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Post by Fletchsmile on Jun 24, 2015 21:09:21 GMT 7
Just like the passive v. active debate, the open ended v. closed decision isn't clear cut. (Actually, sometimes it is. I'm not going to pay a 23.4% premium to NAV to access Lindsell/Train's expertise via their investment trust. If I wanted to put my money with them I'd definitely go the open ended route. The premium is just madness. Not sure I'd pay a 10.2% premium for Woodford's investment trust, either.) Anyway, a few points: (1) Many investment trusts have now started to manage their discount/premium by buying up shares, or issuing new ones. This takes away the problem of widening discounts. (2) If a trust is bought at a discount you're effectively getting more dividend income that if you bought an equivalent unit trust, which is nice. (3) It does appear that more investment trusts are trading at a premium than in the past. Not sure if this is a result of the Retail Distribution Review or not. Some have obviously had their prices driven up by the search for yield (particularly in the infrastructure and property sectors). These I'd be wary of: I don't think the premium is sustainable. (4) Investment trusts are pretty much always sellable. You don't get the problems such as there were with property funds a few years back where investors couldn't exit. Similar problems have afflicted those who invested in the Arch Cru range who have waited years to get a fraction of their money back. (5) By not having to deal with redemptions, investment trusts can hold less cash than funds, cash being a drag on performance. They also don't have the forced sales which are incurred when there's a run on a fund, for example, if the fund manager leaves. Theoretically (and often in practice) an investment trust will perform better than an equivalent unit trust. (6) I'm not so bothered by discounts widening. If a discount goes from 5% to 10% and I'm holding the investment trust for 10 years, then I'm only losing 0.5% a year. And some investment trusts I've held for more than 30 years. Of course, it's more of an issue if you're likely to be a forced seller at some point in the future. (7) I don't particularly like the bid/offer spread on investment trusts, and really don't like paying the 0.5% tax on purchases. (8) Many investment trusts don't communicate particularly well with their holders. Fund managers tend to do a better job with monthly fact sheets and the like. (9) Investment trusts pay their managers less than funds. Does that mean that funds will attract better quality managers than trusts? (10) Investment trusts have to reveal how much the managers and directors have invested in the trust. There's no similar mandatory disclosure for funds. I feel more comfortable when the manager has skin in the game. That's a decent summary of some of the key points. I'd also add: (11) The discount/premium is likely to increase the beta and volatility given a like for like investment trust compared to a unit trust. So can be higher rewards, but higher risk. Often it makes good years better and bad years worse. But (5) Saying an IT will also theoretically perform better than a UT isn't really correct, it often depends on the direction of the market (see (11) above ). Also while there will more likely be a market for an IT as it is based on supply and demand, the question comes up as to at what price people will buy, or perhaps worse, what price people will panic sell at. This can become a vicious circle, as shareholders sell and try and get out at any price, creating a downward spiral. On the other hand with a UT, with some of the property ones involved they simply froze the funds until liquidity resumed. While far from ideal the fact that everyone was in the same boat and couldn't exit did stop an uncontrolled downward spiral, and led to a more orderly resolution and fairer pricing across the board eventually - although people had to wait. While an IT can be more liquid, that's not necessarily good for you in a stampede for the exit. Many years ago I had to help out with East German Investment Trust (EGIT). It was a classic in terms of illiquid investments. The discount widened to over 60% and they tried all sorts of things to narrow it, and failed. Here's an article from 2001, but it's problems went way back before then. Not sure what happened to it in the end. www.trustnet.com/News/Videos/egit-expecting-lse-listing-within-week/12409/No. (6) Isn't accurate as the effect compounds over time and needs to take into account of total cumulative returns not as a % of original cost in discrete years. See this thread: bigmango.boards.net/post/30595/thread how a change from 10% discount to small premium caused the share price to move 50 to 60 percentage points more over a 10 year period than net asset value (NAV). 220% gain in NAV became 280% gain share price. Similarly if it reverses and the discount widens it could cause significant reductions in total returns. Agree on Woodford's IT
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Post by rgs2001uk on Jun 24, 2015 23:51:28 GMT 7
Simplest pick for one single investment would be Neil Woodfords CF Woodford Equity Income fund. Though I suspct you may already own it He has decades of outperforming the UK income sector. Just won best performer on his new fund in his new company, which started about a year ago, and looks like he is continuing where he left off at Invesco Perpetual, where he had couple or decades or so of out performance If you don't want the income paid out in dividends - will yield around 3% -4% in dividends if you select income units - then select the accumulation units bigmango.boards.net/post/28890/threadWould add that I hold it myself, for my mum, brother, sister-in-law, nephew etc and would consider adding it as a core holding for most people who have some form of UK equity portfolio. [Edit: for some reason the links below don't work automatically and don't go to the right page, but do if someone cuts and pastes] www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cf-woodford-equity-income-accumulation www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/cf-woodford-equity-income-accumulation/research Sorry for late reply, just had a quick look at his top 10 holdings, and realised I hold 5 of them, Astra Zeneca will be being sold pretty swiftlty, along with HSBC, they continue to set low targets for themself and continue to meet them. Reminds me of Japan 20 years ago.
