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Post by rgs2001uk on Dec 13, 2017 20:33:24 GMT 7
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Post by rgs2001uk on Dec 13, 2017 22:50:37 GMT 7
Spoke to stockbroker about 1 hour ago, mentioned what to offload and what to buy,
I put my money where my mouth was,
Here is an edited reply,
Thank you for your email.
I will go ahead with the transactions immediately and contract notes to confirm will follow by email in due course.
Once you have firmed up your dates for next year, we can arrange a time to meet.
Enjoy your weekend!
Kind regards
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Post by rgs2001uk on Dec 13, 2017 22:54:58 GMT 7
^^^ forgot to mention, after the above were sold, I also pumped another 10k into Witan.
ITs, if you cant beat them join them.
PS make sure to look at their top 10% holdings, as mentioned before by AyG, check out their Tech sector, another, dot com boom waiting to burst?
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chiangmai
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Post by chiangmai on Dec 14, 2017 6:57:58 GMT 7
I hold different instruments for different reasons, I think it comes back to what AyG was trying to instil in my head about core holdings. I have about five core key equity funds which span the international arena and they produce most of the growth, (Lindsell Train Global, Fundsmith, Baillie Gifford Int., Smith & Williamson Far Eastern, Fidelity Asia), one of which is higher risk than I might normally want but that's OK because it's limited. There might appear to be a duplication of coverage in that list but in fact they all provide something slightly different.
I then have a series of less risky plodders that are quite reliable and produce growth/income at a lower but consistent level.
Thirdly is a couple of holdings that are fall back funds, typically these are bond funds that produce low rates of growth but they fall much less than the others when markets go wonky. And since I don't need the income I have tried to go for growth in most cases, Henderson was a fund that was designed to be in category three above and the divi. was aimed at paying my platform fees. It hasn't quite worked out that way and since they have now cut the divi rate, I may reduce the holding in favour of something more useful.
Trying to keep the balance of global coverage by country, asset class, the category of asset (as in the above)) and level of asset risk, is quite difficult which means a tweak here or there means restricting the choice of replacement fund for fear of changing the required balance. For example, my pension fund is 60/40 equities and is spread globally to the desired level, (lower UK because of Brexit, lower US because of valuations, etc) and my risk allocations are (bearing in mind it's a pension fund) -
Hi. 0% Ab. Av. 9% Average 62% Bel. Av. 27% Low 2%
So making a change in one area means that all areas have to be considered and can be quite challenging.
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AyG
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Post by AyG on Dec 14, 2017 8:37:17 GMT 7
Thirdly is a couple of holdings that are fall back funds, typically these are bond funds that produce low rates of growth but they fall much less than the others when markets go wonky. The concept of fallback funds is great. However, I don't think bond funds are the right way to implement, particularly in the current environment*. When interest rates rise (and they must - they can't fall further) bond values fall. Paul Singer [Elliott] said last year he regards the global bond market as “broken” and expects price falls when they come to be “surprising, sudden, intense, and large” and that investors were now facing "the biggest bond bubble in world history". See www.telegraph.co.uk/investing/bonds/us-hedge-fund-giant-warns-of-biggest-bond-bubble-in-history/For me, I implement this with funds which (a) are specifically managed to minimise losses, and (b) allow the fund manager to move between asset classes according to his/her take on the economic environment. One such fund I hold is Personal Assets (PNL). It's investment policy is “to protect and increase (in that order) the value of shareholders' funds per share over the long term”. Investments are currently spread across equities, index linked government bonds (US and UK), gold bullion and cash equivalents. It ticks both boxes, plus it's an investment trust which means there can't be distortions of the investment policy caused by forced selling upon redemptions. I also hold Ruffer (RICA) in the same role. Ruffer also runs an OEIC with the same strategy, Ruffer Total Return, which I used to hold. RIT Capital Partners (RIT) has a similar defensive approach, using multiple asset classes. However, it's currently trading at a 7.8% premium. It also includes some opaque asset classes such as absolute return, so it's not for me. * Very short term bonds (say, maturity < 3 months) aren't as vulnerable to interest rate rises. However, the returns are nugatory, and certainly won't keep up with inflation. Sometimes useful as a short term parking place for cash, but not as a long term holding.
