This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of four books [see sidebar and books tab]
Edinburgh is one of
the largest investment trusts on the market with assets of over £1.7bn. It is managed
by Mark Barnett.
The trust invests
primarily in UK securities with the long term objective of achieving:
1. an increase of
the Net Asset Value per share by more than the growth in the FTSE All-Share
2. growth in
dividends per share by more than the rate of UK inflation.
The trust holds just
over 50% FTSE 100 companies, 23% second tier FTSE 250 and 15% of the portfolio
comprise overseas listed holdings. This is probably not one for ethical
investors - 4 of the top 10 holdings are tobacco companies and together account
for just over 20% of the portfolio.
Edinburgh has been
one of the cornerstones of my income portfolio held in both Sipp drawdown and
ISA for many years. The sum of £1,000 invested in 2007 would now be worth
£2,370 - the second best performer in the UK equity income sector behind
Finsbury Gr. & Income Trust.
It has recently issued
its results for the year to 31st March 2017 (link via investegate).
The Company's net
asset value, including reinvested dividends, rose by 14.1% during the year,
compared to 22.0% (total return) for the benchmark FTSE All-Share Index.
5 Yr Comparison v VLS 80
(click to enlarge)
Income per share over
the year has increased by 4.5% to 27.9p. The board are proposing a final
dividend of 9.15p making a total of 25.35p for the full year - an increase of 1.0p or 4.1%
which is a small improvement on the previous year. Based on the current
price of 760p, the yield is therefore 3.3%.
Last year the trust
outperformed the benchmark by 8% - this year it has fallen short by 8%. Over 10
years, the return is very good but over 5 years the record is more average and
dividend growth is below par at just 1.8% p.a. This is the 3rd full year in charge for
Mark Barnett after taking over from Neil Woodford.
...and over 2 Years
There are some
managers who can consistently outperform the market but the evidence shows that
over time most fail and this is why I have been moving a larger proportion of
my portfolio into low cost index funds over the past couple of years.
I will be
trimming my current holdings in this trust but will give Mr Barnett a little
more time to see if he is one of the few who can consistently beat the
benchmark over the longer periods - time will tell.
All in all, not such
a good year but the longer term record remains acceptable. Lets see how things
pan out over the coming 12 months....
This property trust was added to my ISA last
October and I also added it to my Sipp drawdown portfolio at the start of this
The fund is managed by Thames River and aims to maximise the
total return by investing in international property shares and direct property
mostly in the south east of UK. Manager, Marcus Phayre-Mudge has been involved
in property investment since 1992 and has been involved in running the
Investment Trust since 2004.
At the end of April the largest geographic
exposure was the 45% weighting in the UK, with France making up a further 17%,
Sweden 10% and Germany 21%. Retail and office space accounted for 31% and 32%
respectively, with another 27% in residential and the remainder divided between
industrials and diversified. The main investment areas at the moment are
shopping centres, residential property in Germany and offices in London’s West
The trust has recently published results for the full year to
end March 2017 (link via Investegate). Net assets have increased by 8.0% and
share price by 9.1% due to a narrowing of the discount.
Commenting on the results, chairman Hugh Seaborn said:
"The UK has performed better
than many commentators expected but there are clear risks due to the
uncertainty of the outcome of negotiations for the UK's exit from the European
Union. Our concern is that businesses will be potentially less able to commit
to longer term investment (such as new leases) without clarity on key aspects
such as potential trade barriers and cross border supply chains. For similar
reasons it is possible that there will be a deferral of the development cycle
resulting in reduced speculative construction starts.
Expectations of global growth
continue to improve. Although bond yields have risen as a result and there have
been some inflationary response, they remain at historically low levels. In
this context the income characteristics of real estate coupled to the emergence
of economic growth which provides an environment for rental growth, will remain
attractive to investors. The Manager continues to seek to invest in businesses
with strong cash flows and the potential for earnings growth and this combined
with the mitigation of risk through a diverse portfolio invested across
numerous submarkets and geographies, is reflected in their decision to maintain
Long Term Performance
Revenues have increased by 36% partly as a result of the fall
in the value of sterling against the Euro. As a result the final dividend will
be increased to 6.4p making a total of 10.5p for the year, an increase of 26%
compared to the previous year (8.35p). This gives a yield of 3.0% at the
current price of 346p.
