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Post by Fletchsmile on Oct 17, 2016 16:41:56 GMT 7
I was searching around today for Sterling High Yield Bonds and came across a few for Investment Trusts with fixed income instruments out.
I recognised all the investment trusts names and even own a couple, but have never really given much thought to the corporate bonds they might issue. It struck me that it might be of interest to hold a small portfolio of some of these.
I wonder if anyone has come across them, hold them or has any thoughts, as I know a few people on here hold various investment trusts. Some examples:
Scottish Mortgage Investment Trust
GBP | GB0007837767 | 0783776 Coupon: 14.000% Maturity: 30 September 2020 Price: 147.000
Scottish Mortgage Investment Trust
GBP | GB0007867426 | 0786742 12.000% 30 June 2026 169.000
City of London Investment Trust
GBP | GB0008689522 | 0868952 10.250% 30 April 2020 128.750
Temple Bar Investment Trust
GBP | GB0008826405 | 0882640 9.875% 31 December 2017 111.500
City of London Investment Trust
GBP | GB0008961913 | 0896191 8.500% 31 January 2021 123.500
British Empire Securities & General Trust plc
GBP | GB0001335867 | 0133586 8.125% 2 July 2023 130.000
Edinburgh Investment Trust
GBP | GB0000401033 | 0040103 7.750 % 30 September 2022 128.750
www.hl.co.uk/shares/corporate-bonds-gilts/bond-prices/gbp-bonds?column=coupon&order=desc
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AyG
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Post by AyG on Oct 17, 2016 19:56:24 GMT 7
AFAIK, none of these is a bond - they are all debenture stock, meaning that they are treated as equity in the event of company liquidation, giving rise to a risk premium.
I think you'll find that these are tightly held, and so very illiquid. Just looked up to of them. Neither has traded this month on the LSE.
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AyG
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Post by AyG on Oct 18, 2016 9:26:58 GMT 7
Sort of off topic, but if you're looking for yield, have you looked at the investment trust "Henderson Diversified Income" (HDIV) which invests in a range of fixed income instruments? It has a pretty good yield, currently 5.54%. It's made a positive share price return every year since 2009, and appears to be defensively managed so I would expect it to do relatively well when interest rates start to rise again, as surely they must. I've used it in portfolios I run for friends as a reliable source of retirement income. Total annual dividends (pence/share) since 2008:
2008 2009 2010 2011 2012 2013 2014 2015
8.15 5.35 4.6 4.8 5.0 5.0 5.1 5.1
(2008 included 5 payments, rather than the usual 4.)
Domiciled in Jersey, though they're currently thinking of switching to London following recent tax changes in the UK. This will reduce costs.
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Post by Fletchsmile on Oct 18, 2016 10:51:34 GMT 7
Thanks: Will take a look at HDIV I'm still looking around for fixed income, so related. Total return is a bit lower than I was looking for but still interesying for elsewehere. I was looking at some individual bonds as I like the idea of the fixed maturity and interest rates, so if held to maturity you know exactkly what you're getting - aside from the credit risk that is. For many unit trusts/funds/ITs, although that's where most of my fixed income exposure is, a key disadvantage is the absence of a maturity date and hence the uncertainty around actual returns. I was looking more for HTM. The only GBP corporate bond I hold is Cooperative Group. I took some around 3 years ago after they tanked and all the problems around the bank side of things, which I didn't think would come to fruition. I locked in a nice yield of around 9%+ until 2025 in return for the credit risk. Cheers Fletch  |
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Post by Fletchsmile on Oct 18, 2016 11:09:12 GMT 7
AFAIK, none of these is a bond - they are all debenture stock, meaning that they are treated as equity in the event of company liquidation, giving rise to a risk premium. I think you'll find that these are tightly held, and so very illiquid. Just looked up to of them. Neither has traded this month on the LSE. I haven't started looking into the details around them yet. But if they are debentures they are still regarded as debt instruments, and would rank above equity in the event of a company liquidation.
When I was looking at the issue sizes I was expecting them to be tightly held and as you say illiquid. If holding to maturity I wouldn't be too bothered though.
What I probably need to look into is the terms and conditions/ prospectus at some point. It would seem very unusual to me for an investment trust to go into the liquidation phase. I know of one or two that have in the past like East German Investment Trust (EGIT) but that was investing in old illiquid East German companies which were not listed on exchanges and more akin to venture capital investments that all went pear shaped.
It's more difficult to imagine how City of London or Scottish Mortgage could go into liquidation. I could envsigae how they might miss an interest payment, or have some form of conditional interest patment, hence the need to look deeper. But full liquidation is hard to imagine for an investment trust investing in listed securities.
