Bogleheads

[englishgirl]

It seems that there are quite a few non-US based people on the forum, so I thought I'd pick your brains.

When I left the UK I transferred my various pension plans into what is now known as a stocks and shares ISA. I seem to have two separate accounts - contracted out from SERPs and something else (not contracted out, presumably). They are both invested in the same fund, the Virgin UK Index tracker, as this was the only broad market index I could find at the time. The TER is 1%. Not only am I not happy at the high fee, it seems like it is also underperforming the index fairly significantly, so isn't even doing very well at being a tracker.

Now as time has passed, I see I can get a Fidelity FTSE all stock (UK) index tracker for a TER of 0.3% so I am thinking of switching. I think it may also help when I come to retire, as I will somehow need to transfer the money from the UK to the US and have thought vaguely that I could perhaps more easily buy, say, a Fidelity SPIA over this side of the pond if I am coming from a Fidelity fund over there.

From looking around the Fidelity website, the UK index seems to be the only low cost index fund that they offer. I'd prefer a broad European or other general foreign index if there was one.

[I've already asked Vanguard if I can transfer the ISA to them, and they said no.]

Questions:
1. Does anyone know of any other low cost index funds that are offered in ISAs?
2. It seems that I can't reregister the ISA fund, but have to sell up and transfer it. Does this trigger capital gains tax?
3. Anyone have any comments on Fidelity in the UK?
4. Anyone have any other comments for me? Seems like it is almost impossible to transfer the ISA to a US-based IRA but am I missing something?

Thanks!
_________________
Sarah

[stratton]

www.ishares.eu for lots of ETFs.

Paul

[englishgirl]

Thanks Paul, I never thought about using ETFs because of the ISA wrapper (kind of like an IRA). But it seems like it might be possible. Have to do some more googling.
_________________
Sarah

[TedSwippet]

Google "self-select ISA".

[cjking]

Selftrade do a self-select ISA. Sippdeal do the equivalent for Pensions. (I doubt you transferred your pensions into an ISA, generally that's not possible.)

Among the ETF's, I like MSCI World which tracks the MSCI developed market index. It's effectively a world tracker fund with a charge of 0.5%. About 48% of its capitalisation is in US shares. If you combined it with the MSCI Emerging Markets tracker in the ratio 92% to 8% the combination would be even closer to being an all-world tracker fund.

If you're living in the US, note that your ISA dividends, interest and capital gains may be taxable there. If you actually have a UK pension account then there's less need to worry, as you will only be taxed on money you extract. (Though you may not be able to take 25% tax-free if tax-resident in the US when you take it.)

Choosing a Fidelity fund inside a UK account won't make any diffence to the ease of buying an annuity in the US.

[SamLJ]

I had a discussion recently with a friend regarding decent funds available in the UK. I think you can build a reasonably decent low(ish)-cost portfolio out of your choice of the following (expense ratios in brackets):

Equity Funds:
iShares MSCI Europe ex-UK (IEUX) (0.40)
iShares MSCI Europe (IMEU) (0.35)
iShares MSCI North America (INAA) (0.40)
iShares MSCI Japan (IJPN) (0.59)
iShares MSCI World (IWRD) (0.50)
iShares MSCI Emerging Markets (IEEM) (0.75)

Bonds:
iShares £ Index-Linked Gilts (INXG) (0.25)
iShares FTSE UK All Stocks Gilt (IGLT) (0.20)

Real Estate:
iShares FTSE EPRA/NAREIT UK Property Fund (IUKP) (0.40)
iShares FTSE EPRA/NAREIT Global Property Yield Fund (IWDP) (0.59)

I really like the Fidelity FTSE tracker for UK equities.

As already stated, be careful with the ISA if you're resident for tax purposes in the USA. The IRS does not recognize the tax-preferred status of ISAs. Also note that if you're no longer resident in the UK you cannot add new money to the ISA.