This trust has so far been a positive addition to my
portfolio - the share price is up 17% on my purchase price last year, recently
receiving a boost after the election outcome in France, and the dividend
increased by 26%. Obviously the next couple of years will be mainly dominated
by the Brexit negotiations so I expect a little volatility in the share price
but the income seems fairly secure and I am happy to continue and may well add
on any significant pull-back in the price.
As ever, this article is merely a record of my
personal investment decisions and should not be regarded as an endorsement or
recommendation -always DYOR!
This large infrastructure trust was added to my
ISA portfolio last December. HICL was the first of its kind to launch in 2006
raising £250m - just over a decade later it has grown 10-fold with current
assets approaching £2.5bn.
HICL raises money from investors and then buys up
infrastructure assets such as hospitals, schools and police stations around the
world. The majority of the portfolio is focused in the UK and HICL receives
management fees for the maintenance of these buildings, and, in some cases, for
providing extra services such as catering and cleaning.
They have today announced results for the full year to end
March 2017 (link via Investegate). Total return for the period is 10.3% and their portfolio of assets has increased 17%
from £2bn to £2.4bn.
Earnings per share are up 4.2% to 12.4p which easily supports a full
year dividend of 7.65p. The proposed increase for the coming year is 7.85p which
gives a forward yield of 4.5% based on the current share price. They also propose
an uplift to 8.05p for 2019.
Commenting on the results, Chair Ian Russell said:
"HICL's investment proposition to deliver sustainable,
long-term income to shareholders, while preserving the capital value of its
portfolio, continues to resonate well with investors, particularly in a
continued low interest rate environment. This was most evident in the context
of the Company's recent £260m equity issue, which was more than three times
We remain disciplined in our approach
and are committed to ensuring that new investments enhance the existing
portfolio. During the year we invested £266.6m in 10 new and five incremental
investments, which increased both the scale and the diversity of the Company's
portfolio. We are well placed to take advantage of new investment opportunities
in our pipeline and, since the year-end, have secured an interest in Affinity
Water which brings new benefits to the portfolio, including enhanced inflation
correlation, which has increased from 0.6 at 31 March 2016 to 0.8 currently".
3 Yr Chart (click to enlarge)
This trust is a recent addition to my portfolio
so early days but so far I am happy with progress and look forward to
collecting my steady 4.5% dividends and hopefully a little extra in capital
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation -always DYOR!
It is now two years
since I added this to my portfolio and time for another update. The fund
represents the largest holding in my portfolio.
Following a review
of my investing strategy in 2015, I have come around to thinking that probably
all I really need is a very simple, no-frills low cost diy strategy which makes
sense, which can be tailored to fit in with my attitude to risk/market
volatility and has every chance of providing a decent outcome.
is all about the long term for the best probability of a good result. Investors
therefore need a sound strategy which will provide them with every chance of
lasting the course or ‘staying in the game’.
rejected the LifeStrategy option for at least the previous two years, I decided
to change tack and take the 'income' I needed from selling units in the
fund rather than the natural yield which I have done with my shares and
Vanguard LifeStrategy funds offer a balanced portfolio of globally diversified
equities combined with some gilts and corporate bonds.
by holding just a single LifeStrategy fund, my portfolio is widely diverse with ~18,000 stocks/bonds from all around the world. The bond element (assuming
you do not want the 100% equity) will comprise a combination of UK gilts,
global bonds, corporate bonds and inflation-linked gilts. The equities element
includes their UK all share tracker, global funds and some exposure to emerging
big advantage for me is the auto rebalance to ensure the fund always remains at
the risk level selected at the start - in my case with VLS60, 60% equities. The
fund is frequently rebalanced - probably daily as new money is injected via
annual charges for the Lifestrategy range have been reduced to 0.22% p.a. in
the past year. My platform costs with Halifax Share Dealing are £12.50 p.a.
which works out at 0.04% for £30,000. This fee would be £45 if held on
Vanguard's new platform however there would be no charges for buying and
how has the fund performed? I made my initial purchase in my new ISA with
Halifax in May 2015 and topped up later in the year as the markets retreated.
My average purchase price was £136.50.
current price two years on is £169.50 so a gain of 24.1%.
