Gavin Milner has started to “de-risk” his investment portfolio as he moves into his mid-60s. Although he still has some exposure to equity markets, he’s says more of his money is now invested in bonds, property and mixed asset funds.
As well as re-structuring his pension, Milner and his wife are re-examining the ISAs they have invested in for a number of years. Recently, they have assets out of higher risk funds into what they consider safer havens.
He says: “At the moment I’d described myself as ‘semi-retired’. I still work part-time as a marketing consultant but my outgoings are less, as the mortgage has been paid off. As a result, I haven’t needed to dip into my pension savings yet.”
Milner has a couple of older workplace pensions from when he was employed by a larger company which will start paying out when he reaches his 65th birthday. He has also saved into a SIPP for over a decade.
“When I was in my early 50s I was made redundant and have worked either for myself or smaller companies since then,” he explained. “That was when I started contributing to a SIPP alongside my ISA holdings.”
“Property has Boosted My Pension Portfolio”
In recent years he has made good returns on these portfolios, which have been invested in a broad spread of assets – including a small exposure to commercial property, which he has added to over the past five years.
His main exposure to commercial property has been via the M&G Property Portfolio fund. Milner says he is “untroubled” by the recent moves to stop investors getting their money.
“I think this is a sensible move. If too many people tried to cash in their gains at the moment this could have a detrimental effect on longer-term investors like myself. I’ve no immediate plans to cash this in,” he said.
Milner invested in commercial property via his SIPP before the financial crisis at the time was alarmed when these funds restricted trading.
“I don't think I had fully appreciated how quickly this can happen. It was more worrying at the time because valuations also seemed to be crashing,” he said. “In fact, the whole economy seemed to be in turmoil, but you couldn’t get your money out of these funds. But we sat tight and things recovered.
“I don’t think we are in the same situation this time. This seems more of a precautionary measure. I still have confidence that this sector will continue to do well.”
“I am More Nervous About Bonds”
However, while he remains sanguine about this holding he says he is “more nervous” about the longer-term prospects about his fixed income holdings. He has a number of fixed interest holdings, including Invesco Perpetual Corporate Bond, and M&G Strategic Corporate Bond.
The Invesco Perpetual fund has a three-star performance, and its managers Paul Read and Paul Causer have a coveted Gold rating from Morningstar analysts.
Fund analysts say: “Bolstered by exceptionally stable managers, this fund continues to thrive. The managers are supported by a focused but experienced and growing team of 12 portfolio managers and analysts.” The managers' significant personal investment in the funds that they run strengthens the alignment of their interests with those of their investors.
M&G Strategic Bond has underperformed in recent years, according to Morningstar, but the analysts retain confidence in the manager Richard Woolnough, who also has a Gold analyst rating.
Analyst Ashis Dash says: “[This fund] still holds long-term appeal for investors. Our conviction in this strategy stems largely from our confidence in manager, one of the more experienced fixed-income managers in the industry.”
Awaiting a Normal Economy
Milner says while both have continued reasonable in recent years, he is worried how valuations will fare as the economy starts to return to “normal” – although he admits he’s no idea when this will be.
“A year ago I was starting to worry about how an interest rate rise might affect these investments. But now interest rates have been cut again, and the Bank of England has committed to further quantitative easing,” he said. “Low interest rates are the new normal.”
For this reason he is glad he has not moved out of equities entirely.
“Capital preservation has become increasingly important,” he said. “I’m not earning enough to make substantial contributions to my SIPP or ISA so I want them to retain their value as much as possible.”
He no longer has holdings in emerging market funds however.
“I previously had holdings in Russia, Latin America and Asia. These did make good gains at certain times, but at other times it was quite alarming seeing values plummet. I don’t think I need that kind of excitement at my age.”
Instead Milner has gone for “steadier” holdings in equity income funds, a couple of global funds and increasingly, absolute return funds. too
He has been very pleased with the returns on Standard Life Global Absolute Return Strategies, also known as GARS.
This is one of the largest investment funds in the UK, with £26.5 billion under management at the end of April this year. The managers of this popular fund have a Bronze rating from Morningstar.
Morningstar says that to date the phenomenal growth of this fund does not seem to have impacted its performance. “At the outset, the strategy was designed to be scalable, making significant use of liquid derivatives to implement the team’s ideas, and there does not appear to have been any slowdown in the overall rate of idea generation.”
Milner has self managed his pension portfolio but says he will seek professional advice at retirement.
“I’ve mainly managed these funds myself, using various platforms. I try to keep costs to the minimum. But I may seek additional advice when I finally retire and need to take an income from my SIPP. The difficulty is knowing how much income I can safely take.”
Although Milner says he’s yet to dip into his SIPP he says him and his wife have accessed their ISA savings. “We want to enjoy our part-retirement while we can. We’ve travelled to Canada and Australia in recent years. We’ve also helped both our children get on the housing ladder with a small contribution towards their deposits.”
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