So I was quite excited to sit down and review my fund after the second quarter of performance. This quarter the investment rate has slowed down, and all the transaction costs I incurred (usually around £15 per share purchase) are slowly getting averaged out over time. There's an article here about how much a high turnover rate in shares costs your pension fund, and the wikipedia article here that explains the "buy and hold forever" approach (which is my preference - and I am one of the extreme cases!)
So how did my fund do? Well, performance is massively up since last quarter - both in straight fund terms and in comparison to the market. My fund is only down 2.55% ex dividends, whereas the FTSE All Share is up 1.17% - a difference of 3.72%, versus a 9.53% difference last quarter (still an underperformance but definitely not as bad as before!).
Next comes comparison with the Trustnet superstar managers. Unfortunately Trustnet has taken out its "year to date" performances, so I was only able to compare to the full last year of their performance. Now the FTSE All Share is down 6.63% in the last 12 months, so this means my performance is likely to look a lot better in the rankings than it should be. On a straight comparison (including a +0.8% uplift for annual charges that Trustnet does not include) I am at 1065, I sit in the 40 percentile - which a massive improvement on where I was last quarter.
As a fairly academic comparison: if I apply the market shift between 1st July 2011 and 31 December 2011 of the FTSE All Share index (down 7.85%) to my portfolio (taking my performance down to -9.22%) I would be ranked......2121 (the 79th percentile). Again, this represents another improvement over the previous quarter.
All in all, I feel pretty good about this. Things are moving in the right direction vis a vis the fund. I was interest to have a look at what would happen if I comtinued my performance to date until I was to retire at 65 - and using this calculator worked out I'd be at a fund with a total value that would enable me to have a pension that is a 13% of my current salary. Not really my aim, so let's hope that things improve substantially - both in the annuity market and my fund performance!
And just so you know, I am keeping in touch with how much this is costing me - my total expense ratio (TER) stands at 0.37% - versus a UK market average of 1.6%. And as an illustration: £100,000 invested for 30 years, with 5% growth would end up as £388,764 with my management fee....and £272,656 with the UK average (so I am 42.6% better off if I perform in line with the City's fund managers). This is scary stuff when you consider your pension.
Anything else to bore you with? Well, firstly I thought you might be interested in my best and worst performing stocks (by pure change in value since purchase). The best? Carnival Cruises is up 11.95%. The worst? Aviva is down 14.14%.
Secondly, a tradeable subordinate preference bond from the Cooperative Bank - ticker CBPA. In short, this is an agreement to borrow money, made by the Coop with investors, at a stated interest rate - in this case 5.5555%. The bond is sold for £100, but the value can then change on the secondary market (much like a share's does). It always pays £5.55 per £100 of face value on the bond though, so if the price of the bond drops to £70 then the actual interest rate is 7.94% (5.555/0.7). Furthermore, the Coop MAY chose to buy the bond back at a specified date in 2015 at the face value (say £100). If you buy the bond at £70, you make £30 as well. However, if the Coop decides not to buy the bond you continue to get the Bank of England base rate plus 2.065% - so 2.565% at the current rate. However, say the Bank of England decides to raise interest rates to rein in inflation then this could increase. Prior to April 2008 the base rate hadn't been below 4%, with one exception, since the 1950s - which means that the bond would be paying at least 6.065%, which I don't consider too bad (although there is no growth there). I think this is one Laura could really go for, but let's wait and see - she's also really into De La Rue because they literally print money!
Until my next entry in a few days - my next purchase should be around the 4th July, so I'll give you an update once that has happened. Over and out.
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