We’ve recently updated the change allocation process so we thought it was a good opportunity to write a blog to describe how changing allocations works and why we’ve made the change.
Changing allocations
With Beanstalk, you can choose to split your investments between two funds: the Fidelity Index World fund, which aims to track the MSCI World index (an index which follows the performance of large and mid cap businesses across 23 developed market countries); and the Legal & General Cash Trust fund, which aims to provide returns in line with money market rates.
Your contributions are allocated to buying the two funds according to the split you set when you apply and you can change this allocation through the app after the account is opened. To do so click on “manage” on the account you would like to change and you will find the change allocation button at the bottom of the account screen.
Both funds that we offer are priced based on the value of their underlying holdings and only calculate and publish a price once each working day. This is known as a valuation point and it is at noon each day. When you change your allocation, trades are normally created for the next day’s valuation point to adjust your existing holdings to your new allocation as well as changing how your contributions are invested going forward.
For example: if your existing holdings are 90% by value in one fund and 10% in the other, moving your allocation to 50:50 will result in selling one fund and buying the other so that you end up with 50:50.
Because a change in allocation involves selling units of one fund and then buying units of the other fund and the purchase can only be made once the funds are available from the sale, changing allocations can take several days to complete. It is important to be aware therefore that if you trigger an allocation change while a previous one is still in process, then it will not be implemented by the Custodian until after all the trades related to the first allocation change are completed. Similarly if you request an allocation change while another trade is underway (such as a sale to meet a withdrawal request), then the allocation change may be delayed by a day or two to avoid conflicting trades occurring.
100% allocations to L&G Cash Trust
allocations
The L&G Cash Trust invests in lower risk, lower return investments such as short term deposits, government bonds and similar in order to provide returns in line with money markets funds. The returns from a portfolio which is 100% invested in the L&G Cash Trust may be lower than putting money into a cash ISA or JISA with a bank or building society. If someone planned to invest for multiple years solely into the L&G Cash Trust, then they might be better off contributing to a cash ISA/JISA. It was for this reason that we did not offer an allocation choice which was more than 80% into the L&G fund.
However we recognise that there may be times when investors want to allocate all their funds to the low risk fund. This could be if your child is approaching 18 and you want to ensure that the value does not fall just before maturity; it could also be if you are planning to withdraw some cash from your ISA in the near term and want to lock in the value. We have therefore made the decision to allow higher percentage allocations to the Cash Trust fund.