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Wasron’s annual portfolio review

A helpful place to also put any annual reports etc, of your own portfolios
Wasron
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Wasron’s annual portfolio review

#136098

Postby Wasron » May 1st, 2018, 8:04 pm

This is the first annual review since opening my SIPP, but my HYP has been running for five years now.

My HYP (in an ISA) was originally intended to provide 25% of my retirement income, but events led to the transfer into a SIPP of a previous pension pot. This increased the total pot by an order of magnitude. I didn’t feel comfortable putting everything into a HYP, so the SIPP is largely invested in ITs. The plan now is to retire at 55 (i’m 41), and live from the capital in ISAs until I can draw down the pension (currently this will be at 58). As such, the investment mix in the ISAs is gradually moving away from HYP as capital growth has become more important.

The investment split across the SIPP and ISAs is as follows:
ITs - 54.7%
HYP - 28.2%
ETFs - 2.5%
Cash - 14.6%

The cash is left over from the transfer in and is being drip fed in on a monthly basis. The SIPP will probably become fully invested in around six months.

Holdings
ITs - BlackRock Commodities Income
Bluefield Solar Income Fund
City of London
European Assets
F&C Private Equity Trust
Funding Circle SME Income Fund
Henderson Far East Income
Henderson Smaller Companies
JPMorgan Japanese
Law Debenture Corporation
Merchants Trust
Middlefield Canadian Income
Murray International
North American Income Trust
Personal Assets
Princess Private Equity
Real Estate Credit Investments
Utilico Emerging Markets

HYP - Ashmore
AstraZeneca
Babcock International
BBA Aviation
British Land
Centrica
GCP Student Living
GlaxoSmithkline
HICL
HSBC
Imperial Brands
Inmarsat
ITV
John Laing Infrastructure
Legal & General
Lancashire Holdings
Marstons
Mucklow (A & J)
National Grid
Paypoint
Pennon Group
Petrofac
Primary Health Properties
Reckitt Benckiser
Schroders
Shell
SSE
Tate and Lyle
Telecom Plus
Tritax Big Box
Unilever
Vodafone
WPP

ETFs - SLXX and VWRL

I’m not really looking to add more holdings, so for top-ups I look for ITs at a discount to NAV and also below their 12 month NAV discount average. For HYP top-ups I use a version of the HYPTUS, with a restriction on capital invested but not on income percentage.

Performance
Unfortunately I gave up on unitising when I started the SIPP. I’d been tracking units on a spreadsheet at work but was simply too busy to keep it up. I’ve lost a useful measure of performance, but as the SIPP isn’t receiving new funds a rolling 12 month average of income from it just about suits my needs.

Roughly speaking, the ITs have outperformed the HYP in capital terms, although they have a slightly lower average dividend yield. Some shares have performed terribly (e.g. Inmarsat and Centrica), but as each HYP share is only 1% of the total portfolio I’m pretty relaxed about it.

When I started the SIPP I considered putting everything into the HYP, but I didn’t feel comfortable with five figure investments in individual shares. The IT holding sizes are much larger than individual HYP shares, a conscious decision on my part as I’m happy to pay the management fee for the peace of mind that the ITs provide.

If I was 55 and mortgage free I could just about live on the SIPP’s current income, this year it’s provided 55% of my target. Fortunately there are 17 years of dividends to reinvest before I can actually take an income from it.

I don’t really have any pearls of wisdom, I’m just hoping that my global diversification and undemanding growth requirements mean this can tick over and give me a comfortable retirement when the time comes. I’ll provide an update in a year.

Regards.

tjh290633
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Re: Wasron’s annual portfolio review

#136103

Postby tjh290633 » May 1st, 2018, 8:37 pm

Wasron, it looks a good tactic. With 17 years of compounding your target ought to be easily achievable. The natural growth of the income is likely to be above the rate of inflation, so you do not need anything exceptional to triple or quadruple the current income flow.

We shall look forward to hearing of your progress.

By the way, what are your objectives with the ETF holdings? Do you use them as a yardstick to measure progress?

TJH

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Re: Wasron’s annual portfolio review

#136105

Postby Wasron » May 1st, 2018, 9:06 pm

tjh290633 wrote:By the way, what are your objectives with the ETF holdings? Do you use them as a yardstick to measure progress?

TJH


As i’ll be using the capital in the ISAs to live on i’ll need to make decisions on what to sell and when. The last five years have suggested that I’m not good at this. All new money and any dividends are therefore going into the ETFs, mostly the global tracker VWRL. When the time comes i’ll therefore just sell a chunk of VWRL every few months. It was the most straightforward way I could think of to simplify the decision making.

SLXX is a corporate bond ETF. I have no other bond exposure and I’m gradually adding to this now that interest rates are expected to rise.

Regards

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Re: Wasron’s annual portfolio review

#136119

Postby tjh290633 » May 1st, 2018, 11:01 pm

Wasron wrote:All new money and any dividends are therefore going into the ETFs, mostly the global tracker VWRL. When the time comes i’ll therefore just sell a chunk of VWRL every few months. It was the most straightforward way I could think of to simplify the decision making.

Presumably, if you have enough dividends coming in to live off, then you will only put the surplus into VWRL, which will become your buffer fund in case of a cut back in dividends?

