Tuesday 1 August 2017

AJ Bell Passive Funds - New Purchase

I have been taking things easy over the past month or so and getting into holiday mode. I enjoyed the two weeks of the tennis and had a small (£1 e/w) wager on Cilic getting to the Wimbledon final so the return from the bookies made up for a rather disappointing men's final. I was also fortunate to back Jordan Spieth to win the golf at Royal Birkdale at good odds before the start so its been a rewarding couple of weeks.

I have also been catching up on reading - just finished 'A Place Called Winter' by Patrick Gale which is based upon actual events from the author's family history and which I can thoroughly recommend.  Secondly I have just started Andrew Craig's best seller 'How to Own the World - A Plain English Guide to Thinking Globally and Investing Wisely'...I will write a review when finished.

As we are in between Test matches, I have time to update on just one new portfolio purchase. Earlier this year I flagged up the range of new passive funds from AJ Bell.

For some time now I have been looking to reinvest some of the cash which has remained on the sidelines following various sales and redemptions. In July, I decided to take advantage of the offer of no platform fees on these funds and purchased the 'moderately cautious' version for my ISA with AJ Bell.

I had been also looking at the Vanguard Lifestrategy 40 as another option but the property element of the AJ Bell fund worked in its favour.

The Fund

This version holds a mix of equities (33%), bonds (52%), property (11%) and cash (4%) via a range of ETFs and passive funds from several providers. It seems to be a mirror image of the moderately adventurous fund which holds 52% in equities and 33% in bonds. Here's a link for the latest factsheet (pdf)...

The equity element is held in :

iShares Core S&P 500 ETF
iShares UK Equity Index Fund
Vanguard Dev. Europe ex UK Fund

The bonds are held via :

SPDR Barclays Sterling Corp. Bond ETF
iShares GBP Corp. Bond ETF
iShares Global High Yield ETF
Vanguard UK Govt. Bond Fund
Vanguard Index-linked Gilt Fund

The property element is :

iShares UK Property ETF


AJ Bell will not levy their platform charges (0.25%) until 2019 and there are no transaction charges for sale/purchase. Therefore the costs of ownership are merely the ongoing charges of the fund at 0.50 % which includes the charges of the underlying funds/ETFs - these range between 0.07% for the iShares S&P ETF to 0.4% on their Property ETF.

The funds were launched in April and the purchase price was 100.3p - just a tad over the launch price so nothing lost by waiting  few months.

The only option currently on offer is the accumulation fund - I assume they will introduce an income version at some point however as there are no charges for selling units it does not make much of a difference to me.

The price of the Vanguard LS 40 (acc) at the time of this purchase was £158.50 so it will be interesting to compare progress.

Enjoy the rest of the Summer!


  1. I think you are overpaying for this portfolio. If you went to interactive investor and invested 90% of your funds in the LS fund of your choice (Cost 0.24%) with the remaining 10% of your funds in iShares Property (Cost 0.4%), your total cost would be 0.265% plus the approx £80 per year fixed platform charge.

    I don't know what your portfolio value is but on a holding of £100 K you wouldpay £345 with iii vs £500 with AJ Bell before 2019 and £750 with AJ Bell after 2019.

    On a holding of £1,000,000 you would pay £2,730 with iii vs £5,000 with AJ Bell before 2019 and £7,500 with AJ Bell after 2019.

    I know which platform I would prefer!

    1. Thanks for the suggestion however I had very poor service from ii in the past and would never invest with them again or recommend them to anyone so that rules them out for me.

    2. Whilst I would agree in the past, I understand that now they are killing off their entire IT platform and migrating everyone over to the TD Direct systems that their customer service has improved dramatically.

    3. I have been with ii for 7 years and their customer service has definitely improved significantly over the last 2.

    4. Its good to hear there seems to be some improvement in the way ii treat their customers over recent years.

      Getting back to platform costs, the majority of my portfolio with AJ is made up of mainly investment trusts plus some remaining shares and the charges for such holdings is capped at £30 p.a. so paying £80 p.a. to ii for my ISA would only work out cheaper if I held all funds and my portfoio was over £32,000.

      I hold my largest holding of Vanguard Lifestrategy (fund) with Halifax who charge £12.50 p.a.

  2. Yes there was a time when ii were very difficult to deal with but I am glad I stuck through it as they seem fine now - and much cheaper than AJ Bell, even though I have around half my holdings with them still. It's just too expensive - and possibly troublesome - to do anything about it now.

  3. Hi there, I previously looked at these funds, but as there was nothing to say they were regularly rebalanced, I assumed that you would have to buy and sell funds individually yourself to rebalance at a cost of £9.95 per transaction. Is my understanding correct?

    Also as some of the holdings are ETFs, I couldn't see where the differences between ETFs and the index tracker funds were explained. I don't know all the differences myself but I don't think ETFs are covered under the Financial Services Compensation Scheme which would put me off a bit. Interested in your thoughts on these concerns.

    1. I agree they could be a little more clear regarding rebalancing. In my previous post on this a comment was raised and I raised the question of rebalancing with AJ Bell and their reply as follows:

      The funds are managed on a daily basis with cash flow used to ensure the asset allocation remains in line with the target portfolio. This use of cashflow avoids the need for wholesale rebalancing that can incur unnecessary transaction costs.

      On a quarterly basis, the long term strategic asset allocation is updated. At this point, the fund management team will look at the potential changes to determine whether the costs / benefit analysis warrants a wider change to the portfolio. This approach limits the risk of over trading where there is no discernable benefit in incurring additional transaction costs.

  4. Thanks. It does seem strange that the documentation online does not make it clear that these funds are managed and rebalanced.