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Can you give me some advice on my AVC-SEC fund?

26 October 2021

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Question by Michael

Hello, I have an AVC-SEC fund with a previous employer. Until a year ago this money was invested in a Newton Global Balanced fund, which you could monitor and it was performing ok. In July 2019 the money was transferred to a Global Multi-Asset in-house company fund that uses the Legal & General LGIM Diversified as the benchmark. Following the transfer to the in-house fund the fund has lagged the benchmark and is now 20% below. If I compare the asset and geographical information for the in-house and benchmark they are identical. How can this be? Thanks, Michael.


Answered by Luke James

Hi Michael,

Here is an example:

Person A
Is invested 25% in BP shares, 25% in Tesla shares and 50% in UK bonds. The split would be 25% UK equities, 25% US equities and 50% UK fixed interest.

Person B
Is invested in 25% in Tesco shares, 25% in American Express Shares and 50% UK bonds. The split would also be 25% UK equities, 25% US equities and 50% UK fixed interest.

They have the same Geographical and asset split but very different investments that will get very different returns.

In your fund there will be a lot more investments than just two different shares but the principal remains the same. The 2 fund managers will be choosing different shares to invest in. So they may have the same asset/geographical split but very different returns.

If this is an AVC from a previous employer and these type of decisions are out of your control it may be worth reviewing this pension. There are sometimes different rules when it comes to AVC pensions and whether you can transfer them but still worth looking in to.

Thanks
Luke

Answered by

Luke James

Independent Financial Adviser

I like to think that I am a bit different compared to most other financial advisers. I like to help people achieve their life goals, whether that be retiring early, buying a new car or helping your kids through university. That is what is most important to me and to most of the people that I meet. Money is just a way to get there!