds on 10% gain/loss - but the point of long term investment via pension is to get a real return over 20 years.  For that, I would not be happy with either outcome: 0 gain, nor 50/50 of 10% gain/loss.

I am seeing major benefit of AVC as being no tax drag on the investment, so I guess I am expecting real return and betting on 20 years being long enough to mean it is not the 50/50 scenario in your question.

Thanks for your response.  Even having to think this out is helpful to me.


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## Guest126 (29 Nov 2006)

Tax-free on way in but it may be taxable on the way out?

I would target the revenue maximum tax-free lump-sum with your AVC - that should be a realistic goal if you have more than ten years to retirement, which you clearly do.

Your proposed fund choice is reasonable considering your earlier comments, but BIAM's performance has been miserable more recently.


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## Beamie (29 Nov 2006)

Taxed on the way out, yes.  But my understanding is that one of the benefits of pension investment is that the profits are not taxed each year.  Big benefit.

Wrt BIAM performance, all the AVC options are with BIAM - at least unless pension trustees change fund managers.  I guess I am banking that past performance is no guide to future returns.

Thanks CapitalCCC.


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## Guest126 (30 Nov 2006)

Thanks Beamie - good luck with your strategy!


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