TJH

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Re: Wasron’s annual portfolio review

#136137

Postby Wasron » May 2nd, 2018, 6:49 am

tjh290633 wrote:Presumably, if you have enough dividends coming in to live off, then you will only put the surplus into VWRL, which will become your buffer fund in case of a cut back in dividends?

TJH


The ETFs are only in ISAs. All dividends in the SIPP go into ITs or HYP.

The ISAs are still largely HYP and if they grow enough to avoid the need to sell any HYP shares i’ll certainly do that.

I’m hoping my cash buffer comes from taking my current defined contribution pension as tax free cash at 58, having transferred it into the SIPP. It should restock the ISAs and provide something to help the kids with weddings/houses etc. I don’t foresee using annuities at all.

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Re: Wasron’s annual portfolio review

#136167

Postby Raptor » May 2nd, 2018, 8:32 am

Thanks for posting. Like you I made a decision when moving my pensions in a SIPP to go down the IT route. I do nto have the range of ITs you have though, currently 6 , with a European focussed one needed to complete the "SET". I have reduced my HYP a lot in the last few years and now most of it is in an ISA, with a gradual move from my Trading account to "save" on TAX and CGT. Like you I found my Capital on IT's growing faster than the HYP but the Dividend % being not too dissimilar. I top-up my IT's based on NAV as well, though I am careful not to make them one-sided.

I have retired 3 years back with a part-time job to stop me climbing the walls (and moderating TLF is not what I mean). Being able to draw my state pension is a year away. To be honest the first time I tried to retire 15 years ago I could have done it without working as was able to draw a company pension at that time, but a "failed" business adventure made me re-think that and go back to work again.

I am happy that my SIPP and ISA dividends will be enough to live on and the state pension is the icing on the cake.

Do you have a "ideal" split on your holdings. I am trying to achieve a 75% SIPP V HYP split as am happy to let others manage my portfolio and in case I cannot or no longer want to manage the "portoflio" would be easier with IT's.

Again thanks for posting

Raptor.

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Re: Wasron’s annual portfolio review

#136275

Postby Wasron » May 2nd, 2018, 12:08 pm

Raptor wrote:Do you have a "ideal" split on your holdings. I am trying to achieve a 75% SIPP V HYP split as am happy to let others manage my portfolio and in case I cannot or no longer want to manage the "portoflio" would be easier with IT's.


Thanks for your comments. I think that within the SIPP it will be around 70:30 in favour of ITs over the HYP, once the cash balance is invested.

Over the last year i’ve sold the likes of Carillion, Mitie, Pearson and Cobham. The sales were following Carillon’s slump and a reassessment of my HYP choices. All the money from these went into City of London and Law Debenture, as where I consider a HYP choice to have failed the money will be recycled into ITs.

Within the ISAs this recycling is into VWRL.

It’s therefore possible that over time the HYP percentage will fall further.

HYP has taught me some valuable lessons about LTBH, diversification and the simplicity of deriving an income from dividends, but TLF has also taught me that I can do this without restricting myself to just running a HYP.

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Re: Wasron’s annual portfolio review

#218531

Postby Wasron » April 30th, 2019, 7:33 pm

This is the second annual review for my SIPP, and my HYP has been running for six years. There have been a few adjustments that are covered in this year’s review (and I’ll include the current holdings in a follow-up post).

The breakdown
ITs – 58.3% (54.7% in 2018)
HYP – 33.3% (28.2% in 2018)
ETFs – 4.7% (2.5% in 2018)
Cash – 3.7% (14.6% in 2018)

Performance
The SIPP generated 73% of target income in the last 12 months (against 55% last year), on a yield of just under 4%. Dividend drag from the drip-feeding of the transfer should see this rise to 77% next year, before the increases slow down (as there’s no new money going into it). Still well on track to leave work at 55 in 13 years.

I realised I could easily unitise the SIPP on an accumulation basis (i.e. excluding the ISAs), so the performance since outset for this is as follows:

2017 – 100 (starting position)
2018 – 103.38
2019 – 109.77

I intend to live off the ISAs (drawing down the capital) until I can draw down the income from the SIPP at 58. Capital performance is therefore more important in the ISAs. The ISAs are made up of part of the HYP and the ETFs. With minimal new money added these are now at 89.9% of target capital (79.8% in 2018). My Target Capital figure is based on three years of income as if I were retiring today, with the income required amount revised each year by inflation, so this is comfortably on track too.

Dividend cuts to Petrofac and Inmarsat were announced in the previous year but felt in this one. These were offset by specials paid by Lancashire Holdings and (two by) Paypoint. Unfortunately ITs aren’t immune to dividend cuts, which I experienced with European Assets Trust and Funding Circle Income Fund.

I said last year that I wasn’t really looking to add new holdings, but it’s funny how things work out. My new HYP holdings had been sat on my watchlist for a while, and as they hit the yield I was looking for as a minimum entry point I added each one, as there was still uninvested cash allowing me to do so. Median holding size within the HYP is now around one third of the annual SIPP income, so with the cash largely invested this would take a while unless it coincided with some selling.

