PEPS: Get a measure of the fund managers

IF you want to take out a last PEP but haven't decided where to put your cash, the choice can be daunting. The key is to decide what you want from a PEP and then find the product that fits your requirement.

In particular, you need to decide whether to risk stock market exposure in return for potentially higher long-term returns, or whether you'd prefer a safer corporate bond PEP with lower long-term returns.

One option is simply to invest in the fund you think will do best in the coming years. But in case you make the wrong decision you need to be able to switch to another fund.

If your manager offers a range of decent funds, transferring PEPs will be cheaper than moving to a fund run by another manager.

Certainly, once you've iden-tified a fund you like, it's worth looking at other funds run by the same company. Look for consistent long-term performance - if your fund is the only one that has done well in recent years, its success might well have been a fluke.

One of the dangers with PEPs is that investors end up backing the companies that shout the loudest. The biggest PEP managers have more to spend on advertising but don't necessarily offer the best products.

Investment Intelligence, an investment research group, publishes figures that show how unit trust managers have performed across all their funds over different time periods. Its latest figures show that Fidelity, Threadneedle, Legal & General and Gartmore, four of the UK's 15 largest unit trust managers, have all posted good performance figures over the last 12 months. However, the perfor-mances of Schroders, M&G and Perpetual, three of the four largest unit trust managers, have slumped over the last couple of years. In response, both Schroders and M&G (just taken over by Prudential) have made high-profile changes to their investment strategies.

Part of the problem is that many large fund managers have house strategies that individual managers must apply. M&G, for example, prides itself on its value style. Managers buy into companies that the market as a whole rates poorly but which M&G believes are fundamentally sound. The idea is to benefit when the market rediscovers these out-of-favour companies.

By contrast, growth investors look for companies they think will grow strongly, irrespective of whether the shares are currently good value. Exponents of this theory include Jupiter.

PEP managers also talk about having top-down and bottom-up approaches. A top-down manager considers which markets and sectors to invest in and then finds the best companies in those areas. A bottom-up manager tries to identify good companies and considers the big picture later.

If you're still confused about picking a PEP manager, you can send for comprehensive literature from discount brokers or talk to an independent financial adviser - though you will have to pay for advice, which is built into the initial charge on a PEP.

If you are happy to buy a PEP from a manager that doesn't offer a wide range of funds, there are several houses with a good reputation. These include Exeter Fund Managers, in particular its Capital Growth fund, and Newton, especially its Income and Higher Income funds.

n For discount brokers see page 8.

David Prosser is personal finance editor of `Investors Chronicle'.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?