AVC - investment mix

I am putting money towards AVC. could somebody please advise on the difference between following investment options i.e. Secured, consensus and Active. what does Indiviudal investment service mean? Unfortunately, I got no joy when I asked my compnay for details on above.
thanks in advance

dervalh said:

Secured

Click to expand...

Most likely low risk/return possibly mostly bonds or cash. Only really suitable if you are moving from higher risk/reward investments near retirement/pension drawdown.

consensus

Click to expand...

Most likely medium to high risk/reward and involves taking an average of the investment decisions made by other fund managers as a guide to what the fund invests in.

Active.

Click to expand...

Most likely the highest risk/reward profile of the three options and means that the fund managers in question make their own decisions about what assets (equities etc.) to invest in.

Normally anybody with several years to retirement (e.g. 10 years or more) should seriously consider investing in a high (up to 100%!) equity content fund with a high risk/reward profile.

what does Indiviudal investment service mean?

Click to expand...

Presumably that somebody will give you one on one advice about what the best pension options/investment decisions are for your specific circumstances. Usually for an additional fee. This is in contrast to lower cost execution only services where detailed advice would normally not be provided.

Perhaps if you could post more specific details about the company and funds in question people could offer more specific feedback?

Derval H,

Clubman is incorrect here.

Individual Investment Service is where the life company will gradually move your fund from non-guaranteed investments (e.g consensus, active) to guaranteed investments (e.g cash, fixed interest) within a set period of your retirement date.

For example, say that you are 100% in active funds with 10 years to go to your retirement. The life company wil move 10% of your funds each year to a secured fund so that when you have one year left to go to retire, you are fully invested in secure funds.

This is done to prevent you being the victim of any stock market crashes in your last year before retirement and therefore taking a serious hit to your fund value.

Imo, a very worthwhile service.

rdrr said:

Individual Investment Service is where the life company will gradually move your fund from non-guaranteed investments (e.g consensus, active) to guaranteed investments (e.g cash, fixed interest) within a set period of your retirement date.

Click to expand...

If that's what it is (and I was deliberately non authoritative on it above) then it is very poorly named as the name does not really reflect the purpose.

Given I take it that you are dealing with Irish Life? If that's the case then it looks like their "individual investment service" is restricted to those who invest in the consensus fund. Is that correct? Don't forget that you can do this yourself - i.e. gradually migrate accumulated savings from higher risk/reward to lower risk/reward funds as you near retirement/pension drawdown.

The IIS with Irish Life can also be done using an Active fund.

Depending on your age profile, circumstances etc... you should seriously think about the pitfalls of investing in an active fund with one fund manager. If you ever look at investment performance tables, the no.1 changes from year and year and there is rarely a consistent trend.

A consensus fund will chose an average investment mix based on a variety of fund managers and offers a less volatile return.

It is really up to your own attitude to risk and years to go to retirement as to what fund you choose. However switching to g'teed funds as you approach retirement is highly recommended (whether you use IIS to do this or another method)

Past performance (of individual fund managers is irrelevant to future returns). My understanding is that a consensus fund might generally be considered to have a lower risk/reward profile than an actively managed fund. You should bear this in mind when making your fund choice(s). In general anybody with a good while (e.g. 10+ years) to go to retirement really should look at investing in the highest risk/reward profile fund. However - as above - a lot depends on your attitude to risk/volatility but you should remember that pension investments are generally very long term and transient volatility should not really be an undue concern. If in doubt get indepdenent, professional advice.

Thanks for your replies.
Re individual investment service - I pressume there is charge for this service - is that correct? As I am not near retirement (another 20 years or so left), is there any other reason why one would avail of this service?
Re IIS, it is with Irish life and 100% of contributions must be invested in either consensus or active if IIS is selected. Is that not a weakness in the service if one wanted to split mix between 3 options.
Surely consensus is best option to pick given that it takes an average of fund mgr investment decisions and therefore you get average of up and downs like a unit linked fund whereas selecting active fund you are taking higher risk by using only one fund manager investment decision (Irish life in this case) who may or may not outperform the average. Surely it's better to take opinions of no of fund mgr and get average than to put all your money into active and relie soley on one fund mgr to make right decisions. I probaly am missing something here but how is active more likely to be the highest reward profile.
thanks again

ClubMan said:

Past performance (of individual fund managers is irrelevant to future returns).

Click to expand...

I've seen this said before and I find it an extraordinary statement. I'll readily accept the line that fund managers are required to print and say, which is 'past performance may not be a reliable guide to future performance which is dependent on future investment conditions'

But to say that it's irrelevent seems amazing to me.

I'll give you two examples. Where a fund manager has been performing very well, over and above the market and his competitors it may mean that he has been getting things right with his fund choices etc. And while of course this might change and he might as easily get things wrong in the future, he also just might continue to get things right. While it's importance would be somewhat less than other factors in deciding where to invest my money it would certainly be a consideration.

Example two: I recently did a comparison of managed funds over the past 13 years, 10 years, 5 years & 3 years including approx. 13 fund managers and while most fund managers chopped and changed in the rankings over the different time periods, over each time period not only was one managed fund in particular (which I won't name because it's not the point of my reply) below the average, but it was rock bottom of the 13 funds over each of the above time periods. I looked at it because I was told that an representative of the fund said that over the long term all these funds even out, when he was challenged about the poor performance.

I don't know about you, but I would certainly think twice about investing in this managed fund having seen such a consistent under performance.