Any one of us could have done well with an international generalist IT like Foreign & Colonial

[IanTHughes]

Moderator Message:
Split off from here to keep that thread focused. - Chris

It's worth noting that one could apply the same argument to the many other portfolio schemes. This might explain why most of them fail when you try them (in my case) - but interestingly for me and others, HYP stood out as one which actually worked and had some practical success in real time.

Arb.

But any one of us could have done well with an international generalist IT like Foreign & Colonial (as it was known in less enlightened times).

Really? Not according to my records!

HYP1 Vs F&C Investment Trust (FCIT) – Income Comparison

HYP1 XIRR |         8.13% | FCIT XIRR |         7.50%
Date      | HYP1 Cash +/- | Date      | FCIT Cash +/-
20-Nov-00 |   -75,000.00  | 20-Nov-00 |   -75,000.00 
20-Nov-01 |     3,451.00  | 20-Nov-01 |       886.50 
20-Nov-02 |     3,474.00  | 20-Nov-02 |       942.78 
20-Nov-03 |     3,197.00  | 20-Nov-03 |     1,196.06 
20-Nov-04 |     3,205.00  | 20-Nov-04 |     1,069.42 
20-Nov-05 |     3,546.00  | 20-Nov-05 |     1,266.42 
20-Nov-06 |     4,131.00  | 20-Nov-06 |     1,407.13 
20-Nov-07 |     4,452.00  | 20-Nov-07 |     1,561.91 
20-Nov-08 |     5,040.00  | 20-Nov-08 |     1,730.77 
20-Nov-09 |     3,187.00  | 20-Nov-09 |     1,815.20 
20-Nov-10 |     3,297.00  | 20-Nov-10 |     1,871.48 
20-Nov-11 |     3,843.00  | 20-Nov-11 |     1,899.63 
20-Nov-12 |     4,289.00  | 20-Nov-12 |     2,279.55 
20-Nov-13 |     5,828.00  | 20-Nov-13 |     2,448.39 
20-Nov-14 |     5,601.00  | 20-Nov-14 |     2,589.12 
20-Nov-15 |     6,093.00  | 20-Nov-15 |     2,673.55 
20-Nov-16 |     6,124.00  | 20-Nov-16 |     2,729.83 
20-Nov-17 |     7,327.00  | 20-Nov-17 |     2,856.46 
20-Nov-18 |     8,882.00  | 20-Nov-18 |     3,039.40 
20-Nov-19 |    10,557.00  | 20-Nov-19 |     3,208.26 
20-Nov-20 |     5,533.44  | 20-Nov-20 |     3,264.56 
20-Nov-21 |    11,339.00  | 20-Nov-21 |     3,461.55 
20-Nov-22 |    11,122.95  | 20-Nov-22 |     3,714.82 
20-Nov-23 |     7,729.25  | 20-Nov-23 |     3,911.82 
20-Nov-24 |     7,640.53  | 20-Nov-24 |     4,249.53 
          |               |           |              
20-Nov-24 |   165,818.00  | 20-Nov-24 |   308,442.78 

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

Enjoy!


Ian

[MrFoolish]

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

Enjoy!


Ian

TBH I couldn't really follow your table. What do those numbers in the last row represent?

[Alaric]

[pre][b][u]HYP1 XIRR | 8.13% | FCIT XIRR | 7.50%

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

Not really the case as an XIRR of 8.13% compared to 7.50% is not very much.

Given the concentration of HYP1 in a relative handful of stocks, the higher risk has given a higher return.

Personally I don't see the relative success of HYP1 as so much to do with chasing dividend yield. It's more perhaps down to diversification. Buy 15 stocks from different sectors and some of them will do well.

[IanTHughes]

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

TBH I couldn't really follow your table. What do those numbers in the last row represent?

My apologies - I simply copied from my Share Database spreadsheet.

