Non-UK growth IT portfolio
Posted: January 24th, 2021, 5:12 am
(Warning: extraordinarily long post)
Hi all
Over the last several months I have been researching and purchasing a portfolio of ITs to diversify away from my portfolio of UK-listed shares, both geographically and sectorally. The contributions on this board including replies to earlier posts of my have been extremely helpful in developing my thinking, and I'd like to thank you all.
Here are the results so far. I'm now at the stage where most of the funds I've allocated to this portfolio have been deployed, and I would welcome thoughts, suggestions and feedback (I've included brief comments on most of the ITs involved, and anyone who gets to the end of this probably deserves a prize).
First, the principles:
I) No UK funds. Diversification away from the UK is a major objective
II) No income required. Objective is long-term total return. Investment horizon is at least 10 years, probably longer
III) Equities only. No bond or commodity funds (I have sufficient commodity exposure through my share portfolio)
IV) I am looking for significant exposure to technology and healthcare as key continuing trends in the coming years
V) I place more importance on 3- and 5-year performance than 10 years – a good position on the 10-year ranking could be driven by outperformance between 5 and 10 years ago, which is a long time back and things may have changed since then
VI) I'm willing to invest in recently-established ITs with shorter performance records if they are in interesting sectors and have made promising starts
VII) I have no minimum IT size. It's the underlying holdings that count
VIII) I would prefer to avoid but can if necessary tolerate a small premium (say up to 2 percent or so), which I view as the somewhat inescapable price of buying into a rising market.
IX) To try to control the number of trusts held I'm adopting an arbitrary but useful minimum initial holding size of 3 percent of portfolio
Second, the practice:
I've primarily used Trustnet for my research (I like the inclusion of a 3-year performance figure in the main screen), with the-aic as a backup – both sites are superb resources - plus of course the ITs' own factsheets. All figures in this post are from Trustnet.
Returns this year have been so extraordinary that to some extent they distort many trusts' long-term performance figures positively (biotech ITs are clear examples of this). I've sought to address this by looking at discrete annual performance as much as cumulative.
A note on Baillie Gifford: the stunning outperformance of the BG stable in the last 12 months has been extremely impressive. I've tried to account for the risk of being overly swayed by recent performance but several of them demand to be included in this portfolio on long-term figures. So while I've tried to diversify between fund management firms, four of my 16 holdings are still BG, plus several of my 'contenders'.
A note on China:
At present my geographical holdings do not include any China-specific funds, or broader Asian ones (which tend to be mostly or largely China-oriented). This is due to personal circumstances: China is clearly a growth story that should be considered for inclusion in a portfolio like this, but I have Chinese exposure through other investments that are off-topic for this board. There are nonetheless some Asian/Chinese ITs on my 'contenders' list.
A note on the US:
At present my geographical holdings do not include any US-specific funds, as the global trusts tend to have mostly US holdings. Nonetheless, there are some US ITs on the contenders list.
Timing: The bulk of the funds for this portfolio only became available recently, which means I've had to overcome my instinctive aversion to buying at or near all-time highs and missed out on the growth of previous months. Such is life (a few holdings were bought in March 2020 and have done well – of course at that point so would a monkey with a pin).
Third, the portfolio as it will look after a few purchases planned in the next few days:
*Keystone is shortly to become Baillie Gifford Positive Change
Contenders: when I started this process I was more focussed on geographic than sectoral diversification. I've moved more to the latter over time, but still have a list of possible additional geographic ITs – esentially the JPMorgan and Baillie Gifford Asia, US, China, Japanese smaller companies ITs, plus the JPM and Templeton emerging markets funds and Schroder Asian (but note caveats above). Of those BG's Pacific Horizon (doubled in last 12 months, less than 40 percent China but a chunky premium over NAV) and JPM Japanese Smaller are probably my top choices.
In the global sector, I have considered but rejected Lindsell Train (I can buy shares in a fund manager if I wanted to), Manchester and London (bit of a mixed bag) and Herald (UK share too large).
Fourth, a few questions:
With around 16 percent of the total funds still available to deploy, what would you do in my position? Top up some existing holdings (if so, which?)? Add something new (if so, one of my contenders, or something else entirely?)? Keep it in cash in case of a buying opportunity in the coming months? Consolidate, on the grounds I have too many different holdings?
Fifth, some thoughts on the ITs themselves
Global:
SMT/Edinburgh Worldwide/Monks:
The Baillie Gifford flight of golden geese, up respectively 415%, 366% and 255% over five years. But no company overlaps across all three of their top 10 holdings, and only three shares are to be found doubling-up in two of the lists: Tesla, Amazon and Alibaba. I can live with that. I've long considered Tesla to be ludicrously overvalued but I was pleased to see 40 percent of the SMT holding sold during December (see my post on that thread viewtopic.php?f=54&t=23391&p=378839#p378839). Wish I'd bought all three years ago, or even 12 months ago.
