As well as managing his own finances, Andrew Daniels has recently taken on responsibility for his father’s investments after the death of his mother last year.
"Both my mother and father had extensive investment portfolios, and my father asked for help sorting these out after she died.”
Daniels’ father is now in his late 80s, and they needed to transfer his mother’s ISA holdings. These can now be transferred to a spouse, without losing the tax benefits.
Daniels, who is in his early 60s, says: “This wasn’t as straightforward as it sounded. I had to deal with three different investment companies and their processes were all slightly different.
“We had to get up-to-date valuations, and although I was executor of my mother’s will, some of them then sent all the paperwork to my father to sign, before they would complete the transfer. He didn’t really want to deal with this.”
Daniels has since discussed setting up a power of attorney with his father, so that if his father’s health deteriorates, he will be able to manage these investments on his behalf.
He says: “My parents seem to have had more money to invest, and have invested in more complex funds than me, so it’s all been a bit of a learning curve.”
Simple Retirement Plan
Daniels, who works as a marketing executive, says his own investments are fairly straightforward. “I have a good pension from a previous workplace. This is due to payout in about five years, and will pay a guaranteed income, linked to my previous salary.”
“I also have a smaller pension with my current employer which is invested, in the default fund offered. This is linked my projected retirement date.”
For many years any surplus savings went into his wife’s current account mortgage. “This effectively enabled us pay off the mortgage early. It was repaid about six years ago.
“Since then I have been using any surplus savings to invest in ISAs, and I have a few Premium Bonds.”
Some of these ISA savings in cash, earning “a pretty rubbish interest rate”.
He also invested in a couple of L&G index funds, one tracking the FTSE 100, and the L&G European Index, which has a Silver Rating from Morningstar.
“I opened these with a lump sum initially, but I have since set up a direct debt to make monthly contributions.”
More recently he has also invested in HSBC’s American Index Fund. This passively managed fund has a Gold Rating from Morningstar.
Father's Portfolio Favours Emerging Markets
In contrast he says his father’s investment portfolio is more diversified. This includes investments in Aberdeen Emerging Markets Equity, and Aberdeen Latin American Equity, plus Jupiter European.
Daniels says: “When we came to transfer these ISAs I did have a discussion with my father about whether he wanted to stay invested in some of these funds. They seem quite high risk. But he says he has been invested in these areas for years and wants to keep his money there for now.
“My parents worked abroad for many years, so perhaps they have an affinity with some of these regions.”
Although he thinks these funds might be too high risk, both him and his father need to think about where they would transfer these funds to, should they decide to switch. “This might be the basis for a discussion over the next few years. But I don’t feel confident really recommending alternatives at the moment.”
Both these Aberdeen funds have a good track record though. Aberdeen Emerging Markets has a Silver Rating from Morningstar analysts. Over the past decade it has produced annualised returns of 8.22%.
The fund was previously managed by veteran manager Hugh Young, but since 2015 Devan Kaloo has been at the helm.
Morningstar analyst Mark Laidlaw says: “There’s still lots to like about this fund. The firm boasts a large and experienced investment team led by Devan Kaloo, a 17-year veteran of the firm. Kaloo is someone we hold in high regard.”
He adds: “The strategy has suffered a tough 2017 as tech names (an area in which the fund typically has an underweighting because of the team’s view of valuation and quality) have enjoyed a strong run. That said, long-term investors have been well-rewarded.”
Aberdeen Latin America has a Bronze Rating from Morningstar. Morningstar says “The fund remains a compelling choice within its sector, managed by a team we regard highly.”
Morningstar adds: “One of this fund’s strengths lies in the team approach and the depth of the analytical resource of Aberdeen’s 19-strong global emerging-markets team, headed by Kaloo.”
Jupiter European Fund a Consistent Performer
Jupiter European is another top-performing fund. The fund has a coveted five star and Gold Rating and has delivered annualised returns of 12.14% over the past decade.
Morningstar analyst David Holder says: “Alexander Darwall has managed the fund since February 2001. This is a notable achievement and this stability and consistency of investment approach is an undoubted contributing factor to the fund's success.”
Darwall has a “high conviction approach” and the fund is unconstrained so can take significant bets against the benchmark.
Daniels’ father has tended to have a number of funds with the same manager. “Over the years this has made it slightly easier to keep track of his investments. Most of them are direct holdings, where he get paper statements every year.”
He says: “I’m looking to increase what I can save ahead of my retirement, but I guess my father is looking at things from the other end of the spectrum.
“He is in the fortunate position that his pension easily covers his day-to-day living expenses and he has reasonable cash savings too.
“He says he wants to leave this capital invested in case he need nursing care in future. But he can’t take it with him, so we are encouraging him to think about what he whether he wants to spend some of these assets now.”