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Post by Fletchsmile on Oct 18, 2016 12:42:37 GMT 7
Had a quick look at HDIV. Looks a solid performing consistent IT. 3 things I wasn't keen on though: 1) it trades at a premium to NAV - something I hate for ITs, particularly if fixed income. Price seems to have been moving ahead of NAV particularly in the last 12 months or so which makes me a bit more uneasy on the timing 2) charges a performance fee if it beats its hurdle rate. Again I don't mind so much on an equity fund where gains can be very high, but on more limited fixed income seems worse 3) The ongoing charges figure seems high at 1.56% for a fixed income fund www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=AJFM1&univ=TFor some reason Bloomber rejects the ticker when I tried to add it to my watchlist. Not quite sure what that is about. Gives an error message: Invalid ticker [HDIV:LN]: Security not authorizedWill keep it in mind and will look some more at it though. Interesting:) |
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Oct 18, 2016 13:31:23 GMT 7
Had a quick look at HDIV. Looks a solid performing consistent IT. 3 things I wasn't keen on though: 1) it trades at a premium to NAV - something I hate for ITs, particularly if fixed income. Price seems to have been moving ahead of NAV particularly in the last 12 months or so which makes me a bit more uneasy on the timing 2) charges a performance fee if it beats its hurdle rate. Again I don't mind so much on an equity fund where gains can be very high, but on more limited fixed income seems worse 3) The ongoing charges figure seems high at 1.56% for a fixed income fund www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=AJFM1&univ=TFor some reason Bloomber rejects the ticker when I tried to add it to my watchlist. Not quite sure what that is about. Gives an error message: Invalid ticker [HDIV:LN]: Security not authorizedWill keep it in mind and will look some more at it though. Interesting:) (1) Anything which produces a decent yield in this day and age is going to be overpriced thanks to crazy economic policies. 2% doesn't seem too bad to me since you're buying into investments were purchased before the current madness. If you look at Henderson's own fact sheet you'll see they have pretty good discount control, which I like. (2) Agreed. (But don't like it on equity funds, either.) (3) Not sure where you're getting 1.56% for ongoing charges. Henderson's own fact sheet and Morningstar both say 1.1% based upon 2015. Since then they've reduced the management fee, and reduced the cap on the performance fee. Management + performance fees are now capped at 1.2%. (Still higher than I'd like, though.) Same problem with Bloomberg. |
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Post by Fletchsmile on Oct 18, 2016 15:01:11 GMT 7
The OCF of 1.56% was at the link on the factsheet. www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=AJFM1&univ=TMaybe it's a bit more current, compared to the 2015. I ran a comparison to Royal London Sterling Extra Yield Fund, a unit trust I hold. Not really the same composition, but similar objectives to an extent: - Both have comparable 5 year performance at 60%+. Royal London beat it slightly if you compare HDIV's NAV to Royal London. For IT I prefer to look at NAV movements as that is a better reflection of the fund manager's skills than the distorted price by supply and demand. On the price basis HDIV is slightly higher though, mainly because it now trades above its NAV, which UT's can't and which I'm not usually happy with on buying ITs - HDIV is a bit more consistent - Royal London will be more liquid. One problem I often get with smaller ITs is not being abe to buy/ sell quantities I want at reasonable prices - More certainty on pricing for Royal London as a UT on buying and selling based on NAV rather than whims of the market - Royal London's charges on the one I used were 0.8% p.a. so cheaper. Particularly worth noting is there is now an "unbundled class" which I can get for just over 0.4% per annum after rebate. It's only been available 2 years, but if it had been available 5 years back this would have made more of a difference - No initial charge or broeker cost to buy or sell Royal London if buy thru a UK discount broker compared to having to pay broker fees to buy/ sell the IT So all in all similar. If I was buying thru the UK, I'd probably go for Royal London. The significantly lower fees going foward at 0.4%p.a. after rebate + no entry/exit charges + the pricing certainty + liquidity would probably give it the edge However, I can't buy Royal London thru Singapore, so HDIV would be a good alternative to buy from there as an exchange trade instrument. I also like being able to buy/sell exactly the time I want to the minute (assuming the market is liquid) |
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Post by Fletchsmile on Oct 21, 2016 16:31:12 GMT 7
Thanks again for putting this on my radar screen. I've some GBP in Singapore that's sat earning next to nothing in cash, so decided to dip my toes in. It was actually quite liquid and easy to buy small amounts with a tight bid-offer spread. I still begrudge the premium though  Still looking around in the UK though which was the main original objective |
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