Global X-US Growth and Income ITs

[yieldhog]

I recently sold the last of my rental properties and am now in the process of investing the remainder of the funds. I'm maxed out on ISAs and my SIPP is fully invested, so the new money will go into a taxable account. About three years ago I was diagnosed with a non-curable cancer, so my wife will inherit the funds in the not-too-distant future. My two sons will then inherit the funds when she dies, which could be as long as thirty years away (she is currently 72). My thought is to build a portfolio of about 10 ITs and maybe a handful of individual shares to provide some income and growth potential. The money will be averaged-in over the coming months.
Many of the ITs I looked at earlier this year appear to have experienced unsustainable increases in price due in part to a narrow focus on big US growth stocks like Amazon, Google, Tesla etc. Some sectors like small-caps also experienced very high growth. There has been some correction in the market over the last month or two but it's still difficult to find what I consider to be reasonable opportunities for growth and income. Add to the mix the clear signs of an upturn in inflation and the old adage of "sell in May and go away, buy them back on Derby Day" may be back in fashion. However, I don't believe in letting current events detract too much from a sensible longer term plan and so I will press on with my averaging-in policy.

My initial thoughts for portfolio candidates are as follows:

NAIT - North American Growth and Income
JETI - Europe X-UK G&I
AAIF - Asia/Pacific Total Return
HINT - Global X-UK G&I
DIG - UK G&I
MRCH - UK Equity Income
ASCI - UK Smaller Company Equity Income
Individual Stocks - ULVR,GSK,IMB

I would like to add a global X-US investment trust to the mix and also maybe an ETF that includes emerging markets. I may also add some BRWM and BERI at some point since I like to include a chunk of natural resource stocks in all of my portfolios.

Any thoughts on alternative suggestions would be appreciated but please bear in mind my objectives i.e. sustainable growth and income, diversification, and liquidity. I prefer to buy ITs at a reasonable discount.

[fisher]

Three ITs I've been building holdings in recently are RIT Capital Partners (RCP), Caledonia Investments (CLDN) and AVI Global (AGT). The first two have rich family connections (the Rothschilds and Cayzers respectively) and have some defensive qualities. They both have some US exposure but it is not the usual suspects. Have a look at their most recent reports to get a better idea of what they hold. AVI Global is different in that it invests in businesses that it sees as at a significant discount to NAV. It invests in a lot of Japanese firms.

All 3 are at a discount, RIT is around 5% discount currently and more usually trades at a premium historically, Caledonia is at over 20% discount which is a little more than their recent average discount, AVI Global is at circa 7% discount.

Dividend yields are not high at between 1-2%, but that could suit you if holding in a taxable account. I think they're worth a look.

There is an excellent article from last year which discusses them amongst another 17 global trusts. See here: https://www.itinvestor.co.uk/2020/06/20 ... -compared/

[torata]

I would like to add a global X-US investment trust to the mix and also maybe an ETF that includes emerging markets. I may also add some BRWM and BERI at some point since I like to include a chunk of natural resource stocks in all of my portfolios.

Any thoughts on alternative suggestions would be appreciated but please bear in mind my objectives i.e. sustainable growth and income, diversification, and liquidity. I prefer to buy ITs at a reasonable discount.

There are lots of EM ETFs around, but, depending on the index they follow, Korea is included or not.
My Sipp is basically index ETF based, with 2 EM ETFs plus Blackrock Frontier IT, but rather out of character, I'm thinking of adding Mobius Investment Trust (MMIT). It's relatively new, very concentrated, but has a good record to now, and the guys that run it have previous form. Runs at a slight discount. There's no dividend (yet) even though it describes itself as "achieve long-term capital growth and income returns"

torata

[Wuffle]

MYI has studiously avoided the parts of USA and big tech providing nearly all the growth for 5 years and if they continue down this same path, may serve your requirements going forward.
Sadly no discount.

W.

[scotia]

I
My initial thoughts for portfolio candidates are as follows:

NAIT - North American Growth and Income
JETI - Europe X-UK G&I
AAIF - Asia/Pacific Total Return
HINT - Global X-UK G&I
DIG - UK G&I
MRCH - UK Equity Income
ASCI - UK Smaller Company Equity Income

All of the above (except ASCI) have a 5 year total return below that of an ETF world index tracker (Vanguard VWRL).
So VWRL is worth a look.
For a managed global fund - have a look at Fundsmith (an OEIC)
And for a Smaller Companies Fund have a look at Amati UK Smaller Companies. (an OEIC).
Both of these OEICS have significantly out-performed (over the past 5 years) of all of your above selections.
The Hargreaves Lansdown site will let you check out, and compare, the performance of ITs, ETFs and OEICs.