(click to enlarge)
comparison, the total return for the FTSE All Share over the same period is
~15.0% so the combination of 40% bonds and a wider exposure to global equities
in the VLS fund has worked very well. The LifeStrategy fund is priced in US
dollars and some of the rise in unit price has come from the fall in sterling
total return for each of the last 5 full years has been
2017 2.81% (4m to end April)
average annualised return since inception is 9.3%.
returns for the FTSE All Share Index2012
12.3%, 2013 20.8%, 2014 1.2%, 2015 1.0%, 2016
16.7% and 2017 year to date 6.8%.
natural yield on the fund is ~1.4% however I really need an income from my
investments of around 4%. I have purchased the accumulation version of the fund
with the intention of selling off some units each
year to provide the 'income' I require.
Due to the
unexpected boost in my Lifestrategy fund last June, I decided to sell 8% of my
holding which is the equivalent of 2 years 'income' so for the coming year I
already have my income requirement covered and can therefore leave the fund to
be seen above, selling off 4% would work in 4 out of 5 years. For periods when
returns are negative, I hold a cash buffer of 10% of the fund value in my
building society a/c however, so far it remains untouched and has increased
with the accumulated interest.
appeal of the VLS strategy is its simplicity - 18,000 assorted global equities
and bonds in one fund with low cost of ownership. It offers me the level of
equity/bond allocation to match my requirements and can deliver a reasonable
return compared to other strategies.
seems to me that putting together a DIY investment portfolio does not come much
simpler than this. You decide on your asset allocation, select your broker,
invest your lump sum and/or set up your automated monthly direct debit - job
done, get on with your life!
only minor reservation I have is the equity allocation of 25% to the UK is a
little high and I would prefer a lower figure of say 15%. Otherwise I am more
than happy with returns for my first two years and hope to top up my ISA
holding in the next few months as I have a build up of cash from various sales
and the redemption of my building society PIBS.
Leave a comment below if you
hold VLS or have any thoughts generally.
Over recent months I have become increasingly
cautious regarding my equity investments. The US markets appear to offer little
more upside - CAPE ratios have only been higher in 1929 and 2000. Of course the
current bull run could carry on for some time but there will be no 14 day
warning when the markets turn. The UK markets will not be immune from any US
bear market and as I have had a very good run in recent years, it is prudent to
rebalance my portfolio.
Some of my disposals over recent weeks include partial sales (top slice) of Aberforth, City of London and Edinburgh and
complete sales of Dunedin Income, Invesco Income and Law Debenture Trust. Share
sales include Amec Foster, Berkeley Homes, IMI, Unilever and IG Group (which leaves just Next and Legal &
I have therefore taken a look at a few options for
investing some of the cash building up from these sales. One addition has been
iShares Corp. Bond (ex fin). In the past I have held Personal Assets Trust to
protect some of the gains but for now I have settled upon Capital Gearing.
CGT has been managed
by Peter Spiller for the past 35 years over which period he has a very good
track record. The only negative return over this period was a loss of 2.5% in
2014. He successfully navigated the
financial crash of 2008/09, making 6% return for investors that year while the
FTSE All Share was down 30%.
CGT v PNL (click to enlarge)
returns since 1982 have been ~14% p.a. compared to ~10% for the All-Share index
The aim of this
trust is firstly to preserve capital and then to achieve capital growth in
absolute terms rather than relative to a particular stock market index,
principally through a wide variety of investments including variable weightings
of investment trusts, cash, bonds,
index-linked securities and commodities when it is considered appropriate.
trust finished 2016 with a very defensively positioned portfolio - a low allocation to equities and an emphasis
on short-duration in the fixed income portfolio. Spiller believes that high
asset prices mean that the prospects for medium-term returns are muted.
current allocation :
Trusts 33% (includes equity, property and infrastructure)
Linked Gilts 35%
Bonds 21% (incl preference shares)
many years the trust share price traded at a significant premium to net asset
values but the management introduced a discount control mechanism in 2015 which
helps to reduce volatility and keep the price closer to NAV.
trust has ongoing charges of 1.0% however, in addition, there will be charges
associated with holding the investment trusts.
initial entry price earlier in the week was £38.60.
In the most recent
quarterly report the manager observes "...that prospective returns are as
low as they have ever been, our principal role as stewards of your money is
return of your capital, rather than return on your capital. The portfolio is
defensively positioned and likely to remain so for the foreseeable future".
The final results
for the year to April 2017 are due end May.
this article is merely a record of my personal investment decisions and should
not be regarded as an endorsement or recommendation -always DYOR!
Vanguard UK have today announced the launch of their own platform for UK investors to compete with the likes of Hargreaves Lansdown
and AJ Bell.