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Post by Fletchsmile on Jun 25, 2015 8:41:36 GMT 7
Sorry for late reply, just had a quick look at his top 10 holdings, and realised I hold 5 of them, Astra Zeneca will be being sold pretty swiftlty, along with HSBC, they continue to set low targets for themself and continue to meet them. Reminds me of Japan 20 years ago. Yes I sold most of my Astra Zeneca shares, as I felt the valuation was a bit rich. I left the profits in as a "free ride" though, as it can be useful defensively, plus to keep an eye on (incorrect term really, but highlights the point). Woodford doesn't hold any banks or are you saying you hold? I often look at what he's holding for ideas, comfort checks etc, but to be honest for long term investment holds rather than short/mid-term term opportunities I'd rather stick my money in his funds than pick myself. The only UK banks I've touched since in decades are HSBC and Stan Chart. Holding HSBC and Stan Chart stem from after GFC where I took a punt as valuations were so low and falls overdone. I traded in and out a few times. Don't hold any HSBC now, and only a little Stan Chart. 20 years or so ago I worked for a merchant bank whose parent company got bought out by Lloyds. I was offered a job, but chose to take a redundancy payout instead, as I really didn't want to work there. I also had some share options that were then converted into Lloyds share options. I sold as soon as I could. Even adjusted, I think, the price today is less than when I sold 20 years ago. HSBC is not a long term hold in my book, and the UK banking sector likewise not a long term hold at all - the whole banking industry in the UK is in a mess. HSBC is probably best of a bad bunch of high street banks though. Not to say there aren't trading profits to made and opportunities on the share prices, just I've no desire to invest in the UK banking sector long term, or bother weighing up short to medium term risks - too much hassle and risk.
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Post by Fletchsmile on Jun 25, 2015 13:59:37 GMT 7
Seems like you already have a good selection of UK stock investments rgs. With that in mind you might want to consider Standard Life's UK Equity Unconstrained fund. As the name suggests it's not constrained by any particular investment sector in the UK. So can go wherever the fund manager thinks fit Ed Legget is another great manager. The fund has been running for just under 10 years, and I've held for most of that time. It knocks socks off most UK indices, sectors etc whatever someone picks for UK, if one considers purely returns Attachment DeletedThis and Neil Woodford's fund are my 2 biggest UK stock exposures. Woodford is more conservative in approach, and Ed Legget's fund is more aggressive, as demonstrated by its betas and volatilities. For someone holding longer term and prepared to accept risk, it could add some nice performance. In good years it can really outperform, but in bear markets may well under perform. The extra volatility is why I wouldn't necessarily pick it as first choice. I believe it's better to pick something like Woodford's fund as a core holding first, then add this sort of thing later. But as you already have a lot of UK core exposures it's worth considering. If you look at the top 10 holdings you'll also see quite a difference to Woodford's more conservative approach, which adds a bit more diversification, albeit still within UK, and I think the two funds complement each other nicely. Cheers Fletch
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AyG
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Post by AyG on Jun 25, 2015 14:14:12 GMT 7
With that in mind you might want to consider Standard Life's UK Equity Unconstrained fund. As the name suggests it's not constrained by any particular investment sector in the UK. So can go wherever the fund manager thinks fit Are you a bit concerned that the fund has now hit something like £486 million? Its size makes the "unconstrained" bit a little less practical; it's getting to the size where it's going to struggle to invest in smaller companies. Great past; not so sure about the future.
