This article is part of our Guide to Maximising Your Pension, helping investors build up the maximum possible pension pot – and turn it into the maximum possible retirement income.
As the head of communications for Hargreaves Lansdown, Danny Cox is often featured in the financial press giving guidance on where others should invest their money.
It’s hard to put emotion aside and take a disciplined approach when it’s your own ISAs and pension
But when it comes to his own savings and investments Cox says he prefers multi-manager funds, so he can leave the day-to-day investment decisions to the professionals.
He is a chartered financial planner and has worked in the investment industry for many years. But he says: “I’ve learned that I’m not always the best judge when it comes to making decisions about my own money. It’s hard to put emotion aside and take a disciplined approach when it’s your own ISAs and pension.”
For example, he says he previously invested in Neptune Russia. “I got in a good time, and saw strong gains. In fact I made a substantial profit on this investment. The only problem was I didn’t bank this profit at all, and then ended up losing all the gains I’d made. Selling is always a far more difficult decision than buying.”
He adds: “With hindsight, if I’d been invested through a multi-manager fund they are likely to have taken a more disciplined approached, and gradually reduced their exposure to Russia as prices soared upwards. I’d have had a more balanced approach and would have benefitted from the strong gains seen in this region at the time.”
Seven Multi-manager Funds Give Me 40 Fund Holdings
Not surprisingly, Cox has most of his ISA and SIPP funds in multi-manager funds run by Hargreaves Lansdown. He says: “In total, I’m invested in about seven funds across my entire portfolio.”
But as these are all multi-manager funds this gives him exposure to up to 30 or 40 different individual funds.
Two of his core holdings are HL’s Multi Manager Income and Growth Trust and its Multi-Manager Special Situations portfolio.
Cox says: “The first gives me a good core holding in the equity income sector. I’ve long been a big fan of this sector, where I know my money is being invested in good quality companies, with dividends being reinvested to boost long term returns. This seems to me what investing is all about: the power of compounding to deliver long term returns.”
This portfolio has a three-star rating from Morningstar.
The Special Situations portfolio has a more global outlook with investments in emerging markets and technology funds. This multi-manager portfolio has a four-star rating from Morningstar, reflecting its strong performance in recent years against peers.
Cox does not just invest his money with HL funds; he has invested with Jupiter’s Merlin range of multi-manager funds in the past.
He says: “With a multi-manager portfolio someone is making the selection for me, when it comes to how much of your money is in different geographic regions and different sectors, be it the US, technology, smaller companies, or emerging markets. Getting these asset allocation right can help boost the value of your investments.”
Is the Higher Cost Worth it?
Cox says many investors are put off multi-manager portfolios because of the relatively high cost. “I’m paying around 50 basis points extra to invest in a multi-manager fund. But I think this is more than borne out by the performance,” he says.
“Costs on some multi-manager funds are approaching 1.8%. This may not look competitive compared to some passives which charge around 0.1%. But if you’ve been invested in a FTSE passive in recent years it has gone nowhere. It’s hard to get income from many trackers at the moment as well, due to the way the index is structured.”
Making Use of Tax Efficient Wrappers
Cox says he has been investing for a number of years, and tries to make the most of his tax-efficient allowances each year. “I first started investing in PEPs and although I haven’t always been able to maximise my ISA holdings I try to ensure the investments I can make are as tax-efficient as possible.”
He has also encouraged his children to save: “They were born before Child Trust Funds and Junior ISAs appeared - but I did set up a bare trust for them and have made regular investments on their behalf.”
Now that they have left full-time education Cox has encouraged his children to open a Help to Buy ISA so they can get start saving for a housing deposit.
“They are both in jobs where they have access to a pension scheme, so I’ve encouraged them to join. I’ve been lucky, and my first job, when I was 18, offered me a pension,” he said. “I didn’t appreciate it at the time, the money simply went out of my salary into this savings scheme. But now I realise that this has helped build a solid foundation when it comes to saving for the future. For every year of my working life money has been going into this pension.”
