HYP1 is 20

[csearle]

Moderator Message:
Guys, the subject is: HYP1 is 20. Could we stick to that in a non-inflammatory way please. Thanks - Chris

[tjh290633]

I know you keep impeccable records for your "tinkered" version of HYP. Do you happen to know what your annualised total return was over the same 20 year time period as HYP1?

I have a note of the period from the end of December 1999, when the FTSE reached its high point, to date, and that tells me 6.14%. I was running at about 13% before that date. My overall IRR is 8.66%.

Slightly contradicting that is my table of IRR from each year end to the present day:

Since        Acc Unit   IRR    
26-Dec-96        3.39     8.33%
01-Jan-98        4.86     7.02%
31-Dec-98        5.89     6.41%
30-Dec-99        6.85     5.96%
31-Dec-00        6.68     6.40%
31-Dec-01        6.43     6.97%
31-Dec-02        5.23     8.62%
31-Dec-03        6.38     7.87%
31-Dec-04        7.59     7.21%
30-Dec-05        9.69     5.96%
31-Dec-06       12.25     4.63%
31-Dec-07       12.41     4.89%
31-Dec-08        7.41     9.98%
31-Dec-09       10.24     7.70%
31-Dec-10       12.32     6.50%
31-Dec-11       13.45     6.20%
31-Dec-12       15.80     4.86%
31-Dec-13       19.56     2.36%
31-Dec-14       20.34     2.08%
31-Dec-15       21.42     1.42%
31-Dec-16       24.37    -1.54%
29-Dec-17       26.70    -5.11%
31-Dec-18       24.06    -2.48%
31-Dec-19       28.84   -22.92%

Current unit value is £22.95

That gives a figure of 5.96%, based purely on the change in accumulation unit value between the date shown and the present day. The other takes into account funds in and withdrawals.

TJH

[Arborbridge]

Even so I cannot imagine anyone in the real world, relying on this HYP for income, to have allowed it to be become so unbalanced.

...and I'm sure the irony isn't lost Dod that a third of that income is now coming from the tobacco industry!

I have commented here before that the real purpose of HYP was to take an old idea, give it a twist (as the tv chefs and bakers are fond of doing), and then sell the book letter (remember £159/year anyone?). Cynical and unfair to pyad perhaps, but a journalist's trade is to provide content after all. But to be fair to pyad for balance, no one in this community has run a HYP as he originally intended. Have they?

How do you know that was the real purpose of HYP. It could just as easily be that Stephen Bland genuinely wanted to share his ideas and only later realised he could launch a newsletter based on what he done on TMF. You've no evidence that it was planned in advance - have you?

Ar.

[Arborbridge]

I've missed much of this conversation, not having turned the PC on over Sunday, but it seems some people are still missing the point of HYP1, or perhaps just enjoy revisiting it each time.

It's an experiement to see what would happen to a non-tinkering, near-enough-pure HYP over a long period of time. To ask for a "pure" HYP when we already have one, or to say that the imbalance is "madness" is all a bit beside the point.
It was set up as an extremely useful example (the only one that I am aware of) to show what would happen. It's up to the individual to take this information and do something with it. I see no point in tetchy disputes about it - it is what it is!

Some posters also seem to have forgotten that HYP is all about income, so comparing with the FTSE100 isn't totally relevant. It's a bit like the FTSE, but focussed on income so one would not expect the TR to be comparable. Of course, some have promoted HYP as a pot builder, but Stephen did not go out of his way to do so - capital was always secondary, and he states this each year in his various remarks. There's not much intellectual prowess in pointing out the TR isn't great when it was never intended to be.

I value HYP1 for what it is: a bold experiment we should all celebrate for the knowledge it gives us. Thank goodness Stephen set it up, and I regret we have only this one example to guide us, for I think his later HYPs would have given us information too in the sense of showing how the universe of pure HYP might differ starting from different times.

Arb.

