The Lemon Fool

Hi,

I have a significant holding in THRG and it is hurting performance. I've gradually been moving all my investments to SWDA (iShares MSCI World tracker). I am intentionally not investing in EM as I have long held concerns and views about governance, rule of law, values, and state interference (others may disagree but we all select what we are comfortable with). However like most people my portfolio is falling in value at the moment. My last active holding, THRG (Throgmorton UK Smaller Companies) is having a very bad year and therefore exacerbating things. This was predictable given what it invests in however we are where we are.

My instinct is that this is not the time to finish my journey to all passive however I am a little unsettled as this holding is a chunky 10%.

I am not buying dips as I am retired and therefore drawing down. I have cash to fund the next two years which I intend to use before touching anything.

Am I right to wait until THRG is in the ascendancy, if not at it's apex, before selling out?

Thanks,
AWOL

I am buying into Throgmorton presently as I had no prior exposure to the stuff it invests in. It might take quite some time to get back near to the ~1000p mark it hit a few months ago. In your shoes, I would be patient, I think.

BullDog wrote:I am buying into Throgmorton presently as I had no prior exposure to the stuff it invests in. It might take quite some time to get back near to the ~1000p mark it hit a few months ago. In your shoes, I would be patient, I think.

I am also investing for the first time into THRG (no previous exposure) and into BRSC (no previous exposure), the discount to NAV on the latter has significantly widened recently. Currently at ~2.5% of p/folio value limited by available funds so , by no means, a significant exposure. I will look to add as dividends accrue.

Likewise I mainly focus on Developed World trackers and have previously held Throgmorton THRG off and on over the years, a small premium is now a discount of around 8% and I would not be surprised to see that increase, it has certainly been at larger discounts for quite a while in the past.

I have thought about buying at these levels and over a 5 year period I imagine it will do just fine.

The dilemma the OP has now is what to do ? If you sold THRG would you put it into SWDA ?

Do you expect SWDA to outperform THRG over the next five years ?

Clearly no one knows but the outlook for THRG at the current price level is probably not bad, considering the sector is hated...

In your position logically I would just hold, however the temptation is to cut a loser and remove the red ink from the spreadsheet !!

THRG and SWDA are very different investments with THRG far more risky. I can understand why you might want to invest in a small cap fund, but why pick just UK small caps? I would want to spread that out geographically.

hiriskpaul wrote:THRG and SWDA are very different investments with THRG far more risky. I can understand why you might want to invest in a small cap fund, but why pick just UK small caps? I would want to spread that out geographically.

UK Small Caps and UK Small Cap trusts in particular have done very well in the long term (compare with ISP6 if you'd like a view of the next best small cap market and the vehicle that I'd likely select for it if valuations were not off-putting). I expect in the long term that will continue although there are headwinds such as the friction and barriers to trade resulting from the UK leaving the EU (our main trading partner) in order to acquire additional sovereignty.

Ultimately I intend to move away from the sort of active decision making but I have done very well out of BRSC prior to switching to THRG and have long held a small cap bias. The last vestige of this being THRG (F&C Smaller Companies, now BMO and others all having been divested and funds reinvested in SWDA.

Ultimately I think that holding a broad basket of large caps will capture equity returns and doing so globally I expect will lead to lower volatility than focussing on specific countries. However I am only 90% migrated.

I am increasingly of the view that even with growth being overvalued I will just grit my teeth and ride out the storm.

AWOL wrote:....

I am increasingly of the view that even with growth being overvalued I will just grit my teeth and ride out the storm.

FWIW, that is what I am doing - easier if you only have 3% in THRG perhaps!

If I had any spare cash I might be tempted to top-up even.

77ss wrote:

AWOL wrote:....

I am increasingly of the view that even with growth being overvalued I will just grit my teeth and ride out the storm.

FWIW, that is what I am doing - easier if you only have 3% in THRG perhaps!

If I had any spare cash I might be tempted to top-up even.

I think Throgmorton quite compelling on a mid term view. Only my opinion, of course, but the IT is invested in some pretty solid companies. As soon as the economic weather forecast looks brighter, Throgmorton should appreciate very nicely.

Bought two lots myself recently. About 3% of total portfolio.