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Post by Fletchsmile on Jun 25, 2015 15:27:53 GMT 7
With that in mind you might want to consider Standard Life's UK Equity Unconstrained fund. As the name suggests it's not constrained by any particular investment sector in the UK. So can go wherever the fund manager thinks fit Are you a bit concerned that the fund has now hit something like £486 million? Its size makes the "unconstrained" bit a little less practical; it's getting to the size where it's going to struggle to invest in smaller companies. Great past; not so sure about the future. Not at this point. The fund is GBP 1 bn+. The unconstrained just means that it can go where it wants, and isn't bound by any particular metrics on index, weight, size etc. Unlikely they would go all in for smaller companies. Around 1/4 is currently in firms under 1bn market cap. Even a pure small cap fund I wouldn't consider GBP 400 mn +/- as too big. In that space, I hold Marlborough UK MicroCap Growth and Schroder UK Smaller Companies which are around that size, give or take. The micro cap fund invests in even smaller companies and doesn't seem to suffer any ill effects. Both are sector leaders and well ahead of FTSE small companies index. Always worth keeping an eye on though.
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Post by rgs2001uk on Jun 25, 2015 22:05:06 GMT 7
Seems like you already have a good selection of UK stock investments rgs.With that in mind you might want to consider Standard Life's UK Equity Unconstrained fund. As the name suggests it's not constrained by any particular investment sector in the UK. So can go wherever the fund manager thinks fit Ed Legget is another great manager. The fund has been running for just under 10 years, and I've held for most of that time. It knocks socks off most UK indices, sectors etc whatever someone picks for UK, if one considers purely returns This and Neil Woodford's fund are my 2 biggest UK stock exposures. Woodford is more conservative in approach, and Ed Legget's fund is more aggressive, as demonstrated by its betas and volatilities. For someone holding longer term and prepared to accept risk, it could add some nice performance. In good years it can really outperform, but in bear markets may well under perform. The extra volatility is why I wouldn't necessarily pick it as first choice. I believe it's better to pick something like Woodford's fund as a core holding first, then add this sort of thing later. But as you already have a lot of UK core exposures it's worth considering. If you look at the top 10 holdings you'll also see quite a difference to Woodford's more conservative approach, which adds a bit more diversification, albeit still within UK, and I think the two funds complement each other nicely. Cheers Fletch Fletch, heres an extract from a recent conversation with my stockbroker. I enclose an up to date valuation of your portfolio. The Conservatives winning a majority at the General Election came as a surprise to the markets. Although this has removed some uncertainty, I suspect we are going to see a pick-up in volatility over the coming months–there are a number of issues that could easily undermine sentiment such as a Greek exit from the eurozone, slowing growth in China and the possibility of an increase in interest rates in the US. Any setback that we see, however, could prove to be short-lived as the US and the UK economies look to be recovering, whilst mainland Europe is also stabilising. Furthermore, takeover activity has picked up and monetary policy remains accommodative across leading countries. You have an excellent selection of global equity funds providing good spread and diversification as well as providing a good platform for your quality selection of direct equity holdings. Prudential has been a superb stock for your, however, the Chief Executive has left for pastures new believing that he has done all he can with the company and is now seeking new challenges. Perhaps this is the time to harvest some of the fantastic profit from the holding by say selling 350 shares to raise approximately £5,600. Standard Chartered, on the other hand, has not had such a good time. The company recently appointed a new Chief Executive, a former JPMorgan Banker who is now looking to make new appointments to strengthen the top team. Whilst the share price has been lacklustre, I suspect that once the new Chief Executive gets his feet properly under the table the shares will start to show better performance. Third quarter figures from Diageo were somewhat disappointing, suggesting that organic net sales declined by 0.3% in the nine months to end March with volumes down 1.7%. The Chief Executive commented that trading reflected continued tough conditions in emerging markets and subdued consumer demand in developed markets. The performance in Latin America continued to be negatively affected by high inflation and weak local currencies. Additionally the Chinese crackdown on lavish spending and gift-giving, with the aim of stamping out widespread corruption, has led to reduced sales in this part of the world; most luxury goods companies have suffered from the clampdown in luxury spending. The company remains well capitalised and I suspect that spending in China will slowly return to close to the previous levels. In the same sector SAB Miller had better figures and for the time being I am quite happy to hold both these quality companies. Tesco is slowly recovering following the huge profit warnings and the change in management. Food retailing in the UK remains very tough at present, however, Tesco being the dominant retailer will, I believe, continue to improve its offer which should reflect on the share price. Centrica is out of favour on account of the slump in the oil price which has affected its ‘upstream’ business. The pick-up in gas and electricity consumption since the turn of the year has helped offset this a little, but the reduction in the dividend by 30% in order to protect the company’s investment grade credit rating has also been a blow. The company is due to announce a strategic review of the business in the summer and the market will be looking for some signs that the worst is now behind it. Royal Dutch Shell has made a $70bn offer to buy BG Group, the 14th largest M&A transaction ever. This has been agreed and recommended by BG. The deal will see Shell increase its reserves by 25% and production by 20%. Purchasing BG Group’s existing reserves is likely to be both cheaper and easier than Shell embarking on further exploration of its own. For example, BG’s strategically important Australian liquefied natural gas facility cost $20bn alone. The deal will result in Shell becoming the dominant player in LNG, as well as providing a better foothold in Brazil and providing $2.5bn per year in cost synergies. The deal is expected to complete by early 2016, following shareholder and regulatory approval. In conclusion, the only change I would suggest at present is to take some of the very good profit from Prudential by selling 350 shares. With the proceeds, I suggest that you introduce Pearson to the list. Pearson has made good progress in the last year following the completion of a significant restructuring programme. The results should start to feed through over the next 12-18 months as the company becomes more digital, more service driven, and more capable of improving education in faster growing economies. I will NOT be buying Pearson, hence my earlier question of where to park it?
