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Property plus Loans and Bonds IT's

Including Financial Independence and Retiring Early (FIRE)
Mort
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Property plus Loans and Bonds IT's

#438516

Postby Mort » August 30th, 2021, 9:59 pm

I retired in 2019 and have not yet taken my pension living off cash from the sale of a building. I have a SIPP with AJB and I am now researching my holdings to suit drawdown.

Within my SIPP I have never invested in property but, in my research, I noticed from an AIC blog on 'Dividend hero investment companies' 1 June 2021. They listed some IT's that I knew of and others that looked attractive in high yield terms, such as:

Value and Indexed Property Income : Property - UK Commercial : 33yrs div increase : Div Yield 5.7%
CQS New City High Yield : Debt - Loans and Bonds : 12 yrs div increase : Div Yield 8.2%

I would like to include such IT's to provide diversity from the share based holdings in my portfolio. The dividends look particularly attractive which leads me to think there must be a downside. As property and debt are new areas for me I wondered if others have experience of like investments.

Regards,
Mort.

Hariseldon58
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Re: Property plus Loans and Bonds IT's

#438987

Postby Hariseldon58 » September 1st, 2021, 5:36 pm

Value and Indexed property used to be called Value and Income, I have held it on and off, occasionally ( presently off) over 30 years, it’s had major changes recently. It has times when it falls to significant discounts, this can offer opportunities to trade the discount. I’d visit their website and read the literature, I personally would not choose to hold it long term as a buy and hold.

Charlottesquare
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Re: Property plus Loans and Bonds IT's

#439091

Postby Charlottesquare » September 1st, 2021, 9:59 pm

Mort wrote:I retired in 2019 and have not yet taken my pension living off cash from the sale of a building. I have a SIPP with AJB and I am now researching my holdings to suit drawdown.

Within my SIPP I have never invested in property but, in my research, I noticed from an AIC blog on 'Dividend hero investment companies' 1 June 2021. They listed some IT's that I knew of and others that looked attractive in high yield terms, such as:

Value and Indexed Property Income : Property - UK Commercial : 33yrs div increase : Div Yield 5.7%
CQS New City High Yield : Debt - Loans and Bonds : 12 yrs div increase : Div Yield 8.2%

I would like to include such IT's to provide diversity from the share based holdings in my portfolio. The dividends look particularly attractive which leads me to think there must be a downside. As property and debt are new areas for me I wondered if others have experience of like investments.

Regards,
Mort.


The downside is uncertainties re UK commercial Property (and elsewhere in the world), high street retail has suffered during Covid and online retail has grown faster than before and this is coupled with uncertainty re office demand as more employers adopt hybrid working from office and home which will very possibly lead to a drop in desk numbers and demand for space, these have thrown a pall over these two stalwart sectors (leisure could also prove fragile)

It is not all bad news, logistics warehouses and distribution centres have seen decent price growth ,the niche ITs re these are showing much lower yields and good gains with increased tenant demand, retail parks are starting to look at being hybrid retail/residential, but the fear is that the new world will not just be the pre covid world dusted down.

So the high yields on offer are maybe not long term sustainable, who knows the truth, I personally am warehouse etc IT invested rather than more traditional commercial property beasts because right now (especially with furlough unwinding at month end) I am nervous- of course I could be being overcautious but maybe I am merely being prudent, time will tell.

Shelford
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Re: Property plus Loans and Bonds IT's

#439401

Postby Shelford » September 3rd, 2021, 9:47 am

I have held CQS for about 8 years. As the record states, it has paid consistently, including last year. For what it's worth.

The high yield (currently north of 7%) is a red flag, and you are therefore wise to be wary. One way to mitigate this of course is to have a mix of property/Fixed income trusts. My rule of thumb is not to have more than 5% of my portfolio in any investment. Currently the biggest is around 3%.

Your question though is a sensible one, which is what is an appropriate allocation mix for newly retired. I am in the same position as you in terms of not taking my pension yet but living off savings/part-time earnings, and am roughly in 60:40 equities: fixed income. The former percentage is a bit high for comfort (though this is mitigated by a decent cash cushion of 2 years income), so I am also looking to balance out my equity portfolio income to 50:50 over next 2 years.

Other ITs you might take a look at (all in my portfolio for at least 3 years, some much longer). All have pros and cons - DYOR. Renewables are at a premium at present. Property at a discount for obvious reasons. I have been burned by the lure of higher yields on some smaller loan funds (SQN/KKV was a disaster for me), so I'd stick to the bigger funds if starting now for a core collection viz. not less than £1b of assets:

Henderson Diversified Income (HDIV)
BIPS
3i Investment (3in)
Sequoia Infrastructure (SEQI)

Property

Regional REIT
AEW REIT
Standard Life (SLI)

The above three all have their problems already mentioned. Big box REITs like Warehouse REIT and Tritax trade at a low discount/premium and are possibly safer bets. I have researched neither and don't own them.

Renewables

TRIG
Greencoat Wind
Bluefield Solar
John Laing Environmental (JLEN)


ETFs

VHYL
iShares High Yield Global bonds
Vanguard Emerging Market Government bonds VEMT

The advantage/disadvantage of the first two is they hold corporate bonds in several hundred/1000+ global companies. So the yield is lower than (say) Royal London Extra Income fund, but the risk is arguably less as you are not reliant on UK PLC.

Hope this helps.

richfool
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Re: Property plus Loans and Bonds IT's

#439410

Postby richfool » September 3rd, 2021, 10:28 am

mort wrote:I would like to include such IT's to provide diversity from the share based holdings in my portfolio. The dividends look particularly attractive which leads me to think there must be a downside. As property and debt are new areas for me I wondered if others have experience of like investments.

I think your questions have mostly been covered, but with particular reference to the downsides of bonds, as I understand it, there is much less prospect for capital growth with bonds and indeed their capital values would likely fall if interest rates rose.

Yes, bond funds and REIT's would give further diversification.

I hold several REIT's, but no bonds, other than indirectly through other vehicles (investment trusts like Personal Assets (PNL).

(I hold WHR, SLI, RGL, SUPR and PHP amongst the REIT's/property companies).
SUPR - Supermarket REIT
WHR - Warehouse REIT
RGL - Regional REIT.

Mort
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Re: Property plus Loans and Bonds IT's

#439502

Postby Mort » September 3rd, 2021, 4:52 pm

Thank you very much to those who have replied. The suggestions given for further research are much appreciated.

Regards,
Mort


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