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chiangmai
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Post by chiangmai on Dec 14, 2017 11:11:27 GMT 7
Thirdly is a couple of holdings that are fall back funds, typically these are bond funds that produce low rates of growth but they fall much less than the others when markets go wonky. The concept of fallback funds is great. However, I don't think bond funds are the right way to implement, particularly in the current environment*. When interest rates rise (and they must - they can't fall further) bond values fall. Paul Singer [Elliott] said last year he regards the global bond market as “broken” and expects price falls when they come to be “surprising, sudden, intense, and large” and that investors were now facing "the biggest bond bubble in world history". See www.telegraph.co.uk/investing/bonds/us-hedge-fund-giant-warns-of-biggest-bond-bubble-in-history/For me, I implement this with funds which (a) are specifically managed to minimise losses, and (b) allow the fund manager to move between asset classes according to his/her take on the economic environment. One such fund I hold is Personal Assets (PNL). It's investment policy is “to protect and increase (in that order) the value of shareholders' funds per share over the long term”. Investments are currently spread across equities, index linked government bonds (US and UK), gold bullion and cash equivalents. It ticks both boxes, plus it's an investment trust which means there can't be distortions of the investment policy caused by forced selling upon redemptions. I also hold Ruffer (RICA) in the same role. Ruffer also runs an OEIC with the same strategy, Ruffer Total Return, which I used to hold. RIT Capital Partners (RIT) has a similar defensive approach, using multiple asset classes. However, it's currently trading at a 7.8% premium. It also includes some opaque asset classes such as absolute return, so it's not for me. * Very short term bonds (say, maturity < 3 months) aren't as vulnerable to interest rate rises. However, the returns are nugatory, and certainly won't keep up with inflation. Sometimes useful as a short term parking place for cash, but not as a long term holding. I do agree with what you've written and if it's any consolation I have changed my view substantially on bonds since I first started this project. I hold index-linked gilts, my one concession to my inherited legacy funds, I also hold short duration bond funds in that third category also, Twenty Four Dynamic Bond Fund being one of them - oh yes, I've also increased my cash holdings within the portfolio to 10% although I can't bring myself to consider gold. But I will take a look at PNL and Ruffer so thank you for the pointer.
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AyG
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Post by AyG on Dec 14, 2017 11:18:31 GMT 7
Incidentally, if you prefer unit trusts, Troy Trojan is very similar to PNL - same fund manager (Sebastian Lyon) and similar remit.
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Post by Fletchsmile on Dec 14, 2017 12:32:03 GMT 7
rgs: you're into IT's can I ask why? Compared to OEIC's/UT's I can only see the downside which is the potential problem encountered when trying to sell (NAV movement, discounts/premium to NAV & volume), what am I missing? (1) For problems with trying to sell, it's funds that can stop you selling. You can always sell an investment trust. I've been waiting since 2009 to get the money back from an Arch Cru fund, and it looks like the process will take another 2 years or so. Similarly, I've been waiting since 2015 to get money back from Aviva Asia Pacific Property fund. (2) NAV movements aren't really an issue. Perhaps they'll vary over a range of 10%, but if you hold for the long term, then the percent per year change is negligible. (3) Many investment trusts actively manage their discount by issuing more shares and/or buying shares back, either into treasury or cancelling them. The main advantages of investment trusts are: (1) The manager can't be forced to sell investments. (Unit trust managers have to do this when there are redemptions.) This means they can take a longer term view with their investments. (2) Investment trusts can use leverage, so improving investment returns. (3) When bought at a discount to NAV, one gets more dividend than one would from an equivalent unit trust. (4) Charges generally are low. (5) Performance is generally better than an equivalent unit trust in the same sector. * Theoretically an investment trust could have its listing on the LSE suspended. I can't recall that ever having happened - and certainly not with a mainstream trust. Above summarises some of the main points. On the disadvantages I'd add though: (1) While unit trusts may stop you selling, it's rare. Property and other illiquid unit trust funds are the most common for unit trusts and even then not so common. If you stay away from Property funds you'd largely elimintae the problem On the other hand it's much more common in investments trusts not to be able to get decent prices, low levels of liquidity, wide bid-offer spreads. If you invest a few hundred or few thousand pounds you're OK. But for many of the smaller funds try selling tens of thousands of pounds and you can frequently get issues (2) I would disagree with this. NAVs can be a large issue. Thinking only about the reduction in current NAV is way oversimplified. You need to think not only about the current NAV. There are much deeper implications. The effect vs what you paid can also be much more than 10%. In recent years discounts have narrowed and significantly enhanced returns vs unit trust peers based more on NAV. eg buy at 100. - IT goes up 5 times to 500. Discount widens 10%. You lose 50. Your gain is now only 4.5 times. 