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Investment Trust Income Portfolio - year 2 review

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Investment Trust Income Portfolio - year 2 review


Postby mickeypops » August 1st, 2020, 1:56 pm

This is a second year review of my Investment Trust Income portfolio, as of 31 July 2020. The objective at the outset was to provide income which helps to fund our retirement, which can keep pace with inflation, and to protect the capital value in real terms in the long term.

The initial report upon the portfolio's completion two years ago, and the year 1 review, are here:


The portfolio consists of 20 income focused ITs, consisting of:

4 UK equity trusts; Dunedin Income Growth, Merchants, Shires Income, Henderson High Income
5 International equity trusts: Murray International, Europeans Assets, Blackrock North American, Middlefield Canadian, Henderson Far East
2 Private Equity Trusts; Apax Global Alpha; Princess Private Equity
2 Bond/Deb trusts: Twentyfour Income, CQS New City High Yield
3 Property trusts: Standard Life Property, Real Estate Credit Investment; Regional Reit
4 Infrastructure based Trusts: Renewables Infrastructure, John Laing Environmental Assets, GCP Infrastructure, Sequioa Infrastructure.

I've rebased the portfolio's starting value to £100,000 for these reports, so all the figures below are pro rata to that amount. This is a buy and hold portfolio and there has been no trades since its inception. All income is removed and put to use.


It's been quite a tumultuous few months hasn't it? Somewhat surprisingly though my income has held up despite the turmoil in the markets and the very sharp downturn in global economic activity caused by the pandemic.

The ITs have produced £5,781 in income, slightly up from last year's £5,743. So far, there have been no cancelled dividends and only one cutter - Princess Private Equity which halved its anticipated interim dividend. (PPE has actually pushed the payment of this dividend into early August for administrative reasons - this places the payment into my next financial year which would mess up the reporting, so I'm pretending it was paid in July as expected.) The yield therefore on the original capital is 5.78%

Clearly the advantages of ITs in terms of reserving earning from prior years to smooth out payments, plus perhaps the ability to use capital in some cases, has been in evidence here. I have seven dividends declared already for August and there are still no other cuts in evidence. I don't know how long this can continue, but I'm pleased with the consistent delivery of income thus far. In terms of supporting our retirement, we do have guaranteed income sources that keeps the wolf from the door, so the income produced here is the jam on our bread and butter. We have ample scope to cut our expenditure. In fact the lack of travel just now has had this precise effect.


Oh dear, not a pretty story here. The capital value has deteriorated by 16.4% since its start, having been up nearly 3% at the end of year one. The initial £100,000 is now worth £85,843. In comparison, the FTSE100 is down 22% over the two years. Worst impacted are the property trusts, down 30% on average. The equity trusts are down 14%. The infrastructure trusts are actually in profit; up 7.2% in total, the star being Renewables which is up about 25% over the two years. The only two other trusts in profit are John Laing Environmental Assets and Apax Global Alpha

I'm quite sanguine about all this. I have no intention of selling any assets for the foreseeable future and am quietly confident that the world will return to normal sometime and the portfolio's capital value will recover, eventually.

Thanks for reading. Comments etc. are very welcome.


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Re: Investment Trust Income Portfolio - year 2 review


Postby JohnW » August 2nd, 2020, 1:00 am

Thanks, very informative.
I wonder if it would be good for me. I did a quick check of an alternative; so my check could be inaccurate and has a lot of rounding, and although I only tested one choice it is something chosen 'after the fact' - so open to fair criticism. As well, one year of return data doesn't mean much either.

How did 60% stocks, 40% bonds, both globally diversified in ETF's compare with your portfolio (last year only)?
Vanguard offers VWRL for stocks: if you'd taken its distributions out you'd have got approx 1.8% yield, with 4.76% growth in capital.
Vanguard offers VAGP for bonds: if you'd taken its distributions out you'd have got approx .32% yield, with 5.55% growth in capital.
Applying the 60/40 balance to the growth would have seen a capital growth for the year of 5.07%, which you could withdraw as living expenses; and yield of 1.2%.
So I could have taken 6.27% from that portfolio for the last year and it would have the same capital value that it started the year with.
Your portfolio could only take 5.8% without affecting the capital. That's a small enough difference to mean nothing over one year. But your capital is down 19% for the year. Not sure if that means anything if we haven't sold original capital.

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Re: Investment Trust Income Portfolio - year 2 review


Postby Dod101 » August 2nd, 2020, 8:06 am

Thanks mickeypops.

It will be interesting to see how the portfolio continues to fare over the next couple of years when the effect of the dividend drought will be more evident although you seem to have a well spread portfolio.


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