Quinn Life SSIA 1 Year On

B

Bearish

Guest
Ok, so I feel like a bit of a moan.

I took out an SSIA in May 2001. One year on and I can say I'm not at all pleased with the performance of the fund. Im fully invested in the Eurostoxx 50. Even though I've been drip feeding funds in each month I estimate that I'm down around 9% on the year. Add in a manageemnt charge of 1% and inflation of 5% and Im looking at a real loss of -15%! Not a great advertisement for Quinn-Life by any standards.
 
Inflation

Is "Bearish" Charlie McCreevy in disguise. Really, the inflation rate is Quinn Life's fault! Honest!
 
One Year On

Canada Life SSIA invested in Focus 15 is down 12.8% on total amount invested. Can't say I'm as depressed as Bearish though :shamrock
 
Re: One Year On

Bearish - You state yourself that you're fully invested in the Eurostoxx 50. The QL fund simply attempts to track this stock index as closely as it can. Quinn Life have no input into the management of this fund. If it's down, that's because the index is down - you can't blame Quinn Life for that.

At least Bullish can wag a finger at Setanta for the poor performance of the Focus 15 fund, as it is actively managed by them. Mind you, it won't do any good!
 
Deo Gratias

Thank Zeus that only 2,600 out of 1.25 million SSIA subscribers followed Eddie Hobbs' and AAM's advice to invest in Quinn Life. :rolleyes

PS We hear lots of calls for apologies from a venerable institution. When is EH and AAM goin' to apologise for so flagrantly promoting Quinn Life?:mad
 
Re: Show me the numbers

Hi Troy / others - Have you any reason to think that QL trackers performed worse than the indices they track? Show me the data!
 
Tracking the Eurostoxx

That's not the point, <!--EZCODE ITALIC START--> rainyday<!--EZCODE ITALIC END-->, I am sure Quinn Life did exactly what they said on the tin. The point is that tracking the Eurostoxx blindly for a five year SSIA was daft as a brush in the first place.:rolleyes
 
Quinn-Life

I should really rephrase my initial moan. I am not blaming Quinn-Life directly for the poor performance of the EuroStoxx, although they are the seller of the product. You dont go back to the factory with a broken TV you head straight for the retailer. That said I realise that the markets are down and that is the product I bought. My point was that 15% of my investment has been eroded via, poor markets, charges and inflation. I was wondering how other people's SSIAs had performed over the last year. If this keeps up there will be a lot of unhappy people in a 5 years. Also while I realise that equity investments are a longterm play, the markets have been down in 2000,2001 and it looks like will be down in 2002. I dont think there has been a 3 year bear market since the 1970s.
 
Pray Tell More

<!--EZCODE QUOTE START--><blockquote>Quote:<hr> tracking the Eurostoxx blindly for a five year SSIA was daft as a brush in the first place<hr></blockquote><!--EZCODE QUOTE END-->. Why's that, Troy ? I don't see that it's any different to any other equity-based SSIA.
 
Markets down

I have an equity based SSIA, and strange as it may seem, I would prefer that markets are down in the first couple of years of the SSIA. The essence of the SSIA is that you are drip feeding into it on a monthly basis. When market is down you are buying in low.

Obviously, I am looking forward to markets regaining momentum after the first couple of years. The Eurostoxx 50 index had gains of between 25% and 48% pa in the years 1996-99. Great, if you had your lump sum built up before 1996. The point is, buying into equities in a depressed market is a good idea. Have your lump sum build up before the markets rise again.

On Troy's point about buying into equity funds for the 5 years of SSIA's. Most equity funds will allow you to continue with your investment after the term of the SSIA so you will not have to encash on the 5 years deadline (of course you will have to pay tax on any growth at that point). What is daft is to invest in equities and expect the smoothness of growth you could get from a deposit based SSIA while at the same time look forward to equity like returns. There is the "risk/reward" trade off that any investor must accept.
 
Buying Low

Investor,

many people thought they were "buying low" when they bought the Nasdaq at 3000 about 8 weeks following its collapse from 5000 in March 2000. Market timing rarely work.