Martin Currie Global, Mid Wynd:
Solid, steady perfomers that offer diversification from the BG funds. Between these two Microsoft is the only holding that appears in both top 10s.
Smithson
Recently-established global smaller companies IT from Terry Smith's Fundsmith stable. Up 24.6% over one year, putting it 5th in the combined global and global smaller companies sector. Happy to see how this one develops.
Sectoral/Thematic:
BB Healthcare/Worldwide Healthcare:
I'm happy to overweight both of these to increase healthcare exposure, with several of the global trusts leaning more to tech. WWH is an outstanding long-term performer, BBH is a newcomer (only launched in 2016) but has better recent figures and appears to have more small- and mid-sized companies in the portfolio. There's only one overlapping top 10 holding, Bristol Myers Squibb (number 1 for both). Incidentally I recommend the BBH monthly factsheets - exceptionally informative.
I decided against against International Biotech and Biotech Growth given the volatility of biotech-only firms and funds.
Allianz Tech/Polar Capital Tech:
ATT is an extraordinary performer in the most successful sector of recent years, up more than 400 percent in five years. Polar Capital suffers by comparison but is still up more than 300 percent in the same period, and is currently available on a discount of nearly 8 percent. Only 4 of their top 10 holdings overlap and I'm happy to hold both.
HG Capital:
Private equity fund focussed on tech and renewable energy with a solid record. NAV only updates every few months so the current premium is based on out-of-date figures.
Augmentum Fintech:
Recent private equity entrant with a currently-hot focus and a good start. I'm taking a punt on this at minimum holding size to see how it plays out.
Keystone:
Bought this as soon as the transformation into BG Positive Change was announced – it has been a successful strategy for BG (and having seen the way Witan Pacific raced to a ludicrous premium when it changed to BG). Again, likely to include Tesla once the mandate switches but I'll have to live with that.
Geographical:
BRGE, FJV and MTE are each among the best-performing trusts in their sectors. MTE is outstanding – in the top 15 of all ITs over three and five years according to Trustnet.
To anyone who makes it this far, congratulations and thank you.
Welcome your thoughts.
Cheers wand
Hi all
Over the last several months I have been researching and purchasing a portfolio of ITs to diversify away from my portfolio of UK-listed shares, both geographically and sectorally. The contributions on this board including replies to earlier posts of my have been extremely helpful in developing my thinking, and I'd like to thank you all.
Here are the results so far. I'm now at the stage where most of the funds I've allocated to this portfolio have been deployed, and I would welcome thoughts, suggestions and feedback (I've included brief comments on most of the ITs involved, and anyone who gets to the end of this probably deserves a prize).
First, the principles:
I) No UK funds. Diversification away from the UK is a major objective
II) No income required. Objective is long-term total return. Investment horizon is at least 10 years, probably longer
III) Equities only. No bond or commodity funds (I have sufficient commodity exposure through my share portfolio)
IV) I am looking for significant exposure to technology and healthcare as key continuing trends in the coming years
V) I place more importance on 3- and 5-year performance than 10 years – a good position on the 10-year ranking could be driven by outperformance between 5 and 10 years ago, which is a long time back and things may have changed since then
VI) I'm willing to invest in recently-established ITs with shorter performance records if they are in interesting sectors and have made promising starts
VII) I have no minimum IT size. It's the underlying holdings that count
VIII) I would prefer to avoid but can if necessary tolerate a small premium (say up to 2 percent or so), which I view as the somewhat inescapable price of buying into a rising market.
IX) To try to control the number of trusts held I'm adopting an arbitrary but useful minimum initial holding size of 3 percent of portfolio
Second, the practice:
I've primarily used Trustnet for my research (I like the inclusion of a 3-year performance figure in the main screen), with the-aic as a backup – both sites are superb resources - plus of course the ITs' own factsheets. All figures in this post are from Trustnet.
Returns this year have been so extraordinary that to some extent they distort many trusts' long-term performance figures positively (biotech ITs are clear examples of this). I've sought to address this by looking at discrete annual performance as much as cumulative.
A note on Baillie Gifford: the stunning outperformance of the BG stable in the last 12 months has been extremely impressive. I've tried to account for the risk of being overly swayed by recent performance but several of them demand to be included in this portfolio on long-term figures. So while I've tried to diversify between fund management firms, four of my 16 holdings are still BG, plus several of my 'contenders'.