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The Arrow
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Post by The Arrow on Jun 25, 2015 23:13:22 GMT 7
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Post by Fletchsmile on Jun 26, 2015 11:03:46 GMT 7
On Standard Life UK Equity Unconstrained, it seems Ed Legget the fund manager will be leaving. Shame as he's been a very good manager for the fund. In this case I'm less concerned than I usually would be for a fund manager leaving though. The guy taking over ran the fund 2005 - 2008 and outperformed, while Ed Legget ran it 2008 - 2015 and outperformed. Also the way the fund is run, it takes best ideas from a wider team, so is by no means a one man band. As I suggested it above though, thought I should add the recent development ===================================================== Standard Life UK Equity Unconstrained - change of managerKate Marshall | Wed 24 June 2015 It has been announced Ed Legget will step down as manager of the Standard Life UK Equity Unconstrained Fund and leave the investment group. Wesley McCoy will take over management of the fund with immediate effect. Wesley McCoy is currently Investment Director of UK Larger Companies at Standard Life Investments. He originally joined the firm in 1998 and launched the strategy behind the UK Equity Unconstrained Fund in September 2005. He managed the fund from its launch in 2005 until April 2008. Over this time the fund delivered a return of 50.8%*, compared with 22.4% for the FTSE All Share index and 17.9% for the IA UK All Companies sector, although please remember this serves as no guide to future performance. The manager subsequently left the group to pursue charity work and re-joined Standard Life in September 2012. We have decided to maintain this fund's place on the Wealth 150 list of our favourite funds across the major sectors. While we often remove funds from the Wealth 150 following a change in management, we are comfortable with the continuity of this fund's process and philosophy. Wesley McCoy was instrumental in its initial development, while he will also continue to have the support of Standard Life's 15-strong UK Equities team. The fund reflects the best ideas from across the UK team, including Standard Life's Head of Equities David Cummings, a highly experienced UK investor. Therefore, performance is not solely reliant on the fund's lead manager. That said, we view Wesley McCoy as a talented manager of UK equities. He has previously demonstrated an ability to outperform the wider UK market and add value through his stock picking ability, according to our analysis, although there are no guarantees this will be repeated. The UK Equity Unconstrained Fund was previously on the Wealth 150 when he ran the fund and prior to Ed Legget assuming responsibility. We view this as a more adventurous UK fund and it is a concentrated portfolio, which means each holding can have a significant impact on returns; however, this is a higher-risk approach. Exposure to small and medium-sized companies, as well as the potential to use derivatives, also adds further risk. www.hl.co.uk/funds/fund-news-and-investment-ideas/fund-news--and--alerts/standard-life-uk-equity-unconstrained-change-of-manager-2015-06-24
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Post by Fletchsmile on Jun 26, 2015 11:22:27 GMT 7
Fletch, heres an extract from a recent conversation with my stockbroker. I enclose an up to date valuation of your portfolio. The Conservatives winning a majority at the General Election came as a surprise to the markets. Although this has removed some uncertainty, I suspect we are going to see a pick-up in volatility over the coming months–there are a number of issues that could easily undermine sentiment such as a Greek exit from the eurozone, slowing growth in China and the possibility of an increase in interest rates in the US. Any setback that we see, however, could prove to be short-lived as the US and the UK economies look to be recovering, whilst mainland Europe is also stabilising. Furthermore, takeover activity has picked up and monetary policy remains accommodative across leading countries. You have an excellent selection of global equity funds providing good spread and diversification as well as providing a good platform for your quality selection of direct equity holdings. Prudential has been a superb stock for your, however, the Chief Executive has left for pastures new believing that he has done all he can with the company and is now seeking new challenges. Perhaps this is the time to harvest some of the fantastic profit from the holding by say selling 350 shares to raise approximately £5,600. Standard Chartered, on the other hand, has not had such a good time. The company recently appointed a new Chief Executive, a former JPMorgan Banker who is now looking to make new appointments to strengthen the top team. Whilst the share price has been lacklustre, I