You say you are "looking forward to markets regaining momentum after the first couple of years". Just how many years are you hoping is a couple and surely you dont think you'll see a return to the bull market of 1990s?

By any measure stockmarkets are still overvalued relative to their long-term averages. Low interest rates maybe cushioning some of the pain for now, buts it only a matter of time before they go back up again, especially with the dollar collapsing.
 
Buying low

I started my SSIA (a Eurostoxx 50 tracker with Quinn Life) in January 2002 on the basis that the Eurostoxx 50 index had fallen 20%+ over the previous year. I decided on taking a gamble with equities knowing that equities had, based on past performance, outperformed all other forms of investment over the last hundred years.

Saying that, I know past performance is no indication of future performance. I don't expect the bullish market seen in the 1990's to return over the five year period of the SSIA and agree that markets may still be overvalued. I am looking at my investment over the long term (as equities should be looked at) and using the SSIA vehicle to buffer any short term losses and to build up a fund in equities. At the moment I am prepared to take the risk for the potential return. Bearish, can I ask what motivated you to invest in equities in May 01?

I must pull you up on the 5% inflation. This is a mute point because any investment be it equities, cash deposits, property and indeed our investment in our working week has been hit by the same inflation rate.

The QL's 1% charge must be compared to the other equity based SSIA's on the market, from memory some were charging 5% (now there's a loss). The calculation of the charge is also important, the 1% charge is taken from the daily value of the unit price in unit linked funds so it may already be included in the 9% loss estimate you made. This of course also means that it is not 1% of €3,804 (assuming €254 + Gov €63 by 12 months) but 1% of the first instalment, 1% x 11/12 of the second instalment and so on. This works out at less that 1%pa of your overall fund because of the way SSIA’s are increased on a monthly basis.

If we analyse deposit based SSIA's in the same way as you analysed the equity SSIA then you still have a loss (and no real prospect of ever having real gains given the EU's commitment to keeping interest rates low) i.e. say 4% interest rate - 5% inflation.

Not to add to your woe’s but did you notice that the Eurozone equities dropped by over 3% on Tuesday due to “Enron” type concerns in European markets, although they have rallied slightly since. We must hold our nerve and whatever you do avoid the temptation to ring QL to find out the current value of your fund!
 
Returns

I got in in May purely for the issue of residency. I knew that I’d be leaving Ireland in the meduim term and wanted to get in my 2 years residency status asap – 25% was just too good to give up. To be honest the only reason I invested in equities was I knew the government contribution would likely be covering my losses, while at the same time I had the potential opportunity of some upside.

Investor I have to disagree with the way you are comparing the returns on different assets. Firstly you cant say inflation of 5% is a mute point. As a mobile worker within the EU, I don’t have to necessarily live in a country with 5% inflation, Europe’s 2.5% is probably more meaningful for someone like me. That said I think its important to look at the real return of the country you are currently residing in even if its not the one you will ultimately end up in.

Your analysis of deposits assumes that 1) interest rates wont go up and 2) that Irish inflation stays at 5% 3) doesn’t take account that you don’t have to pay a 1% management charge. I really believe that when comparing any investments you need to look at real returns less charges. While I take your point regarding how charges are calculated, I’d be very surprised if QL didn’t charge at the end of the year. My real return is still –15% no matter what way we care to look at it. It’s a given that equities are a long-term investment, although Eircom shareholders may not agree. However while equities have tended outperformed other assets over the long-term, there have been plenty of 5year periods where bonds or cash have outperformed. Blindly buying equities and holding for 20-30years is a very lazy strategy that I think can destroy wealth or at the very least lead to below par returns.

I’m not all that concerned with how the market have reacted to Enron scares. What is more worrying is that both the ECB and MPC left rates unchanged and markets still fell. I don’t like to think what they would have done had rates risen!
 
Rates and Charges

I've checked with QL on 1% charge, it is as I said a daily charge on the unit price and not a 1% charge at the end of year. You had me worried there for a sec.

On inflation, I'm afraid we are stuck with Irish inflation rate when comparing SSIA's returns as you could not invest your SSIA in another country.