The HYP
New – New River Retail, Easyjet, DS Smith, Carnival, BP
Sold – RB, JLIF, Pennon, Telecom Plus, Ashmore, Petrofac, Inmarsat

Here are my notes on each, made at the time (with any recent comments in brackets):

[SALE] Reckitt rise with the market. As a lower yielder solely in the SIPP I’m happy to harvest capital gains and wait for a drop in the market to reinvest, not very HYP, but then they aren’t high yield anyway (I’m happy with my current holdings so no regrets with this decision).

[SALE] JLIF receive takeover offer and board seem open to it. Price rises to 140p so take the cash and reinvest some into NewRiver REIT

[BUY] NewRiver REIT – Invest in low grade retail and convenience stores. Have record of converting to residential. Yield is 8% so clearly high risk. Opened a position and will gradually build over next few months (now at median holding size)

[BUY] Easyjet fell to 1115p, which was mildly attractive, but they raised their dividend by 43% to 58.6p. This took them well over a 5% yield so they were added as a bit of diversification away from financials, property and utilities. They also seem to have taken a proactive approach to Brexit to mitigate the risks they face (had an up and down year but I’m happy with how they’ve performed)

[SALE] Pennon and Telecom Plus were sold to reduce my utilities holdings. With Pennon this was specifically to escape some Corbyn risks, with the money going into ITs. With Telecom Plus it was more that they were yielding less than 4% for a utility and that the price was rising despite their trading statements not being great and dividend growth stalling. I would consider buying Telecom Plus again if they yielded at least 4.5%, depending on the political situation (which hasn’t happened yet, as they’re well above my selling price, but I’m still more comfortable to be holding fewer utilities).

[BUY] DS Smith (SMDS) publish solid results and up the dividend by 14%, but price falls 5%. The yield now makes them a worthwhile addition, for a dull defensive packaging company (very happy with this addition too)

[SALE][BUY][SALE] Petrofac were sold and re-bought the same day, meaning I avoided most of a 30% of the drop on 7th Feb. I ended up with 20% more shares than I started with, but from a smaller investment amount. They then had a great month so I banked the 20% profit on 12th March (the price has continued to be fairly volatile. My behaviour here isn’t HYP-ish at all, but this isn’t an ordinary HYP share. The proceeds have been used to buy Carnival)

[SALE] Ashmore has risen 20% in two weeks and now yields only 4%. Dividend has been held for four years. Have decided to sell up as also have the higher-yielding Schroders as an asset manager and plenty of EM exposure in the ITs

[SALE] Inmarsat announce a consortium is looking at a takeover at 544p. Price jumps to 512p. Consider selling the lot, and also hanging on for a firm offer. Decide to hedge my bets and sell my ISA holding. Crystallises a loss, but brings what’s left down below median holding size. Sell the rest when the formal takeover offer is received. Proceeds recycled into ITs

[BUY] Carnival (CCL) fell as market expected more from results. Now yield 4% and they’re a massive global cruise company with good margins, strong dividend growth and not much debt. May consider adding BP to balance holdings with a lot of exposure to oil price movements e.g. Shell + BP vs Easyjet + DS Smith + Carnival

[BUY] BP added as a counterweight to Carnival, will gradually build up the holding

The ITs
New - Smithson
Sold – Smithson, JPMorgan Japan, Personal Assets

My ITs are all in my SIPP, and that’s income-focussed, so I gave my ITs the once over and sold a couple in the late summer. I was holding JPMorgan Japan for some exposure to Japan, but yielding less than 2% it didn’t fit with the strategy. I also sold Personal Assets for similar yield reasons, but also because I’d bought it as a ‘safe’ holding with a bit of gold in, but as it was only 4% of the portfolio it didn’t really offer me much protection.

I participated in the Smithson IPO on a purely speculative basis, knowing I wasn’t going to hold them for long, which I didn’t. I was expecting them to trade at a premium, and sold them after a couple of weeks for a decent profit given the holding period. If I’d had a load of spare cash I could have done this in the ISA and held it, but as money doesn’t grow on trees (as I keep telling my kids) this wasn’t possible.

Funding Circle Income Fund has announced that it’s winding up. This will probably result in a slight drop in income, as the funds will be redirected into existing ITs, which in general have a lower dividend yield. Half the holding was sold immediately, to buy BP and top-up City of London IT. I’ll wait to see how the wind up progresses, as I’m unsure whether the price will drift towards the NAV as the wind up takes place. The lack of movement in the price suggests to me that there’s significant uncertainty about the performance of the remaining loan book.

Fun trades
Talk Talk, RPC, Headlam, Card Factory, Micro Focus, Inchcape, Polymetal, Hochschild, Galliford Try, PZ Cussons, Halfords, Domino’s Group

All were opportunistic investments, buying after price falls, a couple were considered as long-term holds (Micro Focus – oh well… and Galliford Try – I’m glad I sold them when I did!). I don’t think I ever had more than three running concurrently. TalkTalk was bought hoping for a takeover deal, but none materialised. These were essentially ‘fun’ money trades, investing with around 1% of the SIPP value. They were very profitable, producing a 39% capital return in the year (plus a few dividends too), but I don’t think I’d be comfortable scaling this up by much, as I couldn’t sleep well at night with too much money invested this way.


