L&G PMC Multi-Asset fund 3 suddenly ballooned

[8675309]

I have a company pension which is currently in the L&G PMC Multi-Asset fund 3

https://fundcentres.lgim.com/en/uk/...-Asset-Fund/?isin_code=GB00B5W2CB33#Portfolio

L&G say this is for long term growth through exposure to a diverse range of asset classes.

I've been thinking about changing funds as it's been bumping along earning not a lot since 2018 when I started - up to late last year it made 1% total over the six years!

However, between November last year and now it's suddenly gained 10%, according to my pension information. Anyone any idea why this might be the case and if it's just a one-off?

Thanks in advance.

Edit: Oddly the performance chart my pension shows isn't the same as the performance shown by L&G in the link above, or in some of the links in replies below. The value shown when I look at the pension shows it bumping along fairly level from 2017 to late 2023, then suddenly shooting up, where some of the other charts show more rise and fall?

 

[shadow2]

@8675309 Equities have climbed significantly since November, Vanguard FTSE Global All Cap has risen 20% in that timeframe.

https://www.trustnet.com/factsheets/O/ngly/vanguard-ftse-global-all-cap-index/

Your multi asset fund is 40% stocks, so I'd guess the majority of the growth you've seen is thanks to those assets.

 

[annemoon]

@shadow2 A diversified fund sacrifices growth for less variability. It means it’s less likely to lose 20%+ in a single year (which seems scary) but also less likely to go up 20%+ in a single year.

You also have the issue of the bond market tanking badly as governments rapidly increased interest rates to combat inflation. This did for a couple of US banks (Silicon Valley Bank, for instance) but hurt anyone who had bonds. This was exacerbated for UK bonds when Liz Truss went full lettuce.

Personally, I have my pension invested in high growth (a 100% global equities index fund). This means I could have a bad year in a crash but also should be able to get enough growth in the longer term to recover. I have enough time before I retire to handle that.

If you are more conservative/risk averse, or closer to retirement, and if it would stress you out to see your pension tank in a market crash then a mixed fund might be better to sacrifice some growth for more stability. I would probably use a 60/40 equity bond index tracker fund.

 

[8675309]

@annemoon !thanks - I'm in two minds about this. Probably going to make a longer post as I'm trying to sort my ideas out generally. I'm older but not necessarily committed to a fixed retirement date so might be able to ride out a crash, though 60 / 40 perhaps better.

 

[8675309]

@shadow2 !thanks. I wasn't sure about stocks as it didn't seem to see a similar rise after 2020 / Covid - though I guess that could have been disguised by the preceding fall ...

 

[ojusvee06]

@8675309 It was doing ok-ish for a bond heavy supposedly 'low risk' (slow growth) fund, then bonds tanked thanks to a certain prime minister who served less time than a lettuce, now those bonds, and the markets as a whole are recovering.

https://www.hl.co.uk/funds/fund-dis...ral-multi-index-3-class-i-accumulation/charts

See that drop in sep 2022? That was the truss budget. 2022 was a really bad year anyway before that, due to other geo-political factors etc, it cancelled out any previous growth you had. This year so far (since late 2023) on the other hand has seen a lot of growth, so you're up again.

Pure equities would have served you better in that time, if you're young I would definitely consider switching, but that's your call, bonds might be about to surge as the interest rates start dropping, I'd at least go for something a little more equity heavy for balance.

 

[joeydee]

@ojusvee06 Would second considering switching if you are young! I had been in this fund for the last 5-10years, just switched to a higher risk fund last week... long overdue!

 

[fatrabbit]

@joeydee Ditto! I kept putting it off because I wasn't sure, and thought changing would be a pain.

Four clicks later I know changing today is better than changing tomorrow, but two years ago would have been even better.

 

[8675309]

@ojusvee06 !thanks

Oddly the pension performance shown in my account doesn't reflect that HL link, or the L&G link I put in the OP - it's much more bumping along / up and down for a few years then a suddent rise from November. I can't get at it again for a few days to make sure I'm comparing like with like, though.

You are probably right about pure equities and that's a decision making failure on my part. Not young though, so that's a consideration. I'm not sure I really understand the relationship between (for example) bonds and interest rates though @sashieng touches on it below.

@ @lovelikeyou-Ad-8882 same here, and confused by the bewildering array of L&G funds, and wary of change without (I feel) adequate knowledge.

I suppose the question for me is whether change is right if the fund is at last doing something, but then if it's equity fuelled changing to a more equity heavy fund might make sense - but note comments above on bonds and interest rates.

 

[ojusvee06]

@8675309 The graph assumes you have a fixed sum in there from the start. You've been investing every month for a few years. Some of those contributions will be up, some down, etc, so no, the graph will not exactly represent your returns. The bulk of them will have gone up since November though.. How old? I'm 47, still about 90% equities, but also a fair amount of savings at 5%+

 

[fatrabbit]

@ojusvee06 I'm 41 and have it in almost 100% equities, but a good six months of savings too at 4-5% (and a buffer back in my home country). My pensions are only at 55k currently because I wasn't adding to it at all during my twenties, and not much until my mid thirties.

Now I'm at 24% including my employers contributions, and I'm comfortable keeping it at that for now, and hope that'll be enough to make up for lost years.

I assume it's better to stay at high % equities at least until I'm in my early to mid fifties, then start to look at shifting to something more stable over time. I hope to be a little more savvy by then.

 

[ojusvee06]

@fatrabbit Look at the concept of laddering. Even in your retirement years, the portion of your investments that are earmarked for 10 years from when you're likely to need them, should probably still be in 100% equities. The 5 year money at less than that (50/50?), and the 2 year money in savings (rough figures which depend on you risk tolerances, as always).

 

[8675309]

@ojusvee06 I was wondering about this. You tend to think of retirement and pension as a hard cut-off (the old pension until you retire then annuity) and of course it isn't that. Laddering might be relevant to me for a number of reasons - I'll have a look. !thanks again

 

[8675309]

@ojusvee06 Yes, of course, hadn't thought of that. 61, but response to your other comment below.

 

[jocelyn1]

@8675309 Screams to me an IFA would be helpful to educate/navigate/signpost options based on your personal requirements.

 

[mark19801]

@8675309 I don't have an answer for you. But please bear in mind that past returns should not inform your investment strategy. Returns are a consequence of it, not the starting point.

 

[8675309]

@mark19801 !thanks - point well made

 

[illumined1995]

@8675309 Go check the performance of some other world trackers and stuff like the S&P500 which tends to heavily reflect a high proportion of a lot of global funds.

Things have been absolutely booming. One of my funds has done +20% since start of the year and another +30%. Plus whatever happened at the end of last year. I expect you'll find some similar stories with other funds out there as benchmark.

 

[8675309]

@illumined1995 !thanks

 

[sashieng]

@8675309 The bond exposure in the fund will have experienced significant negative events post Covid and the Ukraine invasion inflation environment, which caused bond yields to increase significantly, which in turn meant bond prices decreased significantly (and therefore the value of your find would have been negatively impacted. This probably helps explain the relatively poor performance of the fund over previous years. Bond action (yield / prices) are back to a more normal footing now.

The increase over the last 6(ish) months is down to the significant increase in equity markets, predominantly in the US with the hopes (expectations?) of lowering of interest rates. A number of stock markets have hit new all time highs.