They are offering a stocks & shares ISA, a basic general account (non ISA) and a junior ISA. Investors will be able to choose
from Vanguard's full range of index funds - including the popular Lifestrategy
range as well as Target Retirement funds - also actively managed funds and full
range of exchange traded funds.
I understand a SIPP will be offered later this year.
Obviously the drawback will be that investors are restricted
to holding just Vanguard investments so will not be able to hold individual shares or
investment trusts and funds from other providers.
As you would expect the charges are low - just 0.15%
which means £30 p.a. for this year's £20,000 ISA allowance for example. With HL the
charges would be £90 and with AJ Bell Youinvest £50. Also there are no dealing
charges for the purchase/sale of funds and £7.50 for dealing ETFs.
This move was flagged up last year so it is good to
see the launch.
It will be interesting to see the response from the
established platforms as I am sure Vanguard's offering will be very attractive
to those who are happy just holding their range.
In 2015 I opened an additional ISA with Halifax to
hold my Vanguard Lifestrategy 60 fund and for a one-off buy and hold this is
still cheaper than Vanguard so I will keep it going. I also have my Youinvest
ISA with my mix of investment trusts which I will also retain.
However I will
look at a new ISA for this coming year with Vanguard when the time comes around
to add to my Lifestrategy holding.
Leave a comment below...what do you think about the new platform?
Scottish Mortgage is an actively managed, low cost
investment trust, investing in a high conviction, global portfolio of companies
with the aim of maximising its total return to its shareholders over the long
term. The managers aim to achieve a greater return than the FTSE All World
Index (in sterling terms) over a five year rolling period.
Having waited some
time for a pull-back in the share price without success, I decided to add the
trust to my SIPP portfolio at the start of the year and made my initial
purchase at 338p. The share price has advanced 15% to currently 389p.
The trust has today issued results for the full year to end March 2017 (link via Investegate). Share price total return is up
41% compared to 33% for the benchmark FTSE All-World index. Scottish Mortgage has increased total net
assets to more than £5bn making it one of the UK's largest investment trusts.
It was recently promoted to become the only investment trust in the FTSE 100
and this has provided a boost to the share price as it now has to be held by
all the FTSE 100 index funds.
The managers, James Anderson and Tom Slater run
a conviction portfolio of around 70 shares. The result is a portfolio dominated
by big holdings in some of the companies involved in the new world of social
media, the internet, healthcare, eco-friendly energy and gene therapy.
3 Yr Performance (click to enlarge)
The top ten holdings
account for 54% of the portfolio and include Amazon 9.5%, Baidu 4.4% (China's
equivalent of Google), Alibaba 5.1%, Facebook 4.8%, Tesla Motors 6.8% and
Alphabet (Google) 3.7%. Some 10% of the portfolio is invested in unquoted
companies - Dropbox, peer-to-peer lender Funding Circle and airbnb to name
three I am familiar with.
Largest holding Amazon has become a giant in global
retail. Over just 10 years it has grown more than 20-fold from a market cap of
$20bn to currently $460bn.
Many of these network businesses
now seem to have reached a critical tipping point, whereby their sheer
dominance and scale become a reinforcing competitive advantage. This stems from
the developments within machine learning and artificial intelligence (AI). The
increased level of global connectivity, through the combination of the
relatively new infrastructure of the mobile internet, social media and smart
devices, has produced an explosion in the proliferation of data. The volume of
this is now so great that no human could hope to curate the content. It will
require machine learning and AI to process it. The leaders in these fields need
access to the best data sets, produced by the largest networks. It is no
accident that Baidu, Alphabet, and Facebook are leaders in this area.
offers a clear, consistent and simple proposition: a portfolio of long term
investments in what the managers believe to be the best growth businesses,
operating in any industry and anywhere around the world.
Over the past ten years, the trust has delivered
a return of 302% (second only to Linsell Train) compared to 148.7% for the All-World index. Although this is
essentially a global growth trust, it is worth noting it has increased its dividend
every year for the past 33 years. However, due to the share price appreciation,
the current yield is 0.8% (about the same as an average savings account!).
Obviously I am
pleased with progress since my recent purchase and hope to add to my initial
holding when there is a pull-back down the line but for now the current holding
will return to the bottom drawer.
this article is merely a record of my personal investment decisions and should
not be regarded as an endorsement or recommendation -always DYOR!