In summary, despite the political carnage and global economic concerns everything is pretty much on track. With the transfer almost fully invested it should now be a case of checking the dividends at month end and picking top up choices each month (I intend to participate in No-look November this year). Having enjoyed making lots of investment decisions over the last couple of years we’ll see how hands-off I can be now that I’ll only have dividends to invest…

As always, thanks for reading.

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Re: Wasron’s annual portfolio review

#218534

Postby Wasron » April 30th, 2019, 7:43 pm

A summary of current holdings:

ETFs
ISHARES CORPORATE BOND ETF (SLXX)
VANGUARD ALL WORLD ETF (VWRL)

HYP
AstraZeneca
Babcock International Group
BBA Aviation
BP
British Land Co
Carnival
Centrica
easyJet
GCP Student Living Ord
GlaxoSmithKline
HICL Infrastructure Company Ord
HSBC Holdings
Imperial Brands
ITV
Lancashire Holdings Ltd
Legal & General Group
Marston's
Mucklow (A & J) Group
National Grid
NewRiver REIT
PayPoint
Primary Health Properties
Royal Dutch Shell B
Schroders
Smith (DS)
SSE PLC
Tate & Lyle
Tritax Big Box
Unilever
Vodafone Group
WPP

ITs
BlackRock Commodities Income
Bluefield Solar Income Fund
BMO Private Equity Trust
City of London
European Assets
Funding Circle SME Income Fund
Henderson Far East Income
Henderson Smaller Companies
Law Debenture Corporation
Merchants Trust
Middlefield Canadian Income
Murray International
North American Income Trust
Princess Private Equity
Real Estate Credit Investments
Utilico Emerging Markets

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Re: Wasron’s annual portfolio review

#218539

Postby Spet0789 » April 30th, 2019, 7:58 pm

:evil: Instead of, or as well as VWRL, have you considered VHYL, the global high yield equivalent? Global diversification, lower US weight than VWRL and a 3.50% yield rather than 2%.

I’m not a dividend investor, but if I was that’s what I’d use for international diversification alongside a U.K. focussed HYP.

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Re: Wasron’s annual portfolio review

#218544

Postby Wasron » April 30th, 2019, 8:12 pm

Spet0789 wrote::evil: Instead of, or as well as VWRL, have you considered VHYL, the global high yield equivalent? Global diversification, lower US weight than VWRL and a 3.50% yield rather than 2%.

I’m not a dividend investor, but if I was that’s what I’d use for international diversification alongside a U.K. focussed HYP.


To be honest I haven’t looked at VHYL. The ETFs are only in the ISAs, which are all about capital growth.

I suppose i’m also hedging my bets somewhat, by investing in a general world tracker i’m taking a few eggs out of the high yield basket.

I’m also trying to keep the ISAs as simple as possible, so that when I do retire I don’t need to decide what to sell, I just sell a chunk of VWRL every couple of months.

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Re: Wasron’s annual portfolio review

#218787

Postby Hariseldon58 » May 1st, 2019, 6:29 pm

Interesting posts.

I followed a similar method to retire in my late 40’s in 2007

I think the idea of funding retirement spending by selling chunks of VWRL every couple of months will probably change when you get to retirement !

I would consider IS15 for your corporate bond ETF as well as/instead of SLXX. Much shorter duration and the yield is not that much lower, if you believe interest rates will tend to rise in the next few years, would probably work out better.

Personally I have added quite a few ETF tilts to my international tracker ETFs, including the aforementioned VHYL, I’d have a look at VVAL from Vanguard.

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Re: Wasron’s annual portfolio review

#218824

Postby Wasron » May 1st, 2019, 8:50 pm

Hariseldon58 wrote:Interesting posts.

I followed a similar method to retire in my late 40’s in 2007

I think the idea of funding retirement spending by selling chunks of VWRL every couple of months will probably change when you get to retirement !

I would consider IS15 for your corporate bond ETF as well as/instead of SLXX. Much shorter duration and the yield is not that much lower, if you believe interest rates will tend to rise in the next few years, would probably work out better.

Personally I have added quite a few ETF tilts to my international tracker ETFs, including the aforementioned VHYL, I’d have a look at VVAL from Vanguard.


Thanks for your comments, I’ve followed your posts over the last few years with interest.

Regarding selling VWRL, retirement is a long way off, all I can do at this stage is have a plan ;)

IS15 looks less volatile, so possibly one to consider more once the pot is big enough, but I like the look of VVAL for a global value play.

Regards

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Re: Wasron’s annual portfolio review

#304450

Postby Wasron » April 30th, 2020, 11:57 am

This is the third annual review since opening my SIPP, but my HYP has been running for seven years now.

The SIPP is intended to provide an income in retirement (from 58), with the ISAs there to live off between 55 and 58, drawing down on both capital and income. The HYP is mostly in the SIPP. There has been much less activity than last year, but as well as top-ups there have been some additions and some sales (a list of current holdings will be in a follow-up post).