50 is also half your original cost - A unit trust goes up to 500. No discount to widen. Your gain remains 5 times. If you are taking "income" from your portfolio via selling units, a discount widening at the wrong time can really compound in a negative way eg market crashes: - IT goes from 100 to 50. Discount widens to 10%. You now have 45. You take out your 5 for living and have 40 - UT goes from 100 to 50. You take out your 5 for living and have 45. IT now needs to gain 2.5 times to get back to 100, but UT only needs to gain 2.22 times. A much higher hurdle rate To mitigate this for ITs you might hold a larger cash reserve, to ride things out compared to UTs. But don't forget a larger cash reserve comes with higher cost Another disadvantage of this is the distortion when comparing funds. Regularly people compare the share price of an IT to the performance (NAV) of a unit trust. This is highly misleading and can lead to wrong decisions. You need to compare NAV movements. Narrowing and widening of discounts do not continue sustainably in the same direction. eg if narrows from 10 discount to par, it is unilkely to go to a 10% premium in the next period While if you assume a random walk the discount movements may average out over time. Aberdeen New Thai IT highlighted the problem in their annual reports of large unpredictable swings within a single year. If you're aiming for 7% gains and taking out 4%, then a 10% negative shift in discount is a pain What this also totally overlooks though is that it is not usually a random walk. Discounts usually widen after crashes, compounding falls, and usually narrow in bull markets enhancing gains. So with a like for like portfolio compared to a UT, the volatility of the IT share price will be much higher for an identical portfolio mix to a UT based on NAV In the example above of a market crash, it shows the numerical impact. What also happens is liquidity can dry up too as there are more sellers wanting to get out than buyers. So the spreads widen and perhaps even the discount widens further. In short for a IT compared to a UT during a market crash you can end up with a triple whammy of 1) market crash + 2) discount widens causing a further share price fall 3) spread widens/ no-one really wants to buy so lack of liquidity for selling In contrast a unit trust often suffers only the first one So someone really needs to look at the timing of these things. They are not random and don't necessarily even out if you are adding or withdrawing money. If you buy a UT you have the certainty (avoiding property funds) of selling when you want at NAV. For a IT it may be NAV +/- 10% On the disadvantages: (1) Unit trust managers do not necessarily have to sell when there are redemptions. Often they will use a "managers box", which is like a "float" of units. This means they don't have to create units every time someone buys or cancel units every time someone sells. In periods of heavy sales though it will be true they may need to sell proportions of holdings, possibly incurring additional cost. On the other hand though, conversely, in times of new money coming in the UT may have an advantage over the IT. If the UT wants to make a new investment it may have a steady inflow of funds to do so, and simply buys. If an IT wants to make that same new investment, it would likely first have to sell another investment. This incurs two transaction costs, sell the old, buy the new, compared to just buy the new for the UT. (3) On getting more dividend for your money, this is often true. However, - If the IT trades at a premium conversely you get less dividend for your money. This is less of an issue though as most ITs trade at a discount - Rarely mentioned is that charges are based on NAV not share price. So your charges are actually higher in % terms just like the dividend is higher in % terms. Often the gain on dividend in % terms will outweigh the higher charge in % terms, but for a non-dividend paying IT it is a pure disadvantage. eg NAV 100. Discount 20. Share price 80. You pay charges based on 100 not 80 (5) Performance is a moot point. If you are looking at the last 10 years I would expect ITs to outperform due to the bull market. Discounts narrowing will enhance returns. Look at a bear market though and it will swing towards UTs. People need to measure NAV changes, but this is often not done in analysis. ITs will have an advantage though due to lower cost. All in all ITs can be a useful vehicle compared to UTs. I use both In my view ITs are more suited to more experienced investors though, and one really needs to understand the deeper points, such as those I've mentioned. There's also more admin and monitoring needed for ITs as they have more varied corporate actions There are also points in the cycles I would generally prefer UTs to ITs and vice-versa. eg after a crash you can go bargain hunting in ITs because of widened discounts that will enhance your returns when they narrow. On the other hand beware the end of bull markets where discounts have narrowed substantially or premiums been created, otherwise you're setting up for a triple whammy of crash + widening discount + no-one wanting to buy