Hope this helps,
Sam

[SamLJ]

Also, it looks like the expense ratio on the Fidelity fund should only be 0.1%, not 0.3%:
http://www.fidelity.co.uk/cgi-....id=0387532

[cjking]

My wife has the Fidelity fund in her Sipp, the official management charge is 0.1%, but the TER is 0.3%. The ETF figures are TERs, so should be compared to the Fidelity TER figure.

http://www.fidelity.co.uk/advi....nding.html

[Valuethinker]

[wearethefall]

Here is a list of etfs listed on the lse:

http://www.londonstockexchange....oducts.htm

The db-x trackers USA etf has the cheapest TER at 0.3% for that area:

http://www.londonstockexchange....NINDEX.pdf

[robyates]

I have been looking at these two bond funds for my mother (who is UK based)

Bonds:
iShares £ Index-Linked Gilts (INXG) (0.25)
iShares FTSE UK All Stocks Gilt (IGLT) (0.20)

I have also been looking at this one

iShares £ Corporate Bond (SLXX) (0.20)

The thing that worries me a little is their duration for example when I look up the fund's details at the ishares website (tried to post link, but this is my first post so it won't let me)

I see this

Weighted avg maturity (years) 20.35
Weighted avg coupon (%) 6.41
Macaulay duration 6.87
Modified duration 6.44

The durations / maturities have always confused me and I am not sure which one governs how sensitive it is to interest rate changes. I want to make sure that I have her in intermediate term bonds and not long term bonds. Can someone let me know whether these bond funds are long term or intermediate term?

In addition I would be interested in opinions as to the following portfolio for her. She is 63, is retired, and has a good pension that she can live off. She rarely if ever dips into her investments.

35% iShares £ Index-Linked Gilts (INXG)
17% iShares FTSE UK All Stocks Gilt (IGLT)
18% iShares £ Corporate Bond (SLXX)
25% iShares MSCI World (IWRD)
5% iShares MSCI Emerging Markets (IEEM)

Thanks,

Rob

p.s. does anyone understands which of these funds benefit the most from being in a self-select ISA or doesn't it matter?

[Valuethinker]

[robyates]

Many Thanks ValueThinker, to be clear I am not looking to move into this position immediately as it will take a while to get her assets freed up from her current investments. I plan on doing nothing with the current market crazyness and it will be December at the earliest before any money starts to move over.

As a long term position for her, however, does the portfolio make sense (I will increase the bond allocation as she gets older)?

Also, I have been looking and looking for a short term bond etf / fund in the UK and I can't find one open to individual investors. If anyone can find one I would be very interested.

Finally, given your comment on duration, does that imply that these are intermediate term bond funds and not long funds?

Thanks,

Rob

[Valuethinker]

[robyates]

Valuethinker,

iShares £ Index-Linked Gilts (INXG) has the following durations

Weighted avg maturity (years) 15.94
Weighted avg coupon (%) 2.23
Macaulay duration 13.45
Modified duration 13.39

This seems like a fairly long bond. However, it is the inflation linked one. Is this suitable for a conservative portfolio of someone in retirement, given the long duration?

If inflation expectations abate by a single %age point will this fund loose 13% of its value? That seems fairly risky to me,

Rob

[bengt]

I've seen these international questions quite often here. I'm also quite interested in those and it would be nice to have them in the same place (in case you want to browse the past topics). I suspect 90% of members are not interested in these issues, so would it make sense to create a separate forum group for these issues? Perhaps "International Situations", "Investing Abroad", "Expat Investing", "Foreign Investing and Retirement" or something like it?

Also (or alternatively), are you aware of any such forum (elsewhere) that focuses on international investment situations (e.g. retirement accounts in two countries)?

[Valuethinker]

[cjking]

[Valuethinker]

[TedSwippet]

I've been looking at doing something similar to this portfolio myself. MSCI World Index alone, at just a shade under 50% US, seemed a bit too US-centric for my tastes, though. It's probably perfect if you live in the US, but I want some home-country bias and less currency risk.