The investment split across the SIPP and ISAs is as follows:

ITs – 60%
HYP – 29.7%
ETFs – 8.5%
Cash – 1.8%

Performance
It had all been going so well… even now, after the dividend cuts have started reducing payments over the last couple of months I’m still at 87% of target income for the year (73% last year). I think I’ll struggle to get near this next year. Dividend drag is having an ever-reducing impact, this year it’ll be more about the impact of the dividend suspensions. I’d predicted hitting 77% of target income this year, so to get 87% puts me well ahead of that. There have been some good rises (Law Debenture especially), but I’ve perhaps continued to chase the yield a bit.

As to whether I’m still on track to finish work at 55 (in 12 years time), well let’s see how the next 18 months go in terms of the global economy.

Unitised values of SIPP (accumulation basis):

2017 – 100
2018 – 103.38
2019 – 109.77
2020 – 94.57


As I’m planning on drawing down both capital and income from my ISAs their capital performance is more important (as I’ll be periodically selling chunks of holdings to pay myself a ‘salary’). They’re mostly made up of ETFs, with an ever-shrinking percentage in HYP shares.

Target Capital figures (calculated as three years of income, as if I were retiring today)

2018 – 79.8%
2019 – 89.9%
2020 – 91.9%

This was over 100% for a while earlier this year, so in the long-term I think this is still on track, unless something unexpected happens with work that causes me to have to draw some of this down sooner (I’m classed as a key worker, so have continued working as normal over these last couple of months, but you never know). I have been topping these up more in the last couple of months, as household expenditure has declined (a holiday deferred to 2021, no kids clubs, no meals out or day trips).


Buys and sells: seven complete sales and five new holdings in the HYP. Two sales were company break-up/takeover-driven, and there has been a further drift towards more top-ups of the ITs over the year and fewer HYP holdings (portfolio reduced from 33 to 31 HYP holdings last year, and down to 29 holdings this year)

The HYP
New – Mondi, Ibstock, Petrofac, Micro Focus, Johnson Matthey
Sold – Mucklow, AstraZeneca, SSE, Babcock, Vodafone, Easyjet, BBA Aviation

Here are my notes on each, made at the time (with any recent comments in brackets):

[SELL] Mucklow (MKLW) receive takeover approach from LondonMetric. 20% premium. Would result in shares in LondonMetric. Have enough REITs, if not one too many, so sell and spread the cash around

[BUY] Mondi (MNDI) are a very large integrated forestry and packaging company. There’s overlap with DS Smith, but they manage their own forests and have good margins and are strongly growing the dividend. Yield only 4%, but with the HYP universe shrinking I’m happy to go back and fish in what used to be referred to as the Goldilocks zone by Luni. (Stood up fairly well in the recent market rout, and then suspended the dividend)

[BUY] Ibstock (IBST) added. Brick maker and £1bn company. Low debt, good operating margin, well-covered dividend only 4%, but increasing at over 10% per year. Continues the trend of not stretching for really high yield and focussing on other metrics instead. (No dividend in 2020, but with low debt they should be able to ride out the storm)

[SELL] AstraZeneca (AZN) sold. Need cash for some work on the house and had been feeling twitchy about reports regarding AZN’s cashflow situation. Will replace the cash in ISA when next available, but it’s likely to go into VWRL. Funds in SIPP will go into the new holdings (Ho-hum, one I got wrong, I needed the cash from the ISA, but picked the wrong holding to sell)

[SELL] SSE have passed the break-even point with this month’s dividend. Political risk has had this on the ‘sell’ list for a long time. Proceeds will be spread across Inv Trusts. (Another one that performed well after I sold, although it’s now below my sale price, but the reason for selling was correct at the time, and a different election result could have had a massive impact on the price)

[SELL] Babcock (BAB) sold after breaking even. Like SSE they had been on the ‘sell’ list for a while. Broke even and proceeds will go into Inv Trusts (Happy to be out of this company, especially as the funds went into ITs)

[SELL] Vodafone (VOD) sold, as the cull continues. They cut this year, the price rice has put them well past break even, proceeds will go into Inv Trusts

[SELL] Easyjet (EZJ) - Brexit deal on the cards so several shares jump around 10% in a day. One of which is Easyjet, so take the plunge and sell the lot. The gains are likely to disappear again before long, once Boris opens his mouth again, at which point a re-purchase will be considered. (A lucky escape, I made a lot of profit from Easyjet, offsetting a significant proportion of my losses in Carnival, but maybe I should have listened to TJH and avoided them both all along…)

[SELL] BBA Aviation (BBA/SIG) special divi and share consolidation due in Nov, as part of the company is sold. The remaining company is mainly the corporate jet business, which is the least-ethical part of the business so I’ve decided to sell the lot, rather than end up with a smaller chunk of a company I was less happy about (no regrets about this one)

[BUY] Petrofac (PFC) added again. Price back in my buying range. My trading share… (well down on the entry point in November, with no divi for 2020 either)

[BUY] Micro Focus (MCRO) added after mixed results sunk the price by 20%. (Had been a fun trade last year but it’s a company whose software I use, and cannot see it disappearing. No dividend for 2020, but I can’t see them going to the wall either, they’re very volatile at the moment though)

