ITs for three places: company, ISA, SIPP

[adriangs]

I currently have uninvested cash in three different places:
1) my sole-owned limited company (which has unused retained earnings)
2) my ISA
3) my SIPP

With 1), the company's cash pile needs to be usefully invested to make a return while I gradually draw it down tax efficiently over the next 10 years by way of salary/divs and a company contribution to my SIPP, thereafter probably closing the company as I'll be in my mid-60s by then and looking forward to other things in life.

The SIPP and ISA have cash piles now that also need to be invested (the cash is already inside the wrappers.. just not invested yet).

For the investments themselves, I'm thinking of following Moneyweek's pick of half a dozen ITs, viz.: SMT, CLDN, LWDB, MWY, PNL, RCP. I'm already invested quite a bit in all of them apart from MWY.

I could buy equal amounts of all of them for each of the three vehicles listed above.. but should I be a bit more canny about how I allocate the purchases, given that the ISA is sheltered and the other two aren't? I'm wondering, for example, if some of the ITs I list are more (or less) suited to an ISA, depending on whether they're growth or income-focussed.

Thoughts?..

Adrian

[Dod101]

Surely your SIPP is tax sheltered?

I would be inclined as a priority to make sure that income generators (IE the highest yielders) are placed in a tax sheltered environment first, as the allowance for dividend tax is lower than for CGT before tax kicks in, but that is hardly an issue. Most, certainly the ones that I know of, are growth focussed (SMT, CLDN,PNL and RCP) The other two maybe less so.

So I suspect that it really does not matter much.

Dod

[adriangs]

>> Surely your SIPP is tax sheltered?

Strictly speaking, *tax-deferred* rather than fully sheltered, no?.. apart from the 25% lump sum bit obviously. Though perhaps that doesn't matter much in these circumstances.

Good point about the CGT vs divi tax diiference. Come to think of it, I probably shouldn't have been focussing on buying high-yield shares for the company's investments up untii this point (which I have been doing).. sounds like growth-oriented would have been better..

Adrian

[Dod101]

>> Surely your SIPP is tax sheltered?

Strictly speaking, *tax-deferred* rather than fully sheltered, no?.. apart from the 25% lump sum bit obviously. Though perhaps that doesn't matter much in these circumstances.

Good point about the CGT vs divi tax diiference. Come to think of it, I probably shouldn't have been focussing on buying high-yield shares for the company's investments up untii this point (which I have been doing).. sounds like growth-oriented would have been better..

Adrian

You are right about the SIPP but I was thinking more in terms of the investment environment than extracting the benefit. That seemed to me to be what you were referring to. You are in, it would seem, what is sometimes called the 'accumulation' phase and so it is the investment returns that you should surely be focussing on. Anything could happen to personal taxation in the intervening years before you start to drawdown your SIPP and indeed the rules for the SIPP can easily change themselves.

Dod

[scotia]

For the investments themselves, I'm thinking of following Moneyweek's pick of half a dozen ITs, viz.: SMT, CLDN, LWDB, MWY, PNL, RCP. I'm already invested quite a bit in all of them apart from MWY.
Thoughts?..

Adrian

Apart from SMT, all of the others listed above that you are currently invested in are performing (over 5 years) significantly poorer than a world tracker ETF (e.g. VWRL) in terms of total return.

[adriangs]

>> Apart from SMT, all of the others listed above that you are currently invested in are performing (over 5 years) significantly poorer than a world tracker ETF (e.g. VWRL) in terms of total return.<<

Interesting.

I could be persuaded by that; I'm not especially wedded to what Merryn S.W. has to say. Though presumably there must be *some* appeal of actively-managed funds of this calibre over trackers.. what might that counter-argument be?

Adrian

[scotia]

>> Apart from SMT, all of the others listed above that you are currently invested in are performing (over 5 years) significantly poorer than a world tracker ETF (e.g. VWRL) in terms of total return.<<

Interesting.

I could be persuaded by that; I'm not especially wedded to what Merryn S.W. has to say. Though presumably there must be *some* appeal of actively-managed funds of this calibre over trackers.. what might that counter-argument be?

Adrian

I probably come pretty far down the list of investors who see the appeal in most of the ITs that were listed - although I certainly see the appeal of SMT and MWY (both of which I hold). Albeit they may prove to be volatile.
But looking at the others - some have a philosophy of Capital Preservation as their primary aim. So in a major market downturn, they should out-perform, but possibly at the cost of poorer long term growth. Personal Assets (PNL) fits this model. In the recent world market sharp drop at the end of March, PNL dropped about 11%, while VWRL dropped by about 22%. Both have recovered to above their pre-drop price. Over 5 years, on a total return basis, PNL has grown by 43.6%, while VWRL has grown by 90.4%
But RIT Capital Partners (RCP), Caledonia (CLDN) and Law Debenture (LWDB) all showed substantial drops in late March, from which they have not yet fully recovered. And their 5 year total returns are RCP=32.1%, CLDN=32.76%, LWDB=20.43%
All numbers are taken from the Hargreaves Lansdown site. But with market prices being down around 3-4% today, these numbers are likely to be down tomorrow. And - past performance is no guarantee of future performance.