The last row is the capital value of the portfolio at the last date - 20 November 2024. The Capital Value of the FCIT portfolio is obviously significantly larger, but the Total Return prize belongs to HYP1. In fact many Investment Trusts underperform HYP1, as indeed they do my own HYP Portfolio. There is one that I record that has a greater income, but still lags HYP1 in total return. There are only two that make up for a lack of income with a greater Total Return.

According to my records, HYP1 has undoubtedly beaten most UK Investment Trusts, both for income and for Total Return.

Enjoy!


Ian.

[Lootman]

HYP1 has undoubtedly beaten most UK Investment Trusts, both for income and for Total Return.

Do you mean investment trusts that invest only in the UK?

Or UK-listed investment trusts that can invest anywhere?

Given that the FTSE-100 has done virtually nothing in 25 years, it has not been difficult to beat that. On the other hand the S&P 500 is up about six-fold in the same time period, plus dividends and a FX gain.

Any strategy can look good in terms of a poorly performing benchmark.

[IanTHughes]

[pre][b][u]HYP1 XIRR | 8.13% | FCIT XIRR | 7.50%

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

Not really the case as an XIRR of 8.13% compared to 7.50% is not very much.

In point of fact, the reduction in Capital Value of FCIT, as a results of annual sales to make up missing income, together with the subsequently reduced dividend going forward, is marked and fairly abrupt.

Enjoy!


Ian.

[IanTHughes]

HYP1 has undoubtedly beaten most UK Investment Trusts, both for income and for Total Return.

Do you mean investment trusts that invest only in the UK?

Or UK-listed investment trusts that can invest anywhere?

Given that the FTSE-100 has done virtually nothing in 25 years, it has not been difficult to beat that. On the other hand the S&P 500 is up about six-fold in the same time period, plus dividends and a FX gain.

Any strategy can look good in terms of a poorly performing benchmark.

Investment Trusts I am interested in for this particular exercise are .....

- UK Listed
- Income oriented rather than Growth
- High Yield (as at 20 November 2000)

Enjoy!


Ian.

[monabri]

The failure of FCIT to even match the Total Return achieved by HYP1, clearly indicates that an annual sale of FCIT to make up the extra income of HYP1 would eventually run out of money.

Enjoy!

Ian

TBH I couldn't really follow your table. What do those numbers in the last row represent?

The last row represent the current values of HYP1 (£165818) and/or the current value of FCIT (£308442) if one had invested £75k in November 2000.

FWIW , I can verify the calculation in terms of XIRR values but the total return on FCIT is about £60k more.

Table produced by monabri based on HYP1 data from Pyad and calculations from IanTHughes posted above

[dealtn]

Really? Not according to my records!

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

If HYP1 beats in all 23 cases you have a strong(ish) argument. Otherwise there is a strong liklihood the start date of the respective comparison is a large factor in your argument. If so it isn't much use for anyone considering an investment strategy based on it. (I could argue Preston North End and Blackpool are better football teams than Liverpool and Man Utd if the most important factor was the time period of my evidence. Few would accept it as true or relevant in the world I operate in - I would be ridiculed).

Even then an IRR of 7.5% might still be considered as having "done well", rather than the "done better than HYP1" you appear to be arguing against.

[Alaric]

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

A suggested calculation is as to what happens if sufficent F&C is sold to match the HYP1 income. How does the final value of F&C compare to the final value of HYP1. So that's exactly matching the HYP1 income withdrawn and then comparing the capital values.

[IanTHughes]

Really? Not according to my records!

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

If HYP1 beats in all 23 cases you have a strong(ish) argument. Otherwise there is a strong liklihood the start date of the respective comparison is a large factor in your argument. If so it isn't much use for anyone considering an investment strategy based on it. (I could argue Preston North End and Blackpool are better football teams than Liverpool and Man Utd if the most important factor was the time period of my evidence. Few would accept it as true or relevant in the world I operate in - I would be ridiculed).