[BUY] Johnson Matthey (JMAT) – specialises in catalytic converters and clean air technology. Very much a company for the 21st century, on a PE of 9, divi of 5% and crucially they’ve grown their dividend for the last 20+ years (Bought into in April after the slew of cuts to dividends, as a dividend ‘hero’ I’m hoping this one will ride the storm. Even if the dividend doesn’t survive, this is the type of investment that sits well with me and my world view)


ITs
[SELL] Funding Circle (FCIF) – as it was in the process of being wound up it was sold with the proceeds spread across the other ITs

[BUY] JP Morgan China Growth & Income (JMC/JCGI) – dividend strategy changed to 4% of NAV, so added after trimming Henderson Smaller Companies (it got a massive boost from the election result that I expected to be short-lived, which it was, although not for the reason I expected! JCGI has stood up very well to Covid-19 so far)

ETFs
[BUY] Vanguard Global Value (VVAL) – This was discussed after last year’s review. Its top holdings are different from VWRL and so was another way of capturing global performance, but with less focus on the FAANG stocks.

Fun trades
Only a handful this year, with a bit of trading of Petrofac, AG Barr and Telecom Plus. All were profitable, but as mentioned last year, with less cash available for this type of activity I’ve let the monthly dividend income get invested across the ITs and HYP shares as part of the LTBH strategy. It’s not something I’ve missed really, and recent events with Covid and its impact on the market have emphasized this.


Impact of Covid-19
For the first week when the SIPP value was plummeting I did find it stressful. I was regretting not taking heed from the poster who suggested immediately selling all travel and leisure-related shares. I could have got out of Carnival at around 3000p in that way. But there’s no point in crying over spilt milk, so after a few days of looking at prices all the time I didn’t look for a week and focussed on Covid as a real-world problem, not an investing one. With this perspective I’ve become fairly relaxed about it, because if it shocks the economy to such an extent that we have a prolonged global recession, and if I only end up having to work for an extra year or so to generate enough income then I’ll have got off very lightly.
I toyed with adding Coca-Cola and Diageo to my holdings, but ultimately, neither were high yield so funds in the SIPP were much better directed to the ITs, while the ETFs in the ISAs were so much better diversified that the risk-reward didn’t seem worth it.

As always, thanks for reading

Wasron

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Re: Wasron’s annual portfolio review

#304452

Postby Wasron » April 30th, 2020, 11:59 am

A summary of current holdings:

ETFs
ISHARES CORPORATE BOND ETF (SLXX)
VANGUARD ALL WORLD ETF (VWRL)
VANGUARD GLOBAL VALUE ETF (VVAL)

HYP
BP
British Land Co
Carnival
Centrica
GCP Student Living Ord
GlaxoSmithKline
HICL Infrastructure Company Ord
HSBC Holdings
Ibstock
Imperial Brands
ITV
Johnson Matthey
Lancashire Holdings Ltd
Legal & General Group
Marston's
Micro Focus International
Mondi
National Grid
NewRiver REIT
PayPoint
Petrofac
Primary Health Properties
Royal Dutch Shell B
Schroders
Smith (DS)
Tate & Lyle
Tritax Big Box
Unilever
WPP

ITs
BlackRock Commodities Income
Bluefield Solar Income Fund
BMO Private Equity Trust
City of London
European Assets
Henderson Far East Income
Henderson Smaller Companies
JP Morgan China Growth & Income
Law Debenture Corporation
Merchants Trust
Middlefield Canadian Income
Murray International
North American Income Trust
Princess Private Equity
Real Estate Credit Investments
Utilico Emerging Markets

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Re: Wasron’s annual portfolio review

#408421

Postby Wasron » April 30th, 2021, 9:41 pm

This is the fourth annual review since opening my SIPP and transferring a previous pension into it, but my HYP has been running for eight years now.

The SIPP is intended to provide an income in retirement (from 58), with the ISAs there to live off between 55 and 58, drawing down both capital and income. At 55 I intend to finish work and transfer my current employer pension into the SIPP, and then at 58 extract most of the transferred amount as my tax-free cash on retirement to repopulate ISAs. The HYP is mostly in the SIPP. There have been some additions and some sales in the last year, as per usual (a list of current holdings will be in a follow-up post).

The investment split across the SIPP and ISAs is as follows:

ITs – 58.4%
HYP – 30.63%
ETFs – 8.01%
Cash – 2.96%

Note: the lines between these categories have been blurred somewhat by including two ITs in the HYP, and investing in a growth IT in the ISA (rather than solely targeting ETFs for capital growth)

Performance
In capital terms, the SIPP has recovered well from last year’s dip (it doesn’t receive new money, so investments can only be made from funds generated within the SIPP), but the SIPP income is down by 12.6% from last year’s total, so is now only 75% of target. The fall is almost completely down to a decline in dividends from the HYP, although the ITs I sold were higher yielding than their replacements. Dividends are reinvested in the SIPP, but no new money is added, so a drop of only 12.6% offers further support for the use of ITs as an important element of an income portfolio, ahead of just investing in a HYP.

I’ve definitely made a conscious decision to spend less time ‘chasing the yield’ and have been embracing lower yielders that will hopefully provide a steadily growing income. After eight years I’ve finally acknowledged that my due diligence on high yield companies isn’t good enough, so I’ve been reading ‘The Signs Were There’ by Tim Steer, and will use the multitude of case studies within the book as a reference next time I’m looking to add an individual company. There was a fair bit of repetition in the book, but perhaps that’s an indication that the signs to spot in the accounts are fairly standard, as long as you know what to look for.

