LEAVE the Conservative Party and save your country!
Comments
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I was providing some additional context around the life-stage of investors, risk appetites etc.rick_chasey said:
We are talking at cross purposes.wallace_and_gromit said:
What's an "ideal world" depends very heavily on the nature of the pension fund though.rick_chasey said:Most asset allocators you speak would in an ideal world have some allocation to VC, largely as the returns are not especially correlated to public markets equities.
Members of DB schemes in the UK are either retired or reasonably close to retirement, as such schemes have been closed to new members for a couple of decades. The ideal world for such members is fund full of GBP-backed low risk corporate bonds and government bonds, as what they want is a low risk of their pensions not being paid in future. There's no obvious upside to anyone (except maybe the last living pensioner who in theory inherits what's left in the fund when they die) from generating higher returns via VC etc. and there are lots of downsides in the form of VC investments going "pop", leaving an unfillable hole in the balance sheet and insufficient funds to pay guaranteed benefits.
The same logic applies to those in a DC close to retirement (which is why the major DC providers offer lifetime funds that switch to bonds progressively over time, without you needing to do anything) though when managing one's own finances, one can take a few more risks (e.g. remain in equities close to retirement) as if you mess things up, you won't be failing any fiduciary duties in the way that the Trustees of a DB scheme would be if they "went long" on emerging market equities and suffered major losses. (You may incur the wrath of spouse or offspring though!)
In a DC scheme in your 30s, you can afford to take a few punts by being heavily exposed to equities (and other higher risk investments) as (assuming you stay put in the market for the longer term and are diversified) bad investments will be offset by good ones and you should benefit from the higher returns over time that equities typically generate over bonds.
The same logic applies to DB schemes open to new members where there is a "long time" for losses to be recouped by higher returns elsewhere. There aren't many (if any) in the UK though. The overseas examples you quote are public sector sponsored schemes that are funded, I think. (UK public sector schemes are pay as you go, so there's no fund to invest.)
I am talking about professional fund managers, running ideally $100bn+ AUM.
I am not talking about personal individual allocation. That's numpty sh!t.
USS, UK's biggest pension fund, does do some private equity, though not much VC (none AFAIK).
Obviously if you fund is in run off, you are much more constrained re liquidity etc.
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!0 -
Controversial view maybe, but I think he'd be good as a Management Consultant of the type that goes in at the request of the CEO, asks the senior management the questions that they don't want asking, agrees with CEO what needs changing and then clears off, leaving the longer-term thinkers and doers to implement the required changes.Jezyboy said:
I want to know what Cummings long term career plan is. Clearly he's good at election campaigning. I also suspect he did a moderate to good job at running Johnson's government (given he had Johnson at the helm, had to follow through on Brexit and then had a pandemic thrown in to the mix). On the other hand, he had a large part to play in Johnson being there, as well as Brexit happening. So it's not like he can complain about being hard done by.kingstongraham said:I guess whoever put Cummings in charge must be feeling a bit stupid.
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A slot on GB news?Jezyboy said:
I want to know what Cummings long term career plan is. Clearly he's good at election campaigning. I also suspect he did a moderate to good job at running Johnson's government (given he had Johnson at the helm, had to follow through on Brexit and then had a pandemic thrown in to the mix). On the other hand, he had a large part to play in Johnson being there, as well as Brexit happening. So it's not like he can complain about being hard done by.kingstongraham said:I guess whoever put Cummings in charge must be feeling a bit stupid.
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It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
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The best bet is to put it into EL on the main and MU the SK to insure a return on Greatness.0
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Now that everyone knows what he says behind your back, he's the sort of guy who is brought in without letting anyone know you've spoken to him, and paid a lot of money for some short term advice.Jezyboy said:
I want to know what Cummings long term career plan is. Clearly he's good at election campaigning. I also suspect he did a moderate to good job at running Johnson's government (given he had Johnson at the helm, had to follow through on Brexit and then had a pandemic thrown in to the mix). On the other hand, he had a large part to play in Johnson being there, as well as Brexit happening. So it's not like he can complain about being hard done by.kingstongraham said:I guess whoever put Cummings in charge must be feeling a bit stupid.
He can't write a book because it's already been published.
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To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.0 -
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).0 -
Sounds reasonable, but remember that that is for open schemes. A lower % would be appropriate for UK group / corporate DB pension funds as they are closed. Which probably doesn't add up to a huge amount in the UK tbh, so "pension fund investment in higher risk assets" may well not be a game-changer even if embraced as a concept. And even the amounts talked about (I've read potentially £100b going to infrastructure investments) is a one-off. The incremental annual figure thereafter would be much smaller.rick_chasey said:
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).0 -
Sure, though with default enrolment, over the next generation you would expect to see the size of the collective AUM in pensions pick up substantially, right? These things are never static.wallace_and_gromit said:
Sounds reasonable, but remember that that is for open schemes. A lower % would be appropriate for UK group / corporate DB pension funds as they are closed. Which probably doesn't add up to a huge amount in the UK tbh, so "pension fund investment in higher risk assets" may well not be a game-changer even if embraced as a concept. And even the amounts talked about (I've read potentially £100b going to infrastructure investments) is a one-off. The incremental annual figure thereafter would be much smaller.rick_chasey said:
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).
