What is the question after that (or what was the one before)?
This one is a pretty tricky question to put in a risk assessment, IMHO. It could mean you no longer have a need to take risk, which could lead to a more conservative allocation, or that you have a greater ability to take risk, which could lead to a more agressive allocation. It could also mean that you’re at a stage where market fluctuations play a bigger role in your ability to sustain the life you want to live, or it could mean nothing as market returns are just a bonus to you and you don’t need to use them ever.
Was negatively impressed by the performance of the Partners Group Fund. They compare themselves against a 70% ACWI / 30% Global Aggregate Bonds… and the Fund just about matches that performance. At least, if I got things right. This is not quite impressive.
If you any of you was interested in PE - I would rather just recommend buying a some Private Equity Holding Shares. Probably gives you a bigger upside than this fund. Plus daily liquidity.
With a product like this, it is important to take advantage of the features of a robo-advisor in general and finpension invest in particular:
combining multiple regional ETFs to achieve a TER below, say, 0.10%, compared to 0.15-0.22% of other UCITS world ETFs
correcting a generic “world portfolio” for things that are out of one’s control, e.g. excluding Swiss stocks to reduce the huge home bias resulting from 2nd pillar
reclaiming US WHT through finpension’s reporting
not having to consider implications/costs of handling foreign currencies, as there are no forex fees
being able to have more ETFs and/or making more frequent deposits than you would with a broker, as there are no transaction fees
Amazing what magic quartely valuation does and if the valuation is performed by yourself or one of your friends (who have an incentive to show the results the PE wants…)
Agreed. Evaluation a PE Funds‘ Performance needs at least 7-10 years of performance. This way, funds can run through a lifecycle plus you can smoothen out evonomic cycles a bit.
To be honest, never had a close look at PE myself but was surprised to see the bad performance on the first fund. Time will tell how the second performs, that one doesnt have such a long track record right now.
Re PE Valuations, biggest fun and probably a nice reality check is Private Equity Holdings NAV vs. Share Price developments. Quite imoressive how they diverge.
The viability of finpension depends on the tax return for US WHT (supposedly 2% dividends * 15% withholding tax = 0.3%, which then needs to be reduced by the amount of non-US stocks) and combined TER.
Let’s say we have a portfolio that excludes Switzerland (because it is overweighted in 2nd pillar), with and without EM. We would have:
Index
No EM
With EM
S&P 500
75%
67%
EURO STOXX 50
11%
10%
MSCI Japan
6%
5%
FTSE 100 (UK)
4%
4%
MSCI Pacific ex Japan
3%
3%
MSCI Emerging Markets IMI
0%
10%
Cash
1%
1%
TER
0.074%
0.085%
TER of cheapest equivalent ETF*
0.15%
0.15%
TER advantage of finpension
0.076%
0.065%
US WHT advantage of finpension
0.225%
0.201%
Effective finpension fee
0.089%
0.124%
*MSCI World: HMWO; FTSE All-World: FWRA
This fee of around ~0.09-0.12% p.a. is really not that bad, considering you’d need to pay custody fees and transaction fees with SQ or PF.
Thanks for sharing. I did not realize that you can actually have a lower TER by buying multiple ETFs versus buying one ETF.
I did not quite understand your effective fee calc, but I used your TER assumptions & got following numbers for effective yield. I did not account for buy/sell fees.
S&P 500 yield is assumed to be about 1.6% , so i used that for flat credit back. Lower yield will also reduce tax credit
Basically it turns out that SQ = Neon + custody fees (capped at 200 CHF per year)
FP will cost more
World ETF portfolio
SQ
NEON
FP
(a)
Gross dividend
2%
2%
2%
(b)
Witholding tax (12.5% effective)
0.25%
0.25%
0.25%
(c)
Net dividend (a - b)
1.75%
1.75%
1.75%
(d)
TER
0.15%
0.15%
0.085%
(e)
Custody fees + management fee
0.10%
0%
0.39%
(f)
US TAX credit (assuming 67% exposure to S&P 500 & Gross dividend yield of 1.6% for US portion)
0
0
0.161%
(g)
Deduction for 3rd party expenses
0.30%
0.30%
0.30%
(h)
Taxable income (c - g + f)
1.45%
1.45%
1.61%
Effective yield
(i)
Tax @ rate 30%
0.44%
0.44%
0.48%
Effective yield (c + f - d - e - i)
1.07%
1.17%
0.95%
(j)
Tax @ rate 40%
0.58%
0.58%
0.64%
Effective yield (c +f -d - e- j)
0.92%
1.02%
0.79%
One time fees -: If i assume 5000 CHF investments at a time, then buy + sell fees for SQ will be 0.4% (assuming 10 CHF ETF leader fee per trade) and Neon will be 0.5% (only at time of sales)
FP I do not know if there is any spread or not. For higher amounts NEON might become expensive at withdrawal but would depend on investment horizon and withdrawal amount tranches.
Actually it’s 15% if US was 100% of the portfolio.
But since world portfolio includes less US stocks, I used the average calculated by Dr PI sometime back. Here
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