On an accumulation basis the unitised capital performance of the SIPP has been as follows:

2017 – 100
2018 – 103.38
2019 – 109.77
2020 – 94.57
2021 – 123.16


The ISA capital performance has also been good. By June I’d calculated that I was back at 100% of target capital in my ISAs, so used available funds and a partial selling down of VWRL to create a 50:50 barbell using a global tracker and gold (VWRL and SGLN). This was only using around 50% of the ISA’s value, but was undertaken with capital preservation in mind, with the aim of rebalancing annually. Gold initially performed strongly, but this has now reversed. The combined performance of the two has still been a 11.38% TR this year. The rebalancing will take place shortly, taking the form of topping up SGLN from available cash.

Target Capital figures (calculated as three years of income, as if I were retiring today)

2018 – 79.8%
2019 – 89.9%
2020 - 91.9%
2021 – 119%

Subdued spending during the pandemic has certainly helped to grow this pot, and with normality hopefully not too far away I can reduce the DD once more and start spending my salary on more fun things. It certainly looks like the ISA should be capable of facilitating my retirement in under 11 years, but it’ll be a few years before I’ll really get to see whether the SIPP is in quite such a healthy position from an income perspective. At this rate it’s probable that the ISA will be able to contribute to the retirement income, reducing the need for the SIPP to target only higher-yielders.

Buys and Sells: Five complete sales and four new holdings in the HYP (not counting anything sold and then re-bought within the year), as well as two ITs out and another two in, and one ETF sold and one new one. Quite a lot of change, but in terms of the HYP, none of the sales are that surprising given that they all suspended their dividends in 2020

If I look at my new choices for the HYP this year, two are low/mid-yielders (Diageo, Coca Cola Hellenic) and the other two are actually ITs (Greencoat UK Wind and Hipgnosis Songs), so perhaps I should simply stop describing it as a HYP at all.


HYP
New – Diageo, Coca Cola Hellenic, Greencoat UK Wind, Hipgnosis Songs

Sold – DS Smith, Marstons, British Land, Centrica, ITV

Here are my notes on each, paraphrased from those made at the time (with any recent comments in brackets):

[SELL],[BUY],[SELL] DS Smith (SMDS)– Initially sold after the non-payer perversely entered trimming territory. Come July they were back in the portfolio. The half year results on July 2nd didn’t reinstate the divi but they were fairly upbeat, and the price dropped 10% on open, so able to buy back 15% cheaper (290p vs 340p sold at in May). And yet, by November they were sold again, as more vaccine news caused a market spike. DS Smith were up almost 20% on purchase despite no dividend. I also hold Mondi, a larger packaging company that pays more promptly and restarted its dividends more quickly. I can imagine DS Smith returning to the portfolio again, if I have available funds next time it’s below 300p (it’s above my sell price, but over that time nearly everything seems to have risen)

[SELL] Marstons (MARS) – Sold after Carlsberg JV announced in May. The price doubled, but still couldn’t see when the sector would become profitable again. I’ve kept some exposure to the sector through the pub network in NewRiver REIT, and I’ve kept NRR in case there’s a miraculous recovery. The funds were spread across the income ITs, as is my normal approach if I consider that I’ve invested in a dud in my HYP (the price has continued to rise, but NRR received a significant top up at the time of the sale and that’s up around 70% too)

[BUY] Diageo (DGE) and Coca-Cola Hellenic (CCH) added at the median in July, funded by the sale of Princess Private Equity. These are rock-solid global brands with a history of growing their dividend. With the volume of dividend suspensions the companies who can continue to pay regardless are highly prized. Neither pay over 3%, but if they can grow their dividend by 10% per year then the income will grow nicely.

[BUY] Greencoat UK Wind added (UKW) – A fund investing in renewable energy infrastructure. (This was added at a time when I was facing the prospect of those under the median being non payers/cutters or those who already had their full slug of capital for the time being, so needed something new. If I had more funds, and more potential top-up candidates they would have sat outside the HYP alongside Bluefield Solar Income Fund, but this was a compromise of convenience)

[BUY] Hipgnosis Songs (SONG) - Investment company owning the copyright for music. The performance and streaming revenue provide the income to pay dividends. Market cap £750m, Yield 4.15%. PE is high, but once the copyright is purchased this provides income without ongoing costs. Seems like an investment that’s uncorrelated to the FTSE and performed strongly despite Covid. High charges were a negative, as was the difficulty in quantifying the value of a back catalogue, so gradually building up the holding (this is approaching the median holding size now and it’ll be interesting to see where this goes once income from live music resumes)

[SELL] British Land (BLND) - BLND hits £5 per share in December so exit what seems like a flawed investment, moving the funds into the internationally-focussed ITs NAIT and UEM (no regrets here, BLND is slightly up, but the ITs have risen too and have been paying dividends as well)

[SELL] Centrica (CNA) - Finally sell Centrica in December. The prospects for recovery look unlikely and it’s time to move on. Money will be invested in ITs and for the ISA ETFs (the price is up around 25% from my selling point, but from a very low base… I’m not sorry to be shot of them)