At the moment, I'm considering either blending FTSE and MSCI World Index, or slice-and-dice across ETFs for UK, US, EU ex UK, Japan, FE ex Japan, and EM. IWRD seems to be very thinly traded -- even given ETF arbitrage and so on, could this be a concern?

VT, thanks for your comments on INXG durations. The 15+ years thing had been bothering me too, but I think I now have a better handle on it.

[Valuethinker]

[Valuethinker]

[wearethefall]

[robyates]

One more thing and then I think I am done.

A 'financial advisor' in the UK recently recommended my mother invest in RBS Capital Protected Investment (again, would post link but can't). They stated that this was guaranteed by the FSA.

I have searched all over the FSA site and can't find anything and this smells very fishy to me. I can't believe that the government would back a risky investment such as this, does anyone know if this kind of investment comes with any kind of government backing?

Thanks,

Rob

[Valuethinker]

[wearethefall]

At the moment I'm considering going with a combination of:

Fidelity Moneybuilder UK index (0.28%)
db x-trackers World Ex-UK (0.4%)

The nice feature of the db-x ETF is I get all my international large and midcap in one fund with a competitive ER. It has about 17 million in assets under management so I'm hoping the spreads won't be too large. I can't find any info on the country % breakdown is but I guess I could work that out from the index.

I'll then use the iShares foreign smallcap ETFs for a bit more diversification.

[TedSwippet]

Worth noting that iShares use full replication to track indices, whereas DB and Lyxor use synthetic replication.

So far, it seems neither method is proven beyond doubt to be either better or worse. Reading around got me to a document comparing Lyxor to iShares; Lyxor had lower tracking error, but iShare's tracking error was positive.

Personally I feel a bit more comfortable with full replication; if I buy a basket of shares I'd like it to contain actual shares. This could however just be because I haven't taken the time to understand how synthetic replication works in practice.

[englishgirl]

Interesting discussion, guys.

I still haven't moved my Virgin fund, so it's good to see what the choices are out there. Valuethinker - you're a wealth of information!
_________________
Sarah

[stratton]

[TedSwippet]

[stratton]

[wearethefall]

The cash in the Moneybuilder represents derivatives.

[captain3d]

Hi UKers

I am a Brit living in the US and generally follow index fund type investing. I had a long talk with my retired UK parents this morning after they complained about their Abbey (Inscape) investments losing so much money.

As they are both in their 70's I was shocked to see that their Abbey 'advisor' had responded to their request for a conservative approach with a 75% stock 25% bond portfolio!

What idiotic advise was that? On various correspondence this is referred to as a 'Preserve Real Wealth' investment.

I have since been trying to find out what other fees might be involved with this. Anyone familiar with this?

Are there any front of back end fees? Sounds like they are paying around 1% per year which is not terrible.

Sounds like a bit of self trade is in their future.

cheers...phil

[robyates]

Phil,

for what it's worth I have set my mum up with Halifax's Sharebuilder for her taxable stuff (still can't post links, so google 'Halifax Sharebuilder')

This works well as we will gradually be moving her portfolio into the allocations above and we can buy in at only 1 pound 50 per trade. Aside from that I don't believe there are any fees apart from the ETF's internal expenses which are somewhere between 0.2 and 0.5 %.

I am still investigating where to put the Self Select IRA's, suggestions welcome,

Rob

[captain3d]

Thanks Rob. I will look into that...


http://www.halifax.co.uk/share....uilder.asp

[grumel]

DBxtracker use solely swaps in their etfs. That means if Deutsche Bank goes bankrupt, up to 10%* of your money in the etf is gone.

My suggestion would be to take the spread of Deutsche Bank bonds to government bonds and muliply it with maybe 0,05 and add that amounth to the db expense ratio.

*The amounth can be between close to zero and 10%, got no idear about actual average swap exposure.

[wearethefall]

[robyates]