[dealtn]

It's an experiement to see what would happen to a non-tinkering, near-enough-pure HYP over a long period of time. To ask for a "pure" HYP when we already have one, or to say that the imbalance is "madness" is all a bit beside the point.
It was set up as an extremely useful example (the only one that I am aware of) to show what would happen. It's up to the individual to take this information and do something with it. I see no point in tetchy disputes about it - it is what it is!

I think you need to be aware of the difference though between what "would" happen (in this example) with what "could" happen in others, then, now, and in the future.

It's a single snapshot amongst many possible ones from one moment in time. A very successful one (on most metrics) but still only a single example. The outcome might have been completely different, as is likely to be the case with other potential portfolios going forward. Confirmation bias is so strong some might be mislead.

[Arborbridge]

It's an experiement to see what would happen to a non-tinkering, near-enough-pure HYP over a long period of time. To ask for a "pure" HYP when we already have one, or to say that the imbalance is "madness" is all a bit beside the point.
It was set up as an extremely useful example (the only one that I am aware of) to show what would happen. It's up to the individual to take this information and do something with it. I see no point in tetchy disputes about it - it is what it is!

I think you need to be aware of the difference though between what "would" happen (in this example) with what "could" happen in others, then, now, and in the future.

It's a single snapshot amongst many possible ones from one moment in time. A very successful one (on most metrics) but still only a single example. The outcome might have been completely different, as is likely to be the case with other potential portfolios going forward. Confirmation bias is so strong some might be mislead.

Precisely my own point and why I've always regretted that Pyad didn't continue reporting on the other HYPs. I can understand it would have been quite a burden, but would at least have helped to see the possible variation. I suspect there is a great deal of chance involved related to the date of setup.

At least we do have TJH's tinkering version as a second example, and if I may be so bold, my own tinkering HYP to compare with Terry's over ten years to show that all HYPs are not equal.

Arb.

[idpickering]

I've missed much of this conversation, not having turned the PC on over Sunday, but it seems some people are still missing the point of HYP1, or perhaps just enjoy revisiting it each time.

It's an experiement to see what would happen to a non-tinkering, near-enough-pure HYP over a long period of time. To ask for a "pure" HYP when we already have one, or to say that the imbalance is "madness" is all a bit beside the point.
It was set up as an extremely useful example (the only one that I am aware of) to show what would happen. It's up to the individual to take this information and do something with it. I see no point in tetchy disputes about it - it is what it is!

Some posters also seem to have forgotten that HYP is all about income, so comparing with the FTSE100 isn't totally relevant. It's a bit like the FTSE, but focussed on income so one would not expect the TR to be comparable. Of course, some have promoted HYP as a pot builder, but Stephen did not go out of his way to do so - capital was always secondary, and he states this each year in his various remarks. There's not much intellectual prowess in pointing out the TR isn't great when it was never intended to be.

I value HYP1 for what it is: a bold experiment we should all celebrate for the knowledge it gives us. Thank goodness Stephen set it up, and I regret we have only this one example to guide us, for I think his later HYPs would have given us information too in the sense of showing how the universe of pure HYP might differ starting from different times.

Arb.

Bravo! Well said Arb. It's about time someone said something useful! I was losing the will to live reading this thread over this weekend. It seems some here just don't get it. I think these updates are very helpful and interesting. Long may they continue.

Ian.

[Breelander]

Moderator Message:
Guys, the subject is: HYP1 is 20. Could we stick to that in a non-inflammatory way please. Thanks - Chris

I guess it was for that reason that Itsallaguess started this parallel thread....

I've started a separate thread below that continues to look at the underlying income and capital concentration of HYP1 as it develops over the years -

HYP1 is 20 - thread discussing income and capital diversification -

viewtopic.php?f=15&t=26214

Cheers,

Itsallaguess

...but apparently no one of that inclination has bothered to read the fourth post in this thread.

[pyad]

Even so I cannot imagine anyone in the real world, relying on this HYP for income, to have allowed it to be become so unbalanced.

...and I'm sure the irony isn't lost Dod that a third of that income is now coming from the tobacco industry!

