Underperforming Goodbody Equity Fund being closed by Aviva L&P: how to proceed?

Discussion in 'Financial campaigns and consultations' started by sole, 21 Sep 2013.

  1. sole

    sole Frequent Poster

    Posts:
    68
    I had 10k in the Goodbody Equity Fund and it is now worth about €7,700.

    I have been informed by Goodbody that the fund is Closing following a decision by Aviva life and Pensions, who admimister the fund.

    I have a choice of :
    1. a Goodbody Discretionary account.
    2 Sell
    3 switch to Aviva IRL High Yield Equity Fund.

    They are recommending the Discretionary account at management fee of 1% .

    Any advice on how to proceed.
     
  2. mercman

    mercman Guest

    The past number of years have shown exemplary returns on equities. Have you asked them as to why the fund has dropped so much ??

    If they are making a recommendation to you find out what the TER is on the fund and the past one as well. If they refuse to give it to you, find somewhere different to invest your money. The TER is the actual amount charged to your money for running the fund, which differs from the Management Fee.

    I'd love to know the reasons for stopping the fund without offering any reason whatsoever. Unless you fight your corner and without a suitable credible reason, I think you should consider bringing this as a cast to the Ombudsman.
     
  3. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    Sole,

    To get any realistic commentary you'd need to give us some more details, such as:

    - What kind of equity fund are we talking about, which sectors was it in vested in, currency exposure and so on... in general equities have recovered well over the last few years, but that does not mean that all equities have done well

    - What was your objective when you invested in this fund and how do you want to go on?

    - How long is investment perspective, five years or more???

    - What is actually do they mean by a discretionary account - what kind of description are you granting them?
     
  4. mercman

    mercman Guest

    Jim, On a professional opinion, and on the basis of the information that has been given, surely the OP should request the original invested amount returned ??

    Why should they become another casualty of the Goodbody mistakes ??
     
  5. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    Well since we have no idea of what the fund was nor the reasons why the OP decided to invest in it, I don't see how you can arrive at that conclusion just yet???
     
  6. sole

    sole Frequent Poster

    Posts:
    68
    Thans for getting envolved.
    There is just no explanation of why the fund is closing - exact words "the fund you are currently invested in with us is unfortunately closing." (letter from Goodbody).
    They prcceed to recomend the Discretionary fund and ask me to ring them. I just want to have some ideas before I ring them.
     
  7. mercman

    mercman Guest

    I think the main idea you should be aligned to is you'd like your original investment amount back, at the very least.
     
  8. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,732
    Aviva did something similar with their UK Geared Property fund. A letter to clients saying "we're closing the fund and putting it in the ungeared UK property fund". No explanation of why they arrived at that decision. Awful service.

    Is the closing of the fund a decision by Aviva or Goodbody? Looking at the OP, is may be an Aviva decision and the actual fund may be kept running by Goodbody.

    I would also echo was the other posters said, find out why an equity fund is down 25% after the good returns we've experienced over the last few years.
     
  9. sole

    sole Frequent Poster

    Posts:
    68
    Goodbody Equity Fund closing

    I quote from Goodbody letter " This decision to close the fund has been taken by Aviva Life and Pensions who administer the fund and the closing date is the end of September."

    It was originaly with Hibernian and seems to be valued in units. I can find no info on what equities are used.
     
  10. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    Since we have no idea what fund the OP is talking about nor does the OP seem to be able or willing to provide details, it is not possible to say whether or not being down 25% is reasonable or not!!!

    I know plenty of equity funds that are well down despite the general upward movement in stocks and deserve to be!
     
  11. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    OP if you don't know what you invested in, then the choice is simple: Sell! Never invest in something you don't understand or can't explain.

    As for the performance of the fund, if you can't tell us what it was, then all you can expect is speculation and I don't really subscribe to that without some kind of basis for it.
     
  12. sole

    sole Frequent Poster

    Posts:
    68
    Thanks Jim. I was coming to that conclusion myself.
     
  13. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    35,989
    Hi sole

    The reasons why it is down is a side issue and should not distract you at this stage from making the right decision.

    No one can tell in advace which of the three options you have been offered will be the best performer.

    You chose an equity fund and they are offering you another equity fund in option 3

    3 switch to Aviva IRL High Yield Equity Fund.

    As you have €2,300 of losses, staying invested in Aviva is the most tax efficient.

    Say you leave the money in Aviva, and the fund rises to €10,000, you will get back €10,000.

    Say you cash it and invest the €7,700 in Standard Life and it rises to €10,000, you will pay 35%(?) exit tax on the €2,300 gain.

    So, unless there are good reasons for change, you should leave you money in an Aviva Fund.

    Did Goodbody not raise these issues with you in the letter?

    If you do choose to leave it in Aviva, check that it is just a fund switch and does not trigger an exit from a fund and an entry into another fund.
     
  14. Marc

    Marc Frequent Poster

    Posts:
    917
    Brendan you are spot on.

    The OP should confirm with AVIVA that the internal switch to another AVIVA fund will preserve the tax efficiency of the loss. They should also investigate if any other AVIVA funds are actually available on the contract that they hold. They may have just been given some default options.

    Any other fund from anywhere else is going to mean 36% more tax until the investment recovers back to the original investment.

    The investment fund being offered as a replacement may not suit the OPs risk profile but that is a question that can only really be addressed directly with the OP as the variables are too complex.
     
  15. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,732
    Brendan

    Don't forget that 1% govt tax that would be imposed if he transferred it to another provider.
     
  16. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    Speaking for myself I'd far prefer to get 65 of 70 percent of some future gains than be sitting around hoping that my investment will turn around so that I might save a bit on taxes!

    Restricting investment decisions in an attempt to make use of tax losses may ultimately lead to poor asset allocation strategies and given that asset allocation has a far bigger influence on performance than individual instrument selection, that is a pretty big issue.

    To my mind the ability to take advantage of past tax losses should be treated as a bonus, but not the driving factor in investing decisions.
     
  17. Marc

    Marc Frequent Poster

    Posts:
    917
    But then Jim you don't live in Ireland and have to put up with exit tax which is the single most stupid way to tax investments on the planet!
     
  18. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,732
    Jim

    Good point on the taxes.

    Aviva have plenty of good funds that can be used to construct an investment portfolio capable of making the money back.

    When comparing Aviva's charges, fund strength and potential tax liability with that transferring to another provider, it would probably make sense to leave things were they are.
     
  19. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,003
    But Marc, as I already said, I'd still prefer to have that problem than rather sit around hoping for a change...

    After more that twenty years in this area, there a couple of things that always strike me as odd:

    - The Americans only really get concerned about loosing money on an investment if they are loosing it faster than the benchmark they are tracking

    - The Brits (& Irish it would seem) are more concerned about paying taxes on the gains they might make than actually making the gains in the first place.

    - And just about every average English speaking investor thinks property is a really safe investment!

    - The Asians simply speculate, their investment horizon is the next trend.
     
  20. sole

    sole Frequent Poster

    Posts:
    68
    Brendan thank you for that logical tax analysis which I had not considered fully.
    Goodbody did mention that the Aviva option "is primarily for tax reasons. If you have a loss/gain in the Goodbody Equity Fund and you do not wish to Crystalise this loss/gain this is your best option provided with the underlying investment. You should take independent tax advice on this assue"
    I guess this suggests that it is "fund switch" rather than a new one. I have not had any info on the Aviva High Yield fund yet but as I can efford to invest for 5 or more years I will consider it. It would be nice to recover my original 10k at least.