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Can you compare the past performance of tracker funds?

Vivienne | London| 22/07/2020 | 1

  • Funds

Vivienne's question in full

Hi, I'm trying to choose an 80/20 low cost tracker fund to transfer my pension to, as I'm currently paying 1% fees to my provider which I want to save on. Does the performance of different tracker funds vary a lot (e.g. between PensionBee, Nutmeg, AJ Bell) and how do I compare their track records? Many thanks, Vivienne

Holly Mackay's Response

Hi Vivienne,

 

Thanks for your question. The short answer to your first question about PensionBee, Nutmeg, & AJ Bell Youinvest - is yes, the performance between the various investment solutions you name does vary quite a lot.

In theory the very definition of a tracker fund is that it mirrors an index. So for retail investors, anything tracking the FTSE 100 for example will basically return you the same. That's the theory.

In reality, the sorts of options you mention will typically offer about five choices, which will differ in volatility and the percentage of shares in the portfolios. However, one provider's most volatile portfolio might have 95% of shares in it for example, while another provider's might have 80%. So it can be very difficult to compare like with like.

The other thing is that even if you compare two investment portfolios which both have 80% in shares, the underlying geographies will probably be different. We've seen examples over the last few years where groups have taken very different positions on US equities and have consequently had very different results.

These sorts of ready made investment options are relatively new in the market and very few have meaningful track records yet. A track record of less than a year is monkey and a dart board kind of stuff. I think you really need to see a track record of five years to evidence skill over luck, and none of these guys really have these long track records.

So, the long answer is that it is very hard to make a decision about these providers on an informed and reliable performance basis.

I would use our Compare pages to help you identify two or three you like the look of, and then visit their sites to see what the precise make up of their 80/20 portfolios is - and go from there.

Additionally, this article which was run in June's Telegraph may be helpful to you.

 

Good luck and I'm sorry I don't have a more concrete answer!

Holly

 

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

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Holly Mackay

Founder and MD of Boring Money, Holly Mackay has been working in the investments space since 1998. She read Modern Languages at Oxford, with a special focus on Mediaeval French which was deeply interesting and arguably utterly useless.

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