Even then an IRR of 7.5% might still be considered as having "done well", rather than the "done better than HYP1" you appear to be arguing against.

All I was pointing out was the incorrect assertion that the results of HYP1 could have been achieved simply by investing in Foreign and Colonial investment Trust (FCIT). Such an investment would never have come close to achieving that.

I can also say that three "virtual" HYPs have also beaten the majority of UK Investment Trusts that I monitor, for both Income and Total Return. I also note that my own HYP, and four other family portfolios managed by myself, with various starting dates, have all achieved results superior to what might have been achieved with the majority of UK Investment Trusts. It seems to me that investing in Investment Trusts will regularly produce inferior results, unless one is lucky enough to pick one of the very few winners, and for the majority of one's investment!

Personally, I have yet to see a portfolio of Investment Trusts beating a carefully selected HYP, with either Income or Total Return. Do you have evidence of even a single success for Investment Trusts? I won't hold my breath!

Enjoy!


Ian.

[IanTHughes]

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

A suggested calculation is as to what happens if sufficent F&C is sold to match the HYP1 income. How does the final value of F&C compare to the final value of HYP1. So that's exactly matching the HYP1 income withdrawn and then comparing the capital values.

The portfolio of Foreign and Colonial IT (FCIT) runs out of money!

If you don't believe me, check it for yourself!

Enjoy!


Ian.

[monabri]

TBH I couldn't really follow your table. What do those numbers in the last row represent?

The last row represent the current values of HYP1 (£165818) and/or the current value of FCIT (£308442) if one had invested £75k in November 2000.

FWIW , I can verify the calculation in terms of XIRR values but the total return on FCIT is about £60k more.

(there was/is a problem with the "Post Image" site so I've reposted using the table formatter from TLF)

Table produced by monabri based on HYP1 data from Pyad and calculations from IanTHughes posted above

[Newroad]

Hi Monabri et al.

I appreciate the efforts, but I must admit to not fully understanding the logic behind the two tables thus far. If it's just me being obtuse, my apology.

Additionally on a minor note, I understood the exercise was to see what would happen if one tried to emulate HYP 1's income with FCIT. Given that HYP 1 started (it seems) on the 20th November and accrued the year's income over the following year, I suppose the best that can be easily done is to interpolate an FCIT sale on 20th May (i.e. half way through the year) to achieve the same income.

However, the timing (whether the FCIT is deemed start, mid or end year) is not the key reason I don't understand the tables.

Regards, Newroad

[dealtn]

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

A suggested calculation is as to what happens if sufficent F&C is sold to match the HYP1 income. How does the final value of F&C compare to the final value of HYP1. So that's exactly matching the HYP1 income withdrawn and then comparing the capital values.

How would such a suggested calculation address the point (the only point) I am making regarding the singular start date of Nov 2000? (It doesn't).

[dealtn]

And if you perform the same calculation but instead of the single start date of Nov 2000 use each of Nov 2001, Nov 2002 ... Nov 2023 then what do the respective pairs of IRR look like?

If HYP1 beats in all 23 cases you have a strong(ish) argument. Otherwise there is a strong liklihood the start date of the respective comparison is a large factor in your argument. If so it isn't much use for anyone considering an investment strategy based on it. (I could argue Preston North End and Blackpool are better football teams than Liverpool and Man Utd if the most important factor was the time period of my evidence. Few would accept it as true or relevant in the world I operate in - I would be ridiculed).

Even then an IRR of 7.5% might still be considered as having "done well", rather than the "done better than HYP1" you appear to be arguing against.

All I was pointing out was the incorrect assertion that the results of HYP1 could have been achieved simply by investing in Foreign and Colonial investment Trust (FCIT).

Not any assertion I made. Or, come to that, one that I can see made by anyone else on this thread.

Do you have evidence of even a single success for Investment Trusts? I won't hold my breathe

No, but it's not a point I was proving. Even so a single success would be trivially easy to find, but would be subject to the same claim I am making. It would have no statistical significance to any argument.