[Itsallaguess]

The Hargreaves Lansdown site will let you check out, and compare, the performance of ITs, ETFs and OEICs.

And here's a URL link to that Hargreaves Lansdown comparison tool -

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fundsmith-equity-class-i-accumulation/charts

The above URL has a default chart with Fundsmith on it, but other Funds, Equities, Sectors, or Index's can easily be added using the lower-right area of the page, and the Fundsmith chart can be removed completely if not required, using the 'Remove' button on the lower left area of the page.

It's a brilliantly useful tool...

Cheers,

Itsallaguess

[yieldhog]

Thanks to all for constructive comments - much appreciated. Based on these I will be doing a bit more research this coming week as time permits.

fisher - I will take a closer look at these trusts. I have a feeling at least one of these was on my radar at one time but I have never held any of them.

torata - I will take a look at the Blackrock Frontier trust. I already have a number of Blackrock funds in my SIPP.

Wuffle - I held MYI until last year and have been intending to revisit some time. I can't remember exactly why I sold it.

scotia - VWRL is very much on my radar, as is WQDS and other trackers. By the time my wife inherits my portfolios I will probably have moved everything into a handful of these. I never buy OEICs for liquidity and fee structure reasons (e.g. Woodford fund)

Itsallaguess - I will definitely check out the H.L. site fot comparison purposes. It's already a major stop for any research I do. Up until a few years ago I used Yahoo Finance and found it's site very good, but for some reason I stopped using it. It was particularly good for very long period comparisons whereas I think H.L. only goes back ten years. I occassionally use Trustnet for identifying sector constituents and comparisons.

[mc2fool]

I never buy OEICs for liquidity and fee structure reasons (e.g. Woodford fund).

What liquidity and fee structure issues do you have with Vanguard's tracker OEICs and the like?

[scotia]

I never buy OEICs for liquidity and fee structure reasons (e.g. Woodford fund)

Woodford ran two funds - an OEIC and an IT. The OEIC structure limited his excesses, and investors received back about 70% of the original investment.
The hit on the IT was a lot worse. See my note https://www.lemonfool.co.uk/viewtopic.php?t=27323#p377145

[yieldhog]

mc2fool/scotia
The main problem I have with OEICs is that they can become totally illiquid under certain market conditions. The best example of this is what has happened to most of the open-ended property funds. Due to the changing nature of retail shopping and, more recently, the COVID virus, trading in many of them has been suspended.The other problem I have with open-ended funds is the high level of initial charges made by some funds. This certainly doesn't apply to Vanguard funds which includes some of the best tracker funds available.

On a related issue, I'm wondering how my new taxable account will complicate my tax reporting. If I buy an IT that earns dividends on it's portfolio holdings but reinvests these within the fund rather than paying out to investors, do I have any reportable tax event? If I buy an IT that pays investors dividends based on both capital gains and dividends from it's portfolio, do I need to report these seperately as income and capital gains and if so does the fund/broker providea a tax-year breakdown of any payouts?

[mc2fool]

mc2fool/scotia
The main problem I have with OEICs is that they can become totally illiquid under certain market conditions. The best example of this is what has happened to most of the open-ended property funds. Due to the changing nature of retail shopping and, more recently, the COVID virus, trading in many of them has been suspended.The other problem I have with open-ended funds is the high level of initial charges made by some funds. This certainly doesn't apply to Vanguard funds which includes some of the best tracker funds available.

The illiquidity is only a factor when OEICs invest in inherently illiquid assets, of which property is certainly one, and as for initial charges, well some do and a lot (most now?) don't, esp. since RDR.

If you had said that you don't buy OEICs that invest in illiquid assets and/or have high charges, then I suspect most here would agree with you. But you said "I never buy OEICs for liquidity and fee structure reasons" as if those problems applied to all of them, and they don't, and if you just always never buy OEICs then you're closing yourself off from a bunch of potentially interesting opportunities (both passive and active).

On a related issue, I'm wondering how my new taxable account will complicate my tax reporting. If I buy an IT that earns dividends on it's portfolio holdings but reinvests these within the fund rather than paying out to investors

There's no such thing. If an IT did that then it'd lose its IT status. ITs must pay out, to the investors as a dividend, at least 85% of the net revenue they receive, and there are no tax implications for the investor for the other up to 15%.

If I buy an IT that pays investors dividends based on both capital gains and dividends from it's portfolio, do I need to report these seperately as income and capital gains

No, you just file them all as dividends. They will be enumerated on the Consolidate Tax Certificate issued by your broker soon(ish) after the end of the tax year, just as "normal" company dividends are.