Important information
LGT Wealth Management Model Portfolios
Investments have the potential to help you transform your retirement strategy and make your money work harder. However, they can also carry significant risks. So, whether you’re investing your pension into a Flexible-Access Drawdown or looking for opportunities to grow your savings, it’s important to select investments that are right for you.
To help you understand what this might look like, our team of independent advisers are here to review your circumstances and provide a tailored recommendation.
Important information
When investing, your capital is at risk. Past performance is not a guide to future performance.
How are invested funds managed?
In order to understand what investment strategy might suit you best, it can help to get a feel for the different styles of fund management.
The two main management styles we explore are passive fund management and discretionary fund management (also known as model portfolios). But what do these look like and, more importantly, could one of them help you to unlock the potential in your pension?
We’ve broken down the key facts about each style to give you a better idea of how they might impact your retirement strategy.
Passive Fund Management
Passive fund management, sometimes known as ‘tracking’, aims to match the performance of popular market benchmarks while keeping costs low.
Instead of actively selecting individual investments, passive fund managers replicate market indices, like the FTSE100, to create an Index Fund or Exchange-Traded Fund. The value of these funds moves in line with the performance of the index being tracked.
As passive fund managers don’t pick which investments are included in a fund, the cost of management is low. However, as the performance echoes the performance of the index, if the market falls, so will the value of your fund.
What are the benefits and drawbacks of passive funds?
Low-cost investment strategy, as fund managers don’t need to pick individual stocks.
Low maintenance, simple investment solution.
Limited investment options as your fund manager can’t hand-pick assets.
Discretionary Fund Management
With discretionary fund management, a fund manager actively selects investments to create a diverse portfolio. This typically results in higher management costs, but with the aim that the portfolio will outperform the benchmark.
Discretionary managed portfolios are made up of predominantly actively managed funds made up of various asset classes, such as bonds and commodities. This diversification reduces the impact of market volatility, helping improve long-term performance.
With these portfolios, the portfolio manager will regularly review the markets to spot trends and alter the portfolio composition as conditions change; in some cases, replacing funds completely. What’s more, the active funds within your portfolio also have fund managers who make micro-decisions regarding each individual asset.
So, how do discretionary managed funds compare?
Aim to outperform the benchmark, although this is not guaranteed
Frequently amended to reflect changing market conditions.
Regularly balanced to maintain risk level.
Fees are usually higher than other funds.
How investing works at My Pension Expert
To make sure we can recommend an investment strategy that will meet your requirements, our team of expert Independent Financial Advisers take an overview of your current situation, lifestyle, and your retirement goals. They also consider how comfortable and able you are to take on financial risk and any values you hold that could guide your investing.
Once your adviser completes this analysis and you both agree that investments are appropriate for you, they’ll recommend a model portfolio.
When making our recommendation, we explore a range of portfolio types from leading providers. Any investment we recommend will have a risk rating that matches your attitude to risk and capacity for loss. Your adviser will explain any risks associated with your chosen portfolio to make sure that you’re comfortable with the decision.
Our approach to passive funds
At My Pension Expert, if your adviser believes that you’re most suited to passive investment, they’ll recommend a cost-effective, passive model portfolio that is actively managed by a discretionary fund manager.
This is a portfolio made up of various Index Funds, Exchange-Traded Funds, and occasionally cost-efficient stocks and shares. Each portfolio has a diverse set of investment holdings, with the aim to spread out the risk across numerous assets.
We have an excellent working relationship with LGT Wealth Management, who have designed bespoke passive portfolios for My Pension Expert that are available to our clients. These portfolios benefit from discretionary fund management at the same cost as a typical passive fund, letting our clients experience the best of both worlds!
Other options we can recommend
Sustainable model portfolios
Are you interested in investing in a brighter future? Unlike traditional investments, sustainable investment portfolios allocate your funds to drivers of positive change; whether that’s companies promoting financial inclusion or even developing cures for diseases.
There are sustainable model portfolios at a range of risk levels, so you can find one to meet your needs. The sustainable model portfolios that we recommend to our clients are also discretionary managed, benefitting from a hands-on management approach.
Smooth managed funds
Smooth managed funds are a different method of investing that aim to provide more stable returns by smoothing out short-term market fluctuations. This results in a less volatile investment, with mechanisms to protect your savings and limit risk.
However, it’s crucial to note that, like all investments, Smooth Managed Funds still carry risk. The value of an investment made into a Smooth Managed Fund can go down in value as well as up, and past performance is not a guide to future performance.
Asset allocation: building a balanced portfolio
Asset allocation involves dividing your investment portfolio across different asset classes, such as shares, bonds, and cash. When building a model portfolio, professional asset managers balance the portfolio so that the risks and target performance fall within predetermined boundaries.
For example, portfolios with higher associated risk often have greater growth potential, but also greater possibility of loss. These portfolios may have a higher proportion of shares, which tend to be more volatile, whilst a lower-risk portfolio might carry a higher proportion of more stable assets, like cash and bonds.
Fund managers usually take a broad view of global markets and industries, reviewing trends before digging deeper. It’s important that portfolios are diverse, with a mixture of asset classes, industries, and global markets. This helps to reduce risk by limiting exposure to any single investment.
Understanding the benchmark
Your independent financial adviser will send you a copy of your recommended portfolio factsheets with your application pack. These outline the make-up of assets, along with the fund’s past performance against the benchmark.
It’s important to remember that past performance should not be used to predict future performance. As with all investments, growth cannot be guaranteed. However, the benchmark will show you how a portfolio compares to the average performance of other funds within the same risk profile.
The benchmark can be used to evaluate how the different asset groups which make up your portfolio have performed and when it may be appropriate to make fund changes.
Ready to get started?
Investing can be a great way to help you grow your wealth, provide a lasting source of income, and achieve a financially stable retirement. However, it’s not without risk, and it’s important to be fully informed before making any decisions.
Our team of independent advisers can help you to understand the various investment options available and how these align with your financial goals, so you can explore the options that could provide long-term stability and growth potential.
Book a call with a member of the team today.
