Hargreaves Lansdown's head of pensions research Tom McPhail has been challenged to a contest setting tracker funds against actively managed funds by EveryInvestor editor-in-chief Chris Gilchrist
The idea for the contest arose following McPhail’s comment that SIPPs were now the most efficient form of pension plan, even for people with small capital sums.
However, Gilchrist (who like McPhail uses a SIPP to manage his own pension fund) argues that to gain real advantages from the SIPP, investors must keep the costs down.
For the contest, each has created a £30,000 SIPP Portfolio for someone with over 20 years to go until retirement.
McPhail’s Actively Managed SIPP Portfolio consists of 14 funds chosen from Hargreaves Lansdown’s Wealth 150 list, including funds managed by Artemis, Jupiter, Neptune, BlackRock, Schroder and Invesco Perpetual. It has 10% in fixed interest, 45% in UK equities, 25% in international equities and 20% in specialist funds.
Gilchrist’s Tracker SIPP Portfolio uses 14 Exchange Traded Funds and Exchange Traded Commodities (all listed on the London Stock Exchange) and with an annual cost of 0.52%, compared with 1.66% for the Actively Managed Portfolio. It has 10% in fixed interest, 10% in commercial property, 10% in resources and 70% in shares, with 20% of that portion in emerging markets.
“The academic evidence supports the notion of using tracker funds,” says Gilchrist, “and since they deliver a cost saving of over 1% a year, Tom has a significant handicap to overcome if his portfolio is to deliver higher returns.
“ETFs allow us to access alternative assets at very low cost and more investors ought to be diversifying their portfolios in this way. The Tracker SIPP Portfolio contains gold, energy and private equity as well as commercial property, bringing it closer to the profile of institutional pension funds."
EveryInvestor will report on the performance of the two portfolios next year.
Tom McPhail’s Actively Managed SIPP Portfolio http://www.everyinvestor.co.uk/investing/sipp-centre/the-actively-managed-sipp-portfolio
Chris Gilchrist’s Tracker SIPP Portfolio
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created