Pension Funds - Reducing Equity Risk

[David_Dublin]

Hi Folks,

I'm between brokers at the moment and simply don't have time to engage with a new one.

Fairly recently I changed jobs, the following is the breakdown of pension funds I contributed to as a Company Director. I now contribute to a fund (not captured below) as PAYE. I know I need to get a broker organised, but due to circumstanes beyond my control, I won't be able to do so for 6 months or more. Until I do that, does anything in the below strike people as particularly risky or exposed, given that we can't be far from equity growth slowing, or tanking?

Standard Life: Ireland MyFolio Active IV Fund - 44%
Irish Life: Setanta Equity Dividend Fund Series P - 39%
Irish Life: Multi Asset Portfolio 4 Series P - 17%

If there were obvious moves to lock in gains by moving within Standard Life/Irish Life to more conservative/potentially less volatile funds I would make those moves now. I think I am fairly equities sensitive at the moment. But I am really bad at this stuff. So if anyone has any recommendations I would really appreciate it.

When I get set up with new broker I believe I need to sort out Buy Out Bond/Personal Retirement Bond, but I'm not going to get to this any time soon.

Thanks!

 

[Sarenco]

Well, you could always go to cash if you want to lock in your gains.

I don't think it's a good idea to try and time the markets - pick an allocation that meets your need, ability and willingness to take risk and stick with it.

 

[MugsGame]

Are all those funds actively managed?

 

[Sunny]

Are all those funds actively managed?

It doesn't really matter. People think Active management protects them in a downturn. It doesn't. All if it means that if the benchmark falls 39% and your fund only falls 38.5%, then the fund manager is still going to be boasting that they have beaten their benchmark. A lot of fund managers are defensive on equities but can't do anything about it. They have to have a certain % invested in equities and they can't afford to under perform a benchmark while waiting to be right. It's the great con job of active funds.

As Sarenco says, you should probably pick an allocation you are comfortable to stick to it and leave it go and down because you have a long term view or go more defensive but you better be prepared to underperform and risk performance growth. The more times you do this, the more risk you are taking of losing money from trying to time the market. Having said that, I have switched funds before and it has worked out. But that was probably just luck.

 

[David_Dublin]

Thanks for the feedback, I appreciate it. I too have been burned trying to second guess markets, cashed in lots of shares a number of years ago in the belief that Trump effect would be very destructive.

That said, it's hard to not see some sort of slump coming up in the coming months, everything seems to point towards that.

My understanding of the above funds is they are heavily weighted towards equities, I'd be happy to swap them out of equities for something less volatile for the next 12 months, and then take a look at how things are. Converting to cash is certainly an option to protect, but I suppose you're then into the forex risk.

But I accept Sunny & Sarenco advice, trying to second guess markets introduced risk, and I should stick by my original allocation and switch based on more standard decision making: age/proximity to retirement.

 

[MugsGame]

It doesn't really matter. People think Active management protects them in a downturn. It doesn't ... It's the great con job of active funds

Great, so we're in agreement . At worst active management involves the investor paying a monkey handsomely for throwing darts at the index and on average there's a guaranteed headwind when compared to passive index trackers with their consequently lower management fees.

 

[Steven Barrett]

It doesn't really matter. People think Active management protects them in a downturn. It doesn't. All if it means that if the benchmark falls 39% and your fund only falls 38.5%, then the fund manager is still going to be boasting that they have beaten their benchmark. A lot of fund managers are defensive on equities but can't do anything about it. They have to have a certain % invested in equities and they can't afford to under perform a benchmark while waiting to be right. It's the great con job of active funds.

It all depends on the funds mandate. If you are in a Global Equity fund, the manager has to stay in equities. There may be investors piling in to buy cheap and then they discover that the fund is in cash!! If you have enough funds to have a discretionary fund manager, they will have the ability to move you 100% to cash as each portfolio is separate, not quite the case with unit linked funds.

Thanks for the feedback, I appreciate it. I too have been burned trying to second guess markets, cashed in lots of shares a number of years ago in the belief that Trump effect would be very destructive.

That said, it's hard to not see some sort of slump coming up in the coming months, everything seems to point towards that.

My understanding of the above funds is they are heavily weighted towards equities, I'd be happy to swap them out of equities for something less volatile for the next 12 months, and then take a look at how things are. Converting to cash is certainly an option to protect, but I suppose you're then into the forex risk.

But I accept Sunny & Sarenco advice, trying to second guess markets introduced risk, and I should stick by my original allocation and switch based on more standard decision making: age/proximity to retirement.

Investors have accept that there's going to be ups and downs with an investment strategy, some might be bigger than others or last longer. Look at what the end game is and forget about the journey along the way, it's part of the process. If you invest in quality stocks, you'll do alright in the long term. If the ups and downs of an equity strategy makes you nervous, diversify some of you money into other asset classes. Get you expectations and goals right at the beginning and just let it run.


Steven
www.bluewaterfp.ie

 

[David_Dublin]

It all depends on the funds mandate. If you are in a Global Equity fund, the manager has to stay in equities. There may be investors piling in to buy cheap and then they discover that the fund is in cash!! If you have enough funds to have a discretionary fund manager, they will have the ability to move you 100% to cash as each portfolio is separate, not quite the case with unit linked funds.




Investors have accept that there's going to be ups and downs with an investment strategy, some might be bigger than others or last longer. Look at what the end game is and forget about the journey along the way, it's part of the process. If you invest in quality stocks, you'll do alright in the long term. If the ups and downs of an equity strategy makes you nervous, diversify some of you money into other asset classes. Get you expectations and goals right at the beginning and just let it run.


Steven
www.bluewaterfp.ie

One thing I don't think has been addressed earlier is that with a personal retirement bond, as I understand it, I can take out a significant amount tax free (is it up to 25%?) at the age of 50. If I plan to do this, would I be better adopting a lower risk strategy in the 3 and a half years I have to my 50th birthday? A bit like I would be advised to move away from equities as I approach retirement age.