Thank you everyone for your helpful and on-point advice so far!
Some clarifications below.
First, I found
this fund on the retail Irish Life website and compared it to the fact sheet provided by my work (which I'm not sure I'm allowed to share so I just pasted relevant info below). The geographical/sector split, top 10 holdings, and benchmark performance are exactly the same. So I think it's safe to say my AVC tracks the same thing, i.e. the MSCI World Index, according to the retail fund's fact sheet.
What's strange is:
- Performance differs between the AVC and retail fund, despite tracking the same thing with presumably the same methods
- The benchmark differs a lot from the actual MSCI World Index, even though IL says that's what they're tracking! (Or did I get it wrong?)
Performance | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
My AVC scheme | 8.71% | -4.43% | 29.67% | 6.37% | 29.76% | -12.58% |
Retail Irish Life fund | 7.87% | -5.10% | 28.68% | 5.55% | 28.81% | -13.24% |
Benchmark (same in both fact sheets) | 8.99% | -4.16% | 30.09% | 6.72% | 30.04% | -12.78% |
"Real" MSCI World | 23.07% | -8.20% | 28.40% | 16.50% | 22.35% | -17.73% |
I have no idea why the two funds differ - both are before charges and both try to track the same thing! But the AVC seems to track it better.
Other differences are: the AVC fund (series?) was launched five years earlier (likely doesn't matter as both factsheets are from 31/08/23) and the AVC fund is bigger, which I guess makes sense as it likely contains many companies' AVC schemes while the retail fund contains individuals.
Some more info based on user questions:
If they are indexed/passive funds then what management is involved? Just the actual tracking of the relevant indices?
Yes, as far as I understood from my chat with the financial advisor.
I’d imagine these are not funds designed for these scheme but are a re-brand of existing Irish LIfe funds .
I'd say you're right based on my findings above. But the difference in performance is strange. The financial advisor had said the funds available in the AVC are not the usual IL funds available to the retail investor, but rather the trustees decide on an investment strategy and Irish Life are the company that the trustees chose to manage the investments. So maybe even though it's the same index, IL do a better job at tracking it because it's a different fund managed by a different team or...something? I don't know.
The difference in TER might be worth paying if the ILAC tracking error was greater than vanguard by that much (or of the index it tracks is a worse performer). I vaguely recall someone on here saying ILAC index tracking funds weren't great at tracking the index.
Yes that's also one of my considerations, though according to the AVC fund fact sheet, since launch (2005) the fund returned 8.73% per annum before fees vs. 8.91% for the benchmark which doesn't sound too bad. But again, I'm not sure what this benchmark is since it doesn't seem to track the MSCI World Index (or not closely at all) despite the "twin" retail version of my AVC fund saying that it's the index they track!
They should be able to tell you what it's currently invested in. If you have the fund factsheet, you should see what the breakdown of investment is, and the investment strategy. Unless it specifies a specific index, then it's not trying to track one.
The fund factsheet lists the investment style as "indexed" and the financial advisor told me all the funds in the AVC are passive/index funds. The fund objective is listed as "
to perform in line with the benchmark index..." etc. so I'm confident it's passive. The fund description says: "
This fund invests in global shares. The fund is fully invested in global companies domiciled in developed market countries. The Fund follows a passive strategy and the Fund Manager replicates the securities held in the underlying benchmark." Based on my findings above, it seems the index they track is the same as the indexed equities
IL retail fund, though the AVC tracks it better for some reason, and I'm still not sure what this index is as despite saying they track MSCI, benchmark figures aren't close to MSCI at all. Very confusing altogether!
You might want to search Askaboutmoney for existing threads on such "lifestyling" and why many people advise against it.
Thank you, I'll take that into consideration. I don't have a solid plan yet re: lifestyling etc, but I figure since I have 40 years until state pension age, for now I should just stick it into an indexed global equity fund and reassess in a few decades. But very open to advice and input here as well. The next most "risky" fund available is 60/40 equities/bonds which seems a bit bonds-heavy given my time horizon but I could be wrong.