Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

SIPP Portfolio Review - opinions required

A helpful place to also put any annual reports etc, of your own portfolios
cgd134
Posts: 2
Joined: August 26th, 2021, 12:20 am
Has thanked: 1 time
Been thanked: 1 time

SIPP Portfolio Review - opinions required

#437467

Postby cgd134 » August 26th, 2021, 1:00 am

I currently hold a SIPP portfolio with A J Bell platform and looking for some guidance or ideas on how I could improve the portfolio going forward. The portfolio is £80k and consists of the following collective funds:

Vanguard FTSE All World ETF GBP (27.42%)
Capital Gearing Inv Trust Ord (19.78%)
Royal London Short Duration Global Index Linked M Inc (24.74%)
iShares U.K. Gilts 0-5 yr ETF (23.62%)
BMO Commercial Property Inv Trust (3.11%)
Cash (1.33%)

I’m 60 and fully retired but am looking to defer taking the benefits from the SIPP for at least 5 yrs as I’m living off inherited savings. This SIPP is my only pension plus the state pension. I’m planning on paying into the SIPP the non earnings limit of £3,600 gross per annum over the next 5 year timescale. About two years ago I decided to reduce the number of fund holdings as I had fallen into the common mistake of over diversifying and holding far too many smaller funds (12) for the size of the portfolio. My attitude to risk is probably low to medium (4 on scale of 1-10).

Any ideas would be welcome.

Many thanks

Dod101
The full Lemon
Posts: 16629
Joined: October 10th, 2017, 11:33 am
Has thanked: 4343 times
Been thanked: 7534 times

Re: SIPP Portfolio Review - opinions required

#437484

Postby Dod101 » August 26th, 2021, 7:34 am

I can understand your low threshold for risk but at the same time you really need to look to boost the capital value if you can. Does Capital Gearing Trust fit that profile? It seems to me that you might be better with a more mainstream generalist trust to give you a better chance of capital gain.

I do not know the other holdings but they sound very conservative as well.

Dod

77ss
Lemon Quarter
Posts: 1271
Joined: November 4th, 2016, 10:42 am
Has thanked: 233 times
Been thanked: 414 times

Re: SIPP Portfolio Review - opinions required

#437498

Postby 77ss » August 26th, 2021, 8:41 am

cgd134 wrote:I currently hold a SIPP portfolio with A J Bell platform and looking for some guidance or ideas on how I could improve the portfolio going forward. The portfolio is £80k and consists of the following collective funds:

Vanguard FTSE All World ETF GBP (27.42%)
Capital Gearing Inv Trust Ord (19.78%)
Royal London Short Duration Global Index Linked M Inc (24.74%)
iShares U.K. Gilts 0-5 yr ETF (23.62%)
BMO Commercial Property Inv Trust (3.11%)
Cash (1.33%)

I’m 60 and fully retired but am looking to defer taking the benefits from the SIPP for at least 5 yrs as I’m living off inherited savings. This SIPP is my only pension plus the state pension. I’m planning on paying into the SIPP the non earnings limit of £3,600 gross per annum over the next 5 year timescale. About two years ago I decided to reduce the number of fund holdings as I had fallen into the common mistake of over diversifying and holding far too many smaller funds (12) for the size of the portfolio. My attitude to risk is probably low to medium (4 on scale of 1-10).

Any ideas would be welcome.

Many thanks


With a time horizon of 5 years or more, I would be looking at 5 yr Total Returns.

If I understand your holdings correctly, the Vanguard product is OK, but the rest look like stinkers to me. Even Capital Gearing has given a mere 43%.

As Dodd suggests there are some pretty solid global Investment Trusts out there. With much better histories.

FCIT, BNKR, JGGI and MNKS to name but a few. 5 Year total returns ranging from 99% to 194%.

I hold all 4 and no complaints, but, as ever, DYOR.

fisher
Lemon Slice
Posts: 386
Joined: November 4th, 2016, 12:18 pm
Has thanked: 351 times
Been thanked: 201 times

Re: SIPP Portfolio Review - opinions required

#437549

Postby fisher » August 26th, 2021, 11:23 am

You have a very small amount in Cash and a Property trust. Leaving these aside you have about half your portfolio in Gilts and Bonds, one quarter in a World Equity Index Tracker and one quarter in Capital Gearing Trust - a wealth preservation trust which has some equity exposure. You say your time horizon is at least 5 years, this is your only pension and you have a relatively low risk threshold.