I'm not necessarily disagreeing that the UK institutional investment sector isn't set up for it yet, but without ambition etc.0 -
auto enrolment is for DC schemesrick_chasey said:
Sure, though with default enrolment, over the next generation you would expect to see the size of the collective AUM in pensions pick up substantially, right? These things are never static.wallace_and_gromit said:
Sounds reasonable, but remember that that is for open schemes. A lower % would be appropriate for UK group / corporate DB pension funds as they are closed. Which probably doesn't add up to a huge amount in the UK tbh, so "pension fund investment in higher risk assets" may well not be a game-changer even if embraced as a concept. And even the amounts talked about (I've read potentially £100b going to infrastructure investments) is a one-off. The incremental annual figure thereafter would be much smaller.rick_chasey said:
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).
I'm not necessarily disagreeing that the UK institutional investment sector isn't set up for it yet, but without ambition etc.
As the forum yoof with a longer investment horizon than most of us can I ask how much of your pension you put in these sorts of funds?
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As someone of RC's age I feel it should be part of a balanced portfolio but my view is that VC risk is typically offset by being tax efficient, (VCTs) so not worth putting in a pension and I don't have any long-term investments outside of my pension.0
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I am wise enough to know I am not qualified to be making SAA decisions. I get a fee discount for using the company pension firm, so I just use what's available. I use one of the preset splits, which they calculate on your risk appetite; I think I am 6/7 on that scale.surrey_commuter said:
auto enrolment is for DC schemesrick_chasey said:
Sure, though with default enrolment, over the next generation you would expect to see the size of the collective AUM in pensions pick up substantially, right? These things are never static.wallace_and_gromit said:
Sounds reasonable, but remember that that is for open schemes. A lower % would be appropriate for UK group / corporate DB pension funds as they are closed. Which probably doesn't add up to a huge amount in the UK tbh, so "pension fund investment in higher risk assets" may well not be a game-changer even if embraced as a concept. And even the amounts talked about (I've read potentially £100b going to infrastructure investments) is a one-off. The incremental annual figure thereafter would be much smaller.rick_chasey said:
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).
I'm not necessarily disagreeing that the UK institutional investment sector isn't set up for it yet, but without ambition etc.
As the forum yoof with a longer investment horizon than most of us can I ask how much of your pension you put in these sorts of funds?
Savings wise I have about 15% of my savings in the Vanguard S&P500 tracker. Should probably have done more but rates are quite attractive now.0 -
I'm old and quite risk averse, but no amount of tax efficiency will help if the venture underlying your VC investment turns out to be unviable and thus worth nothing pre or post tax, as many sadly do.shirley_basso said:...VC risk is typically offset by being tax efficient...
That said, I do have the last couple of % of my pension contributions directed to quite racy Vanguard funds knowing that the worst I can do is lose that couple of % but with the hope I get lucky and can retire early! (Very unlikely, but you've got to be in it to win it...)
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(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)0
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No one knows more than the market. You just talk to people constantly who think they do.rick_chasey said:(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)
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There's a reason my savings are in a tracker and not an actively managed fund.TheBigBean said:
No one knows more than the market. You just talk to people constantly who think they do.rick_chasey said:(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)
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I would never invest directly into a single qualifying asset, but there are a number of good, reputable VCT asset managers where you get the benefit of the tax break on day 1 and the portfolio of assets under management.wallace_and_gromit said:
I'm old and quite risk averse, but no amount of tax efficiency will help if the venture underlying your VC investment turns out to be unviable and thus worth nothing pre or post tax, as many sadly do.shirley_basso said:...VC risk is typically offset by being tax efficient...
That said, I do have the last couple of % of my pension contributions directed to quite racy Vanguard funds knowing that the worst I can do is lose that couple of % but with the hope I get lucky and can retire early! (Very unlikely, but you've got to be in it to win it...)
The way the managers are incentivised is to maintain a more stable NAV of the investments under management so you typically don't see assets go boom or bust (although large portfolios will have some of this), instead it's about creating stable returns over time. Because of VCT rules you can't really create unicorns as you are limited by investment size and company age, but you can make acceptable returns, in line with PE returns (3x over 3-5y) while also benefiting from the tax upside. Plus gains are CGT exempt.
It's a good way to invest if you have maxed out your pension (conscious that is not relevant right now but may change) or you have a windfall likely to be exposed to a large CGT expense which you have no immediate need to spend.
https://www.wealthclub.co.uk/articles/vct-reviews/vcts-performance-over-the-years/0 -
Terry Smith had a very good run before morphing into a tech fundTheBigBean said:
No one knows more than the market. You just talk to people constantly who think they do.rick_chasey said:(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)
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Big fan of pro cycling and liked his Tour analogies.surrey_commuter said:
Terry Smith had a very good run before morphing into a tech fundTheBigBean said:
No one knows more than the market. You just talk to people constantly who think they do.rick_chasey said:(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)
Do like his view that churn is both unnecessary and costs too much in dealing fees.