BullDog wrote:

77ss wrote:

AWOL wrote:....

I am increasingly of the view that even with growth being overvalued I will just grit my teeth and ride out the storm.

FWIW, that is what I am doing - easier if you only have 3% in THRG perhaps!

If I had any spare cash I might be tempted to top-up even.

I think Throgmorton quite compelling on a mid term view. Only my opinion, of course, but the IT is invested in some pretty solid companies. As soon as the economic weather forecast looks brighter, Throgmorton should appreciate very nicely.

Bought two lots myself recently. About 3% of total portfolio.

I think this applies to a lot of growth ITs at the mo. On a few year’s forward view, my wife and I see current prices as good top up points. We have therefore been gradually re-investing the ‘ammo’ we created when some of our holdings were flying in 21, plus adding new funds too. Doing this has served us well over the years. No certainty to catch the bottom of course, there never is, but when things pick up it it just as hard to catch good prices imho. Nothing ventured…

Plodder

Growth is still expensive so i am not sure it it's yet time to top up. I think value will continue to rerate and inflation won't be transitory. However the future is unknowable.

Ultimately my biggest concern now is the performance of the post-BREXIT UK economy and the lack of a credible economic strategy. This isn't because of exposure to it through my investments. It's because it's where we live. I think their will still be UK small caps that thrive even in a shrinking UK economy.

AWOL wrote:Growth is still expensive so i am not sure it it's yet time to top up. I think value will continue to rerate and inflation won't be transitory. However the future is unknowable.

Ultimately my biggest concern now is the performance of the post-BREXIT UK economy and the lack of a credible economic strategy. This isn't because of exposure to it through my investments. It's because it's where we live. I think their will still be UK small caps that thrive even in a shrinking UK economy.

UK small caps face a lot of headwinds. Brexit red tape has hit small businesses hard, much more so than larger businesses, with many completely abandoning EU exports. There are significant staff shortages affecting many small businesses. This puts pressure on earnings as they have to increase labour costs to attract staff and/or hold on to those they already have. UK small caps are much more reliant on the UK domestic economy than big caps and that is looking to be headed for trouble due to the cost of living crisis. Much of this is likely to already be in the price of course. Even so, I would not want to bet 10% of my equities portfolio on UK small caps in a single IT. Admittedly I wouldn't want to do that in boom times either.

Interesting ...explanation of the discount at THRG (section titled "The whale dumping Throgmorton")

https://citywire.com/investment-trust-i ... d/a2387507

monabri wrote:Interesting ...explanation of the discount at THRG (section titled "The whale dumping Throgmorton")

https://citywire.com/investment-trust-i ... d/a2387507

Thanks, that does help explain the present price weakness. Note, CityWire log in is required to read the article.

Any chance of a summary please? I hate signing up for more than I have to.

I presume it's as simple as a large holder selling out?

doug2500 wrote:Any chance of a summary please? I hate signing up for more than I have to.

I presume it's as simple as a large holder selling out?

Yes, Prudential with profits fund managed by M and G selling because of fund management change. Essentially, any way.

Hi Doug2500.

An excerpt from the article linked to

"... However, it is likely some of the persistent selling pressure is coming from Prudential’s £94bn with-profits fund, which had been a leading investor in investment trusts and overweighted the sector.
M&G Investments, the overall manager, has outsourced the management of a passive UK equity portfolio within the with-profits fund to an external index-tracking specialist, Citywire revealed at the start of the April. A subsequent rebalancing is seeing trust holdings being sold or scaled back ..."

Regards, Newroad

Thank you both.

It's not an 'informed' sell then, just a change of policy. I'd love to know how it turns out in 5 years time. I know where I'd rather be, but then I'm not accountable to anyone and have my own views on risk and aims.

Thank you for bring SWDA to my attention. Naively this seems to me to be a rock solid holding. However its Key Investor Information Document rates it as 6 out of 7 on the risk profile, only one notch below "extremely risky". Does this make sense? Do you take much notice of the KID?

Cinelli

I take no notice of KIDs. They're a box ticking exercise, just like home energy survey packs. As much use as telling me that I'm a male because I have a penis.

SWDA's a world tracker, so it will show a lot of volatility, hence it's marked as risky.