I don't see any problem with what you already have. I know nothing of the Gilt and Bond funds but I presume they are likely to preserve your capital with a small chance of some gain. For your given risk profile having just over 25% of your assets in a World Equity Index Tracker seems reasonable and probably as much exposure to equities as you need. Capital Gearing Trust gives you some extra exposure to equities but also gives you some protection if equity markets fall.

My question would be what is it you think you want to improve. Why does this portfolio not work for you as it is? If you want a "racier" portfolio you could move some of the money in the Bond funds into other equity trusts that have been mentioned earlier, or perhaps just increase the percentage you hold in the World Tracker. Or alternatively move some of the Bond fund money into CGT or an alternative wealth preservation trust such as RCP (RIT Capital Partners), CLDN (Caledonia Investments) or PNL (Personal Assets). I am in my late 50s and I invest in some of these. If you want less equity exposure you could do the reverse and up your bond holdings or move some of your World Tracker funds into CGT, RCP, CLDN or PNL.

Although global equity markets have typically risen over the last decade there is no guarantee this will continue for the next 5 years and I personally think Capital Gearing Trust is a solid trust to have if you are hedging your bets. It is unfair to compare its performance against a global tracker as it will obviously underperform when world markets go up, but it should perform better should they fall.

The "wealth preservation" trusts mentioned will still most likely fall in value if equity markets fall, but they may "cushion the blow" somewhat.

So, the bottom line is what are you unhappy with and do you want to increase your attitude to risk , decrease it or leave it as is. Do you want to diversify more and just split your holdings into more funds or trackers or are you happy just holding the main 4 you have? Without knowing that information it is hard to give more specific advice.

AshleyW
Lemon Pip
Posts: 55
Joined: April 23rd, 2020, 5:43 pm
Been thanked: 32 times

Re: SIPP Portfolio Review - opinions required

#437697

Postby AshleyW » August 26th, 2021, 9:31 pm

A lot depends upon what your post-retirement plans are for the SIPP. Do you plan to purchase an annuity or drawdown from the portfolio? Your portfolio is bond-heavy for a UK investor who plans drawdown - research shows that a UK investor in drawdown should have an equity holding of 60-70% (have a look at https://www.retirementace.co.uk/2021/06/variable.html). If you are planning on an annuity then you are right to be bond heavy and should be gradually increasing your bond holding as your annuity purchase date approaches.

Like you I have greatly simplified my portfolio as I entered retirement as I have learnt the hard way that simplicity is the way to go - and you won´t go far wrong with a FTSE World or MSCI ETF and the bond holdings split equally between an All Gilts ETF and an Inflation Linked Gilt ETF - just decide upon your equity weighting according to your risk profile, time scale and whether you're going for drawdown or an annuity.

Dod101
The full Lemon
Posts: 16629
Joined: October 10th, 2017, 11:33 am
Has thanked: 4343 times
Been thanked: 7534 times

Re: SIPP Portfolio Review - opinions required

#437712

Postby Dod101 » August 26th, 2021, 10:21 pm

Caledonia and RCP are not wealth preservers in the same way that Capital Gearing and Personal Assets are. I have done well in recent years with the first two.

If the inflation threat is to be believed then bond funds are going to be bad news for anyone who holds them now. That does not seem to me to a sensible hold in this portfolio.

Dod

cgd134
Posts: 2
Joined: August 26th, 2021, 12:20 am
Has thanked: 1 time
Been thanked: 1 time

Re: SIPP Portfolio Review - opinions required

#437801

Postby cgd134 » August 27th, 2021, 1:42 pm

fisher wrote:You have a very small amount in Cash and a Property trust. Leaving these aside you have about half your portfolio in Gilts and Bonds, one quarter in a World Equity Index Tracker and one quarter in Capital Gearing Trust - a wealth preservation trust which has some equity exposure. You say your time horizon is at least 5 years, this is your only pension and you have a relatively low risk threshold.

I don't see any problem with what you already have. I know nothing of the Gilt and Bond funds but I presume they are likely to preserve your capital with a small chance of some gain. For your given risk profile having just over 25% of your assets in a World Equity Index Tracker seems reasonable and probably as much exposure to equities as you need. Capital Gearing Trust gives you some extra exposure to equities but also gives you some protection if equity markets fall.

My question would be what is it you think you want to improve. Why does this portfolio not work for you as it is? If you want a "racier" portfolio you could move some of the money in the Bond funds into other equity trusts that have been mentioned earlier, or perhaps just increase the percentage you hold in the World Tracker. Or alternatively move some of the Bond fund money into CGT or an alternative wealth preservation trust such as RCP (RIT Capital Partners), CLDN (Caledonia Investments) or PNL (Personal Assets). I am in my late 50s and I invest in some of these. If you want less equity exposure you could do the reverse and up your bond holdings or move some of your World Tracker funds into CGT, RCP, CLDN or PNL.