When I was comparing the return on deposit SSIA I was looking at the same time frame as you i.e. May 01-02, and that would be about 4%-5% with usually no charges. The fixed rates offered over 3 and 5 years by mortgage lenders would suggest that those in the know (or think they are in the know) are not predicting any significant increase in interest rates over the next few years, maybe 2-3% up but no more. Low interest rates over the medium term could fuel inflation, so by the way could lump sums being released from SSIA's in four years time, and even spending prior to the end of SSIA's in anticipation of money becoming available.

I would not recommend blindly holding equities over the long term. I recommend active management of investments through regular reviews. My strategy would be to buy with markets falling and sell when the time is right to lock in profits. That's when the crystal ball really does start to come into play! It is possible that I will become more risk averse as the lump sum grows but at the moment I am happy to stick with equities.
 
Troy ??

Still no word from Troy as to why he thinks investing in the EuroStoxx index was "daft as a brush" for SSIAs. As I said, I can't see why it's different to an other equity SSIA.
 
QL SSIA performance

I believe that anybody who can't stomach the market volatility inherent in QL's index tracking SSIAs could always switch to their Bond fund - but obviously at the cost of reduced potential gains. Alternatively one could theoretically switch to another provider altogether including a deposit option... Just a thought...
 
Index Tracking

<!--EZCODE ITALIC START--> Dogbert<!--EZCODE ITALIC END-->, is there any index which you would concede that it would be daft as a brush to blindly follow? The Moscow SEQ? Taiwan SEQ? Columbian SEQ? Indian SEQ? Hang Seng, NASDAQ, Nikkei, etc. etc.

QLD/EH chose Eurostoxx 50 because with only 50 stocks to track you could do it with an actuarial student and a dog and it had a certain illusory ring of conviction.

Oh, and then we had this report showing that blindly following the Eurostoxx 50 beat the sox of any of your conventional managers over all historical perspectives.

EH really warmed to this populist theme ignoring completely that the short history of the Eurostoxx 50 was absolutely <!--EZCODE BOLD START--> NO GUIDE WHATSOEVER<!--EZCODE BOLD END--> to its future prospects.

If one must invest in equities do so in a diversified, preferably actively managed, portfolio. A blind punt on the EuroStoxx was and still is gambling. If you wish to make this punt do it through the medium of Tracker Bonds which guarantee you a return of your capital. With this guarantee of capital a punt on an Index (any Index) changes from being a gamble to being an investment, albeit a rather cautious one.

To revert to the earlier post, do EH and the other populists ever apologise? Here we are a year later and the Eurostoxx 50 was just about the worst punt they could have advised. What do they respond? "One should take the long term view". In other words, they are never, never wrong and they never, never, never apologise.:rolleyes
 
Indices

I didn't say you should track any old index, Troy, but fair enough ... make that any major diversified index. I would have thought (though I confess I haven't studied it in any detail) the Eurostoxx 50 would fit that bill.

Don't agree with you that active managed portfolios are preferable to indexing. The evidence is clear on this. Around 75% of active managers underperform their index benchmarks, in good markets or bad, and they cost you more in charges for the privilege. If I had to pick an active manager, I doubt I'd pick any of the Irish ones (other than maybe BIAM), but would look instead at the major international houses, which weren't available for SSIAs.

By the way, I think I'd take some of the indices you list over the ISEQ (though again I'd have to look harder at them before I commit for sure) !
 
Re: Show me the data

Hi Troy - Got any data to back up your preference for active management of funds?
 
Index funds

Hi Troy,
It seems you've got it This post will be deleted if not edited to remove bad language about front. A decline in markets in the first year or two, follwed by a lift is a good prescription, not a bad one. Secondly Europe is the hot tip as best region currently. Thirdly it's within our currency zone, and is our largest stock index. You're argument is like suggesting that Yanks shouldn't invest in the Dow Jones, in favour of US active managers.

Buying the main european index at only 1%, some one third cheaper than the local life market I thought was a good idea for equity investors, and I took the advice. Over the five years and beyond I believe that the pattern of active management underperformance will continue. You've offered no evidence whatsoever to counter this view, only opinion. You take a stock market fall to bash trackers, but the fall has been felt across the board, and especially among the actively managed focused fund groups.
 
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