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Should Drawdown customers flood to active funds?

Enable’s IFA’s in Bishop’s Stortford note that recent figures from Hargreaves Lansdown show “The first wave of drawdown customers post pension freedoms are backing active managers.”Their analysis of the investment of the preferences of just their investors who opened drawdown contracts after 6 April shows just £1 in every £20 went into passive funds. It also suggests that UK equity income was the most popular fund sector, accounting for 27.55 per cent of all drawdown assets, while Lloyds Banking Group was the most popular individual stock.

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Hargreaves senior analyst Laith Khalaf says: “What is particularly striking is there is clearly an appetite for growth, as well as income, which suggests investors are saving some of their jam for tomorrow, as well as using their pension pot to produce an income today. Passive funds are not yet well represented amongst drawdown investors.”

But Enable would like to draw attention to the fact that contrary to the impression you might get from the advertising produced by the funds industry, very few active fund managers are able to consistently outperform the markets. For example, analysis of the UK All Companies sector at the end of 2010 showed that only 24% of actively managed funds managed to beat the benchmark stock market (the FTSE All Share) over the previous decade. In that case there would be a strong chance you could end up with a fund that fails to deliver you the return you could get by simply tracking the index with a passive fund.  If you want to look what sort of funds are right for you Enable’s experience IFA’s can talk you through your options.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

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