Although global equity markets have typically risen over the last decade there is no guarantee this will continue for the next 5 years and I personally think Capital Gearing Trust is a solid trust to have if you are hedging your bets. It is unfair to compare its performance against a global tracker as it will obviously underperform when world markets go up, but it should perform better should they fall.

The "wealth preservation" trusts mentioned will still most likely fall in value if equity markets fall, but they may "cushion the blow" somewhat.

So, the bottom line is what are you unhappy with and do you want to increase your attitude to risk , decrease it or leave it as is. Do you want to diversify more and just split your holdings into more funds or trackers or are you happy just holding the main 4 you have? Without knowing that information it is hard to give more specific advice.


Many thanks for these pointers as these are very useful. Probably my main concern with the portfolio is the equity/bond split allocation as I feel that I’m probably under weight in equities. My current equity allocation based on the Morningstar Portfolio X Ray tool is approx 32% in equities and 55% bonds. My target equity allocation is probably 40% - 45% based on the online Risk Profile tools I have used. With regards the holdings I’m fairly pleased with the performance of the Vanguard Global Equity Tracker ETF and I took some profits from this holding back in July and reinvested this into my existing Capital Gearing Inv Trust as I like this fund as it gives a degree of protection if markets take a fall at some point in the future. The iShares U.K. Gilts ETF holding is one I will probably review and reduce or sell and reinvest some or all of this money into another wealth preservation fund, possibly Personal Assets Trust or a mix of this with a general Global Equity Inv Trust such as Monks or Bankers. With regards the BMO Commercial Property holding, I plan to sell this holding in order to tidy up the portfolio as it represents such a small holding in overall terms. Thanks for your help.

hiriskpaul
Lemon Quarter
Posts: 3856
Joined: November 4th, 2016, 1:04 pm
Has thanked: 683 times
Been thanked: 1493 times

Re: SIPP Portfolio Review - opinions required

#437936

Postby hiriskpaul » August 27th, 2021, 11:07 pm

The gilts ETF you hold has a weighted average yield to maturity of 0.19%. From past returns against the benchmark, the stated fee and historic stock lending returns, a reasonable assumption would be future underporfance of about 0.05%. This means the expected return on the ETF is about 0.14%. Youinvest charge 0.25% capped at £10 per month for running your SIPP, which essentially means everything above £48k does not result in higher charges, so at least you are not paying Youinvest to hold the ETF. Even so, the expected return is lower than available cash deposits.

The Royal London Short Duration Global Index Linked fund is harder to assess, but it has an OCF of 0.27%, has consistently underperformed its benchmark and Youinvest charge you 0.25% to hold it. Bonds have had a good return, delivering more than their expected future returns for many years, but right now this bond fund looks set to deliver low, possibly even negative returns after charges. I would stress that I don't know this for sure as the fund is hard to assess with the mobile phone I am using. However, if we get unexpectedly high inflation, the fund could do well compared to everything else in your portfolio.

Am I right in saying you are not currently using up your personal allowance? If so a good way forward would be to fully crystallise your SIPP, selling the gilts ETF, taking the 25% pension commencement lump sum and putting it into the best deposit account you can find, perhaps some on term deposits up to 1 year. You should also draw down your SIPP each year, using up your personal allowance, and reinvesting in an ISA.

You should definitely continue to pay £3600 per year (£2880 net) into your SIPP, right up until age 75, or until pension rule changes prevent you from doing this. The fact that you will be able to make withdrawals within your personal allowance even after you receive the state pension makes this very worthwhile for you.

Have you had a state pension forecast? If not get one and check you are set to receive the maximum. If not, top up your NI contributions. Ask on the pensions practical board if you need help on this.

As for the asset allocation, I would ditch the ITs. Decide on the allocation to equities you are comfortable with and top up the Vanguard ETF as required across your SIPP and ISA. Hold the rest as cash. Each year you should rebalance back to your chosen weight. That will generate a rebalancing bonus for you over time. If you are nervous about buying into equities after a crash, then don't, but sell after a rise to bring you back to weight. The rebalancing bonus will be lower that way, but being able to sleep at night is more important.


Return to “Portfolio Management & Review”

Who is online

Users browsing this forum: Google Adsense [Bot] and 9 guests