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Post by Fletchsmile on Dec 14, 2017 15:57:15 GMT 7
Just a bit more on ITs vs UTs (I lost my internet connection earlier during a power cut from the rain ![LOL](//storage.proboards.com/6207754/images/7WqwXnsEcase2oKDoa3y.png) ) and my own reasons for chosing also depend on where I'm buying from In the UK: I tend more towards UTs. - There is a much wider range of UTS than ITs - Also a lot of the basic theory about UTs vs ITs has been written years back and gets perpetuated. On charges for example it was often written before the advent on single pricing/ OEICS and loyalty rebates. If you take Woodford Income as an example: 1) It is single priced. An advantage over ITs which have a bid offer spread. 2)There is no initial charge as it is rebated back to you. So you get in for zero cost compared to an IT which will incur a brokerage charge plus bid-offer spread 3) If you compare to EDIN (Edinburgh Investment Trust) with a similar focus, that also used to be run by Neil Woodford, In addition to Woodford having no initial charge, EDIN has an annual TER of 0.57%, but Woodford is a bit higher at 0.75%. However this is reduced further to 0.6% after discount (You can't get discounts on ITs), so they are pretty similar, except Woodford has no initial charges. So these days it is not necessarily the case that ITs are cheaper if you shop around and you take into account loyalty bonuses, rebates etc. Headline rates may show ITs cheaper, but you need to look at the full picture including rebates 2) In Singapore I tend towards buying UK ITs rather than local Singaporean UTs - There is a wider ranger of ITs available - ITS are generally cheaper than unit trusts. the Singapore market hasn't evolved as far as the UK in terms of charges, discounted fees and rebates on unit trusts but 2 areas for me at least where my Singapore unit trusts have advantages other than those already mentioned in posts above i) I can borrow against qualifying Singapore unit trusts at a rate based on Sibor. This means I can leverage and/or have additional liquidity. I can borrow up to 70% of the value, at a current cost of around SGD 2%. My decision when to leverage or not, unlike an IT. Also ITs generally don't leverage more than about 10% if at all ii) there are sometimes SGD hedged versions of funds. This can be useful sometimes. SGD has much less FX risk in relation to THB than GBP does, and the correlation is much stronger. There are some funds I own, which I feel are a bit too US and USD focused. So in a year like this one while USD returns are Ok, once you translate back to SGD (or THB) they are much less attractive 3) In Thailand I tend towards UTS simply because it's not easy or doesn't make sense to buy UK ITs thru a Thai intermediary Even though: - The range of funds in Thailand is much more limited than the range of ITs - Charges are generally higher on Thai UTs than UK ITs The main advantage of Thai unit trusts/mutual funds for us over ITs though are: i) You can get tax relief on Thai RMFs/LTFs - a massive advantage if applicable ii) For Thai equities, the best funds are located in Thailand. There are very few Thai only focused ITs, and their performance is much less consistent than local funds, plus no wide fluctuations on NAV vs share price, plus the volumes and liquidity are there iii) They are more convenient for smaller regular savings amounts (kids) and simpler to manage for my wife. While I can do transact via UK and Singapore, my wife couldn't and going local is much more convenient, even though the product itself may be inferior in Thailand (with the exception of LTFs/RMFs and Thai equities). Also don't overlook the charges of moving money between countries, admin, tax time etc iv) There's then th odd fund like TMB Property Income Fund where I can't get anything similar in focus in a UK IT. But this type of exception is few and far between
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Post by Fletchsmile on Dec 14, 2017 16:40:59 GMT 7
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chiangmai
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Post by chiangmai on Dec 14, 2017 16:55:40 GMT 7
Is there a simple or easy way to assess the risk of an IT? Most UT's and OEIC's are rated independently by various bodies so their overall risk rating is quite easy to identify, unless I've missed something, that's not the case with IT's.
