Monday, 7 January 2019

Passive me against my pension fund

Let's see how my passive investment strategy did when compared to my active pension fund in 2018!

The bull run
Most of my colleagues have their pension actively managed by our pension fund. This is the default option. This means Nationale Nederlanden puts your pension money in their NN first class return fund. This fund is currently a mix of actively selected stocks (70%) and bonds (30%). This can always change in the future. Whatever the wise experts decide.

I am one of a few that has taken matters into his own hands. I am fully invested in a passive tracker. Stocks only, worldwide. I reported before that my returns have been consistently higher for years on end. While my costs are lower. We started using this defined contribution pension in 2014 and my total return is more than double that of the pension fund. Passive wins active. No surprises there.

The cool thing is I am in the pension steering committee. So I got a chance to address  their poor performance. "Why do we pay you fees to pick stocks that underperform the market average?". They had a clear answer. My risk profile was too high and the only reason they underperform was because of the bonds. 

They were derisking as they expected some turmoil on the markets. In a turmoil I would loose more money. My risk profile was wrong and I just got lucky because of the long-lasting bull market. I would reason they are timing the markets and this is a loser's game. But anyway; turmoil there was in 2018. Great opportunity to put them to the test!

The bull shit
Indeed my pension strategy did not work out great in 2018. My ishares developed world index fund yielded -5.53%. And now for the NN first class return fund -drum rolls-; they managed to go up by..... -5.80%. They have again failed to keep up with a passive strategy. 

I am not great at statistics but just picking random stocks should have given them a winning year by now. It is actually quite an achievement they did worse than a passive strategy every year since 2014. Can't wait till the next meeting with them!

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