I have commented here before that the real purpose of HYP was to take an old idea, give it a twist (as the tv chefs and bakers are fond of doing), and then sell the book letter (remember £159/year anyone?). Cynical and unfair to pyad perhaps, but a journalist's trade is to provide content after all. But to be fair to pyad for balance, no one in this community has run a HYP as he originally intended. Have they?

How do you know that was the real purpose of HYP. It could just as easily be that Stephen Bland genuinely wanted to share his ideas and only later realised he could launch a newsletter based on what he done on TMF. You've no evidence that it was planned in advance - have you?

Ar.

As you imply, moorfield's suggestion about the "real purpose" of HYP is untrue. When I wrote articles on TMF about the HYP strategy there was no thought of a tipsheet on this subject in either their minds or mine at the time I launched the idea. In fact there never was any purely HYP tipsheet from TMF me during my time there. Thus the "real purpose" was simply writing about investment ideas as you say.

Sometimes, one can be too cynical...

[moorfield]

As you imply, moorfield's suggestion about the "real purpose" of HYP is untrue. When I wrote articles on TMF about the HYP strategy there was no thought of a tipsheet on this subject in either their minds or mine at the time I launched the idea. In fact there never was any purely HYP tipsheet from TMF me during my time there. Thus the "real purpose" was simply writing about investment ideas as you say.

Sometimes, one can be too cynical...

My comment was a little cantankerous and intended to elicit a response - and thank you for that, and recced. And yes I'm afraid I am skeptical of the motives behind much that financial journos and analysts peddle, particularly if they have no skin in their own games. You called some of them The Wise once upon a time I believe. With the RSA takeover imminent I'm looking forward to see what you replace it with next year.

[IanTHughes]

It has proved beyond any further need that a non tinkering HYP is just not realistic.

Can you produce that proof?


Ian

[Bubblesofearth]

All the talk about comparing the outcome with the FTSE100 or anything else is I think irrelevant. That depends of course on the original purpose of tracking a non tinkering HYP over 20 years. The overriding outcome to me is that it is now so unbalanced as to be absurd as I have already said and no one would allow it to get into such a position in real life.

Dod

Just a quick comment to let you know that you are wrong. I am personally aware of at least one bespoke portfolio managed by a well-known investment house that has taken exactly this strategy with that portion (just north of 40%) of the funds allocated to UK shares. The fund is actually older than HYP1 and the degree of imbalance even greater. Interestingly only 13 UK shares are held, all taken from the FTSE100. Biggest casualties, not surprisingly, have been the two bank shares. but this has more than been made up for by holdings in the likes of ULVR and DGE. The portfolio overall has done significantly better than the FTSE100 index, both for income and capital value.

Until you or someone else can produce a real World example of an equal weight on purchase long-term buy and hold portfolio of 15 or so shares that has done significantly worse than the index from which it is taken then I would suggest any criticism of the approach is questionable at best.

BoE

[Dod101]

All the talk about comparing the outcome with the FTSE100 or anything else is I think irrelevant. That depends of course on the original purpose of tracking a non tinkering HYP over 20 years. The overriding outcome to me is that it is now so unbalanced as to be absurd as I have already said and no one would allow it to get into such a position in real life.

Dod

Just a quick comment to let you know that you are wrong. I am personally aware of at least one bespoke portfolio managed by a well-known investment house that has taken exactly this strategy with that portion (just north of 40%) of the funds allocated to UK shares. The fund is actually older than HYP1 and the degree of imbalance even greater. Interestingly only 13 UK shares are held, all taken from the FTSE100. Biggest casualties, not surprisingly, have been the two bank shares. but this has more than been made up for by holdings in the likes of ULVR and DGE. The portfolio overall has done significantly better than the FTSE100 index, both for income and capital value.

Until you or someone else can produce a real World example of an equal weight on purchase long-term buy and hold portfolio of 15 or so shares that has done significantly worse than the index from which it is taken then I would suggest any criticism of the approach is questionable at best.

I do not mind being called wrong if you have some evidence to prove that that is so, but since I am simply voicing my opinion, I do not think it is a matter of right or wrong. I am entitled to my views and just because some investment house has taken the strategy which I am criticising that does not of itself make it right. HYP is an income strategy and whilst Unilever and Diageo are good shares (in my opinion) they are not known as being particularly attractive as income shares so far as I know. Not sure of the point you are making?