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AyG
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Post by AyG on Dec 14, 2017 17:10:53 GMT 7
Deleted. Need more time to think.
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Post by Fletchsmile on Dec 15, 2017 15:44:16 GMT 7
Is there a simple or easy way to assess the risk of an IT? Most UT's and OEIC's are rated independently by various bodies so their overall risk rating is quite easy to identify, unless I've missed something, that's not the case with IT's. Trustnet has similar info for both unit trusts and investment trusts and is quite good. You can look at various sectors, managers etc, as well as drill down into an individual IT. Shows various analysis and ratios like volatility, and their own FE score which rates risk relative to FTSE100 eg Witan www2.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITWTAN&univ=TUnder the performance section you can also see how the discount to NAV has been moving. For example: - Over 5 years NAV has increased by 112.8%, but share price has increased by 137.7%. That's around 25% points extra and would make a big difference to returns. This highlights how someone thinking there return might be only around +/-10% different and even out in the long run may get a very pleasant surprise. On the other hand, they could also have received 25% less had it gone the other way ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) - In 2016 share price gained only around 18.4% compared to 23.2% on NAV; but in 2013 and 2014 the share price gained around 8% more in both years than NAV - In the last 5 years it's swung from a 13% discount to NAV up to 2% premium. A swing of 15 ppts
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AyG
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Post by AyG on Dec 15, 2017 16:54:18 GMT 7
- In the last 5 years it's swung from a 13% discount to NAV up to 2% premium. A swing of 15 ppts I think you're being a tad disingenuous here. Witan introduced a discount control policy of buying back its own shares. This is what has primarily accounted for the "swing" (along with the trust's popularity because of rather good performance). So, it's not really a "swing", it's a one off adjustment. Going forward the discount to NAV is going to hover around zero, making it more like a unit trust with benefits. I think investment trusts can broadly be categorised into three groups: (1) Those with strong discount control, which will always trade around par. (2) Those which don't have discount control, and typically trade at a significant discount (meaning enhanced dividends for the investor). (3) Those which don't have discount control, and trade at crazy premia to NAV. Most of the ITs in this category are income-oriented, and are often involved in infrastructure*. Some are simply "fashionable" (e.g. Lindsell Train). It's important for the investor to understand which category a potential investment falls into. * That said, HICL and John Laing, both of which I've looked at in the past, have seen their premia reduce quite dramatically over the last 12 months. They're almost buyable again. I'll be keeping my eye on them. 3i Infrastructure, however, is at a crazy 39% premium. It yields 3.9%.
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Post by Fletchsmile on Dec 15, 2017 17:59:32 GMT 7
I'd disagree that the discount control policy is the primary driver for Witan's narrowing - Though there's no decent way to quantify it, and split out what is attributable to buy backs and what to other factors. It's probably had some impact, but unlikely to be the main factor. Over the years I've also seen many of these policies for different ITs prove to be ineffective. I doubt that when the markets turn negative it will be hovering around zero. When the markets next crash I expect it to move to a discount. Any buy backs will be a trickle in comparison to a market upheaval. If you look at the IT Global sector, most of the 23 listed have higher movements in their share price over the last 5 years compared to their NAV, which highlights that a sizeable chunk of the swing is due to the market factors generally and not specific to Witan. www.trustnet.com/fund/price-performance/t/investment-trusts?tab=fundOverview&pageSize=50§or=T%253AIGThere's also plenty of articles around saying how ITs generally are trading at close to all time lows in terms of discount. e.g. www.ft.com/content/19fa0508-ba6d-11e7-bff8-f9946607a6baSo while it might be worthwhile being mindful of ITs with discount control policies and categorising them, and while Witan's actions may have helped, in reality there are other much larger driving factors.
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