A note on China:
At present my geographical holdings do not include any China-specific funds, or broader Asian ones (which tend to be mostly or largely China-oriented). This is due to personal circumstances: China is clearly a growth story that should be considered for inclusion in a portfolio like this, but I have Chinese exposure through other investments that are off-topic for this board. There are nonetheless some Asian/Chinese ITs on my 'contenders' list.
A note on the US:
At present my geographical holdings do not include any US-specific funds, as the global trusts tend to have mostly US holdings. Nonetheless, there are some US ITs on the contenders list.
Timing: The bulk of the funds for this portfolio only became available recently, which means I've had to overcome my instinctive aversion to buying at or near all-time highs and missed out on the growth of previous months. Such is life (a few holdings were bought in March 2020 and have done well – of course at that point so would a monkey with a pin).
Third, the portfolio as it will look after a few purchases planned in the next few days:
*Keystone is shortly to become Baillie Gifford Positive Change
Contenders: when I started this process I was more focussed on geographic than sectoral diversification. I've moved more to the latter over time, but still have a list of possible additional geographic ITs – esentially the JPMorgan and Baillie Gifford Asia, US, China, Japanese smaller companies ITs, plus the JPM and Templeton emerging markets funds and Schroder Asian (but note caveats above). Of those BG's Pacific Horizon (doubled in last 12 months, less than 40 percent China but a chunky premium over NAV) and JPM Japanese Smaller are probably my top choices.
In the global sector, I have considered but rejected Lindsell Train (I can buy shares in a fund manager if I wanted to), Manchester and London (bit of a mixed bag) and Herald (UK share too large).
Fourth, a few questions:
With around 16 percent of the total funds still available to deploy, what would you do in my position? Top up some existing holdings (if so, which?)? Add something new (if so, one of my contenders, or something else entirely?)? Keep it in cash in case of a buying opportunity in the coming months? Consolidate, on the grounds I have too many different holdings?
Fifth, some thoughts on the ITs themselves
Global:
SMT/Edinburgh Worldwide/Monks:
The Baillie Gifford flight of golden geese, up respectively 415%, 366% and 255% over five years. But no company overlaps across all three of their top 10 holdings, and only three shares are to be found doubling-up in two of the lists: Tesla, Amazon and Alibaba. I can live with that. I've long considered Tesla to be ludicrously overvalued but I was pleased to see 40 percent of the SMT holding sold during December (see my post on that thread viewtopic.php?f=54&t=23391&p=378839#p378839). Wish I'd bought all three years ago, or even 12 months ago.
Martin Currie Global, Mid Wynd:
Solid, steady perfomers that offer diversification from the BG funds. Between these two Microsoft is the only holding that appears in both top 10s.
Smithson
Recently-established global smaller companies IT from Terry Smith's Fundsmith stable. Up 24.6% over one year, putting it 5th in the combined global and global smaller companies sector. Happy to see how this one develops.
Sectoral/Thematic:
BB Healthcare/Worldwide Healthcare:
I'm happy to overweight both of these to increase healthcare exposure, with several of the global trusts leaning more to tech. WWH is an outstanding long-term performer, BBH is a newcomer (only launched in 2016) but has better recent figures and appears to have more small- and mid-sized companies in the portfolio. There's only one overlapping top 10 holding, Bristol Myers Squibb (number 1 for both). Incidentally I recommend the BBH monthly factsheets - exceptionally informative.
I decided against against International Biotech and Biotech Growth given the volatility of biotech-only firms and funds.
Allianz Tech/Polar Capital Tech:
ATT is an extraordinary performer in the most successful sector of recent years, up more than 400 percent in five years. Polar Capital suffers by comparison but is still up more than 300 percent in the same period, and is currently available on a discount of nearly 8 percent. Only 4 of their top 10 holdings overlap and I'm happy to hold both.
HG Capital:
Private equity fund focussed on tech and renewable energy with a solid record. NAV only updates every few months so the current premium is based on out-of-date figures.
Augmentum Fintech:
Recent private equity entrant with a currently-hot focus and a good start. I'm taking a punt on this at minimum holding size to see how it plays out.
Keystone:
Bought this as soon as the transformation into BG Positive Change was announced – it has been a successful strategy for BG (and having seen the way Witan Pacific raced to a ludicrous premium when it changed to BG). Again, likely to include Tesla once the mandate switches but I'll have to live with that.
Geographical:
BRGE, FJV and MTE are each among the best-performing trusts in their sectors. MTE is outstanding – in the top 15 of all ITs over three and five years according to Trustnet.
To anyone who makes it this far, congratulations and thank you.
Welcome your thoughts.
Cheers wand