Dod

[Bubblesofearth]

Dod

I do not mind being called wrong if you have some evidence to prove that that is so, but since I am simply voicing my opinion, I do not think it is a matter of right or wrong.

Dod

You said;

"The overriding outcome to me is that it is now so unbalanced as to be absurd as I have already said and no one would allow it to get into such a position in real life."

I know of at least one real life example which makes your statement wrong. Maybe if you had said "IMO no one would allow..." but you didn't, you stated it as a matter of fact.

The main point I am making is that we have evidence that the strategy observed by HYP1 can work to deliver a better overall performance than the underlying index. There is no evidence that I'm aware of to the contrary.

Most people in the World of finance would see that sort of performance as very good.

BoE

[Dod101]

Dod

I do not mind being called wrong if you have some evidence to prove that that is so, but since I am simply voicing my opinion, I do not think it is a matter of right or wrong.

Dod

You said;

"The overriding outcome to me is that it is now so unbalanced as to be absurd as I have already said and no one would allow it to get into such a position in real life."

I know of at least one real life example which makes your statement wrong. Maybe if you had said "IMO no one would allow..." but you didn't, you stated it as a matter of fact.

The main point I am making is that we have evidence that the strategy observed by HYP1 can work to deliver a better overall performance than the underlying index. There is no evidence that I'm aware of to the contrary.

Most people in the World of finance would see that sort of performance as very good.

BoE

Thanks BoE. You have now clarified your point. OK, so in my opinion if there are others who in real life follow this strategy I would not want to put my funds with them.

As an income strategy it may be delivering on the income but surely no one would argue that it is a high risk strategy to rely on so few shares to produce most of that income.

Dod

[Lootman]

I am personally aware of at least one bespoke portfolio managed by a well-known investment house that has taken exactly this strategy with that portion (just north of 40%) of the funds allocated to UK shares. The fund is actually older than HYP1 and the degree of imbalance even greater. Interestingly only 13 UK shares are held, all taken from the FTSE100. Biggest casualties, not surprisingly, have been the two bank shares. but this has more than been made up for by holdings in the likes of ULVR and DGE. The portfolio overall has done significantly better than the FTSE100 index, both for income and capital value.

And the name of this fund is . . . ?

[idpickering]

And the name of this fund is . . . ?

Off topic for this board whatever it's called!

Ian.

[Wizard]

I am personally aware of at least one bespoke portfolio managed by a well-known investment house that has taken exactly this strategy with that portion (just north of 40%) of the funds allocated to UK shares. The fund is actually older than HYP1 and the degree of imbalance even greater. Interestingly only 13 UK shares are held, all taken from the FTSE100. Biggest casualties, not surprisingly, have been the two bank shares. but this has more than been made up for by holdings in the likes of ULVR and DGE. The portfolio overall has done significantly better than the FTSE100 index, both for income and capital value.

And the name of this fund is . . . ?

I would also be interested to know which fund it is. I do not see this as off topic, as it is not about investing in that fund but rather understanding how it is run as part of the discussion of HYP1.

[Bubblesofearth]

I would also be interested to know which fund it is. I do not see this as off topic, as it is not about investing in that fund but rather understanding how it is run as part of the discussion of HYP1.

It's a bespoke portfolio run for a client of Brewin Dolphin. I would assume they run portfolios along similar lines for other clients although I don't have the same sort of direct evidence for this. For obvious reasons I cannot reveal the name of the client.

BoE

[moorfield]

I would also be interested to know which fund it is. I do not see this as off topic, as it is not about investing in that fund but rather understanding how it is run as part of the discussion of HYP1.

It's a bespoke portfolio run for a client of Brewin Dolphin. I would assume they run portfolios along similar lines for other clients although I don't have the same sort of direct evidence for this. For obvious reasons I cannot reveal the name of the client.

BoE

On the other hand Brewin Dolphin itself is on topic, has continued to pay its dividend through the pandemic, and has been a new holding for me this year.