[SELL],[BUY] Lancashire Holdings (LRE) – LRE announce their final results, they just scrape a profit so there’s no special. Sell the lot as the price is £7.60 (they had already been trimmed in June with the price over £8.50). I noted that I’d buy back into Lancashire when the price was back below £6.50, which happens about two weeks later (not very HYP-ish, but reacting to the oscillations of Lancashire is the closest thing I get to trading these days)

[SELL] ITV announce annual results. No dividend for another year. ITV had been on the possible sell list, due to the lack of dividend, so at just under break-even point decided to sell and move on, redirecting the funds into ITs over the next couple of months, probably SMT and JEMI (the ITV price has drifted downwards again and I’m quite happy to have redirected the funds)


ITs
[SELL] Princess Private Equity – dividend halved, higher charges than BMO Private Equity. Funds were to be reinvested in something more transparent (which turned out to be Diageo and Coca Cola Hellenic)

[BUY] Scottish Mortgage Trust (SMT) – This was added to both SIPP and ISA in early Feb. I’ve come around to this IT, as it invests in a completely different way to most of the portfolio. It’s likely to get a regular drip-feed of funds so that I continue to build my growth investment alongside all my income investments, with the drip-feed to smooth out the volatility.

[BUY] JP Morgan Emerging Markets IT (JEMI) - added to SIPP as a means of increasing exposure to emerging markets, after reading Factfulness by Hans Rosling, which describes the growth of the middle class across Asia. Another holding that will get a regular drip-feed of funds

[SELL] BMO Private Equity – decided that I didn’t need any Private Equity ITs. Can get 5% yield elsewhere for a much lower charge (was 1.22%) and something that’s more transparent (it had 85% of the portfolio as unquoted). Funds partially used for large top-ups of HICL and Greencoat UK Wind. If I want exposure to unquoted investments then Scottish Mortgage has that


ETFs
[BUY] Physical Gold (SGLN) – Bought to provide a counterweight to VWRL

[SELL] Vanguard Value (VVAL) – Was made aware of Vanguard’s intention to close this, so sold and used some of the proceeds to open a position in SMT


Fun Trades
None in the last year, or at least no trading that I would put in this category. The Hokey Cokey I’ve been doing with DS Smith and Lancashire Holdings are because their share prices have been out of step with their dividend payments. As I’m ticking over with cash at around 3% of the portfolio I can’t see there being many fun trades in the coming year


As always, thanks for reading and comments are very welcome, particularly on the portfolio churn

List of holdings to follow

Wasron

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Re: Wasron’s annual portfolio review

#408423

Postby Wasron » April 30th, 2021, 9:43 pm

A summary of current holdings:

ETFs
iShares Corporate Bond ETF (SLXX)
Vanguard All World ETF (VWRL)
iShares Physical Gold (SGLN)

HYP
BP
Carnival
Coca Cola Hellenic
Diageo
GCP Student Living Ord
GlaxoSmithKline
Greencoat UK Wind
HICL Infrastructure Company Ord
Hipgnosis Songs
HSBC Holdings
Ibstock
Imperial Brands
Johnson Matthey
Lancashire Holdings Ltd
Legal & General Group
Micro Focus International
Mondi
National Grid
NewRiver REIT
PayPoint
Petrofac
Primary Health Properties
Royal Dutch Shell B
Schroders
Tate & Lyle
Tritax Big Box
Unilever
WPP

ITs
BlackRock Commodities Income
Bluefield Solar Income Fund
City of London
European Assets
Henderson Far East Income
Henderson Smaller Companies
JP Morgan China Growth & Income
JP Morgan Emerging Markets Income
Law Debenture Corporation
Merchants Trust
Middlefield Canadian Income
Murray International
North American Income Trust
Real Estate Credit Investments
Scottish Mortgage
Utilico Emerging Markets

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Re: Wasron’s annual portfolio review

#408450

Postby GrahamPlatt » April 30th, 2021, 10:43 pm

I wish I’d had your nous at your age. Well done Wasron.
Just one thing; HICL’s an IT I believe.

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Re: Wasron’s annual portfolio review

#408484

Postby Wasron » May 1st, 2021, 6:44 am

GrahamPlatt wrote:I wish I’d had your nous at your age. Well done Wasron.
Just one thing; HICL’s an IT I believe.


About 20 years ago I sat next to someone at work whose lunchtime reading was Investors Chronicle. I then picked up a Motley Fool Investment Guide and my journey to income investing began. It was also given a jolt when the Final Salary scheme I was a member of was closed, as that significantly jeopardised my retirement plans.


Re: HICL, very true. I think they fall into the group of ITs allowable for discussion on HYP-Practical due to their investment in assets that can’t be invested in directly. So the same argument could be made for Greencoat UK Wind and Hipgnosis Songs.

Regards

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Re: Wasron’s annual portfolio review

#408507

Postby funduffer » May 1st, 2021, 9:28 am

Ditto Greencoat UK Wind is an IT, but its splitting hairs, and doesn't matter a jot!

Interesting commentary on your ups and downs!

FD


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