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Your S&P500 Tracker is effectively a tech fund investing the the 'Magnificent 7 Tech Stocks'. They have driven all the returns in that index. You're not getting any diversification any more.rick_chasey said:
I am wise enough to know I am not qualified to be making SAA decisions. I get a fee discount for using the company pension firm, so I just use what's available. I use one of the preset splits, which they calculate on your risk appetite; I think I am 6/7 on that scale.surrey_commuter said:
auto enrolment is for DC schemesrick_chasey said:
Sure, though with default enrolment, over the next generation you would expect to see the size of the collective AUM in pensions pick up substantially, right? These things are never static.wallace_and_gromit said:
Sounds reasonable, but remember that that is for open schemes. A lower % would be appropriate for UK group / corporate DB pension funds as they are closed. Which probably doesn't add up to a huge amount in the UK tbh, so "pension fund investment in higher risk assets" may well not be a game-changer even if embraced as a concept. And even the amounts talked about (I've read potentially £100b going to infrastructure investments) is a one-off. The incremental annual figure thereafter would be much smaller.rick_chasey said:
Few guys i spoke to were talking between 2% and 9% allocation to VC (via VC funds, I should add), because of the lack of correlation to public equities, but yeah, they have a lot of assets to play with.wallace_and_gromit said:
To be pedantic, it's probably easiest to view the optimum proportion of such investments as being no larger than the proportion you can afford to write off without compromising your ability to achieve the lower end of your acceptable range of outcomes.rick_chasey said:
It should be a small proportion of your SAA, right?wallace_and_gromit said:
If you want to invest all your long term savings in Venture Capital then I say go for it and report back how it goes!
So somewhere between "small" and zero.
AussieSuper has around 15% allocation to PE; around a 12-13% of your PE allocation going to VC seems fairly sensible given the risk premium etc (so we're talking what, less than 1% of overall AUM).
I'm not necessarily disagreeing that the UK institutional investment sector isn't set up for it yet, but without ambition etc.
As the forum yoof with a longer investment horizon than most of us can I ask how much of your pension you put in these sorts of funds?
Savings wise I have about 15% of my savings in the Vanguard S&P500 tracker. Should probably have done more but rates are quite attractive now.
W&G - your comments regardingsubstantial / total losses are more applicable to EIS. VCT tends to be a bit more mature and there are some long established VCTs that have done well and don't carry such a risk.
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That always made me laugh coming from a former broker. It is easy to do nothing when you are flying, less so when returns are on the wane.rick_chasey said:
Big fan of pro cycling and liked his Tour analogies.surrey_commuter said:
Terry Smith had a very good run before morphing into a tech fundTheBigBean said:
No one knows more than the market. You just talk to people constantly who think they do.rick_chasey said:(still blows me away pretty much no fund manager can outperform S&P500 in the long run, and you can buy the index for 0.07% fees.)
Do like his view that churn is both unnecessary and costs too much in dealing fees.
My appetite to risk is such that I had about 80% of my investments with him, now have virtually with Vanguard.0 -
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Sure, but isn't that the point of index funds? It's only ever 10-15% of the index that's driving the returns, but with the index you won't risk missing out on them.Dorset_Boy said:
Your S&P500 Tracker is effectively a tech fund investing the the 'Magnificent 7 Tech Stocks'. They have driven all the returns in that index. You're not getting any diversification any more.
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Thanks. (And to Shirley earlier.) Very informative.Dorset_Boy said:W&G - your comments regarding substantial / total losses are more applicable to EIS. VCT tends to be a bit more mature and there are some long established VCTs that have done well and don't carry such a risk.
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I used to do my own stock picking before that so saw 27 stocks as diversifying.rick_chasey said:80% with one manager? Yikes.
Very risky but I did very well out of it but in an ideal world would have sold earlier0 -
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You miss out on dividends with trackers and dividends form a huge part of overall returns. Less so in the US than the UK where there are diffierent cultures around paying dividends.rick_chasey said:
Sure, but isn't that the point of index funds? It's only ever 10-15% of the index that's driving the returns, but with the index you won't risk missing out on them.Dorset_Boy said:
Your S&P500 Tracker is effectively a tech fund investing the the 'Magnificent 7 Tech Stocks'. They have driven all the returns in that index. You're not getting any diversification any more.
Many people also use trackers as they think they are getting diversification. With the rise of the Magnificent 7 in the US, you are not getting that diversification as the index is now so concentrated in those 7 stocks.
Trackers have their place but should not be the only solution in a portfolio.0 -
My brother is a corporate lawyer and has tipped shares to me based upon the individual who has taken over being very impressive.rick_chasey said:christ alive.
Many years ago I heard Terry Smith speak (at a Robert Walters business breakfast at the Savoy) and was very impressed.
Anyway I made a sh1t load of money and a mate who is a professional investor persuaded me to thin out and then sell out.0 -
Robert Walters, it gets worse the more you say!
If you know those guys can I just say I am at the other end of the spectrum to those muppets.0