[1nvest]

Hi Monabri et al.

I appreciate the efforts, but I must admit to not fully understanding the logic behind the two tables thus far. If it's just me being obtuse, my apology.

Additionally on a minor note, I understood the exercise was to see what would happen if one tried to emulate HYP 1's income with FCIT. Given that HYP 1 started (it seems) on the 20th November and accrued the year's income over the following year, I suppose the best that can be easily done is to interpolate an FCIT sale on 20th May (i.e. half way through the year) to achieve the same income.

However, the timing (whether the FCIT is deemed start, mid or end year) is not the key reason I don't understand the tables.

Regards, Newroad

Fundamentally FCIT, that has around 50% US stock weighting, had a bad earlier years sequence of returns that HYP in contrast largely side stepped (US dot com bubble bursting). A bad earlier year sequence of returns significantly impacts longer term outcome. HYP initially paid a 4.5% dividend yield, if that was enough for your needs then a 4.5% SWR applied to FCIT to recent would still have around half of its inflation adjusted start date capital still available after 24 years. SWR is commonly measured over 30 years i.e. see a 65 year old through to age 95, so with half the original portfolio still available after 24 years, another 6 to go, the indications are that it was a success at supporting a 4.5% SWR. In contrast HYP1 in avoiding the earlier years big dip has done better, been able to pay out more/left more residual. In other start date cases things might swing the other way around, if within the first few/handful of years the portfolio value declines by half then subsequent years prospects are typically bleak. For other start dates and earlier years sequence of returns outcomes other asset allocations might be vastly superior, stronger gains than a comparable HYP. Swings and roundabouts.

FCIT could have matched the initial dividend yield as the first year HYP, seen that income rise with inflation since, as per a inflation linked annuity, with SWR withdrawals drawn at the times and amounts matched to each individuals needs, and unlike a annuity (that HYP was proposed as a alternative to) still likely have left residual capital to heirs after a 30 year retirement horizon period (or around 50% of the inflation adjusted value if a 65 year old retiree back in 2000 passed away recently). Far from a failure in that context, but yes lower rewards than a HYP for that one particular case primarily driven by bad earlier sequence of returns risk arising out high US exposure (50%) and its exposure to dot com bubble bursting.

[IanTHughes]

All I was pointing out was the incorrect assertion that the results of HYP1 could have been achieved simply by investing in Foreign and Colonial investment Trust (FCIT).

Not any assertion I made. Or, come to that, one that I can see made by anyone else on this thread.

Check the title of this thread!

or else ......

viewtopic.php?f=31&t=45216&p=697785#p697705

But any one of us could have done well with an international generalist IT like Foreign & Colonial (as it was known in less enlightened times).

Enjoy!


Ian.

[moorfield]

Personally, I have yet to see a portfolio of Investment Trusts beating a carefully selected HYP, with either Income or Total Return. Do you have evidence of even a single success for Investment Trusts? I won't hold my breath!

Personally that's becoming increasingly irrelevant to me as my objective is now shifting towards the conservative and securing a six figure natural yield income for the next 15-20 years. Investment trusts offer more stolid / less volatile ground, no HYP roller coaster needed. Anyway enough from me, I'm due another break from this place.

Enjoy!

[Newroad]

Thanks 1nvest.

I broadly understood the principle being espoused - it was the contents of the tables themselves which bemused me. It's not a big deal.

Taking everyone's assertions at face value, the broader point Dealtn made remains unchallenged IMO. IanTHughes refuted the post title over a specific period - fair enough as well.

Interestingly, my children's JISA's were 100% FCIT for more than a decade starting either side of the 2008 GFC. If anyone has records of a Pyadic HYP starting from approximately 2008 +/- a year or two, I'd be interested in that comparison vs FCIT since. My guess is it wouldn't be pretty for the HYP (but who knows, I could be wrong). I do know FCIT performed well over said period.

Regards, Newroad