suspect that once the new Chief Executive gets his feet properly under the table the shares will start to show better performance. Third quarter figures from Diageo were somewhat disappointing, suggesting that organic net sales declined by 0.3% in the nine months to end March with volumes down 1.7%. The Chief Executive commented that trading reflected continued tough conditions in emerging markets and subdued consumer demand in developed markets. The performance in Latin America continued to be negatively affected by high inflation and weak local currencies. Additionally the Chinese crackdown on lavish spending and gift-giving, with the aim of stamping out widespread corruption, has led to reduced sales in this part of the world; most luxury goods companies have suffered from the clampdown in luxury spending. The company remains well capitalised and I suspect that spending in China will slowly return to close to the previous levels. In the same sector SAB Miller had better figures and for the time being I am quite happy to hold both these quality companies. Tesco is slowly recovering following the huge profit warnings and the change in management. Food retailing in the UK remains very tough at present, however, Tesco being the dominant retailer will, I believe, continue to improve its offer which should reflect on the share price. Centrica is out of favour on account of the slump in the oil price which has affected its ‘upstream’ business. The pick-up in gas and electricity consumption since the turn of the year has helped offset this a little, but the reduction in the dividend by 30% in order to protect the company’s investment grade credit rating has also been a blow. The company is due to announce a strategic review of the business in the summer and the market will be looking for some signs that the worst is now behind it. Royal Dutch Shell has made a $70bn offer to buy BG Group, the 14th largest M&A transaction ever. This has been agreed and recommended by BG. The deal will see Shell increase its reserves by 25% and production by 20%. Purchasing BG Group’s existing reserves is likely to be both cheaper and easier than Shell embarking on further exploration of its own. For example, BG’s strategically important Australian liquefied natural gas facility cost $20bn alone. The deal will result in Shell becoming the dominant player in LNG, as well as providing a better foothold in Brazil and providing $2.5bn per year in cost synergies. The deal is expected to complete by early 2016, following shareholder and regulatory approval. In conclusion, the only change I would suggest at present is to take some of the very good profit from Prudential by selling 350 shares. With the proceeds, I suggest that you introduce Pearson to the list. Pearson has made good progress in the last year following the completion of a significant restructuring programme. The results should start to feed through over the next 12-18 months as the company becomes more digital, more service driven, and more capable of improving education in faster growing economies. I will NOT be buying Pearson, hence my earlier question of where to park it? Yes I don't find Pearson attractive either. Centrica, and Diageo don't appeal either. To be honest I don't follow any of these. Tesco and Stan Chart probably wait for a recovery and then consider exiting. I hold some of these, but less than I used to, and see them as recovery plays rather than long term holdings. Stan Chart's issues go much deeper than simply the CEO. Of the other individual shares mentioned, the only one I would add to is RDSA. I like it, hold it and am looking to add more. These days though, I'm holding less and less individual UK shares, as I find it difficult to pick anything that UK really stands out for, whereas other countries seem to have natural strengths. Days gone by I would have said Finance - but that's a mess now in the UK. Europe - I like for insurers and selected manufacturers like BMW/Daimler Australia - banks and resource stocks Singapore - property companies and REITs US - technology UK - ???? So more and more I prefer the likes of Woodford and others like Standard Life to do all the legwork, and take the decisions when it comes to UK. Cheers Fletch
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Post by Fletchsmile on Jun 30, 2015 9:59:36 GMT 7
.. Already hold the usual suspects, Alliance, Monks Witan and Scottish Mortagage. Already hold a spread of blue chip companies. ... I tend to stick with the tried and tested, but am willing to step out of my comfort zone and at least consider something I may have overlooked. ... Had a revisit of some of those investment trusts last night. They've obviously served you well over the years, and some solid stuff. Difficulty at the moment for new money investments is the premiums they trade at. Think I'll keep an eye on them for future though Cheers
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