Edinburgh Fund Management is advising PEP holders to diversify their investments into fund of fun...
Edinburgh Fund Management is advising PEP holders to diversify their investments into fund of funds in light of April's legislation changes that allow PEPs to be invested globally.
The group says the inconsistent performance of individual funds as well as the inconsistent performance of the major markets naturally puts the spotlight on fund of funds as an ideal means of diversifying risk.
EFM notes that an examination of Micropal statistics shows that only 6% of funds in the UK All Companies Sector have remained consistently in the top two quartiles over the last three consecutive calendar years and only one fund has been top quartile over each of these years.
Similarly, says EFM, analysis of the returns generated by each of the major markets over the last 8 years show that no market is the top performer for any 2 years in a row.
Marianne Cantley, marketing director explained: "At present, approximately 71% of PEP money is invested in the UK, however, the UK was the top performing market in only one out of the past eight years.
"The difference in fund performance between the top and bottom performing funds in these markets is staggering, the top performing fund in the UK All Companies Sector, turned £1,000 into £4,262 over five years to April 2001 in stark contrast to the worst performer which returned just £1,176."
The group's own fund of funds unit trust - the Edinburgh Managed Growth Portfolio - is most heavily weighted on UK funds, at 55.3%. Bond funds are weighted at 10.3% with the Europe and US both weighted at 9.3%.
There are no transfer charges apart from IFA commision which is capped at 3%. Annual management charge is 1.5% and annual servicing commission to IFA is 0.75%.
Slow progress in improving diversity
Share purchase deal with assets of £28m
Came into effect in January
Three examples of compensation rule issues
Buying in baskets