Portfolio Advice for 2017


#1

I recently transferred my SIPP to a new provider and elected to make the transfer in cash. I am approximately 45% invested following the transfer. As 2017 is nearly upon us, now would seem to be an opportune time to review my investment approach for the future. By way of background:

I am intending to retire or wind down (depending on personal circumstances / health etc) in around 12 years time, but this is flexible.
The total cash transferred is circa £230,000. I intend to make annual contributions totalling £16,000 (gross) and increasing by around 4% p.a.
I also hope to make total additional lump sum contributions of between £100k and £150k during this period as well.
Neither my wife nor I have access to defined benefit pensions and hence our retirement income is dependent on the success or otherwise (!) of the investment approach taken.
We haven’t accumulated as much as we would like this far, but we do have three children who are now healthy and happy and reason that this is by far the most important thing :-).

Enough background. I am thinking of holding a combination of income generating stocks (with a view to reinvesting dividends during the accumulation period) and growth stocks. Although not averse to holding individual stocks, my preference is Investment Trusts (low platform charges) as I have to recognise the fact that I have very limited time during the working week to do the necessary research and keep on top of my investments.

Ideally I would also hold part of the portfolio in bonds / cash & other preferably uncorrelated or inversely correlated assets, but I think this is easier said than done in the current rather artificial environment. I am thinking of holding circa 20% of the portfolio in asset allocators run by managers I trust - such as PNL, RICA & CGT ? (I quite like RCP as well, but think this is currently expensive?). I also think BH Macro is an interesting inversely correlated holding which can prove its worth in volatile markets. At the moment I would hold another 5% in cash, if not more.

UK - considering TIGT (held Troy Income for a number of years), CTY, Temple Bar or Law Debenture (maybe both as I think a value tilt may be worthwhile at present - bond proxies argument?), Finsbury Growth & Income.
Henderson Euro Trust
North American Smaller Companies (hold already) or F&C Global Smaller Companies
Murray International
Fundsmith Emerging Equities Trust or Templeton Emerging Markets (change of manager has made this interesting)
Schroder Oriental Income, Henderson Far East Income or Pacific Assets
Scottish Mortgage

Infrastructure? Possibly an etf and / or Utilico Emerging Markets. Another possibility is the First State infrastructure unit trust,

Private equity / early stage (although Scottish Mortgage has a reasonable exposure to unquoted investments) - F&C Private equity or Harbourvest.
Commercial Property - TR Property & Tritax Big Box Reit (hold already)

I would welcome any comments on suggested % allocations to the investments / views on geographical and asset diversification.
I have also wondered about a global generalist such as Witan or even Scottish Investment Trust (starting to look interesting now).
Finally I would be interested in views on number of holdings. I don’t want the portfolio to be too unwieldy such that it becomes a closet global tracker.
Any insights on what others may do in my position would also be welcome. I understand that I must do my own research, but alternative opinions are always welcome, as are indicative portfolios.

Please be gentle!

Thanks in anticipation.


#2

Quite a long list of trusts there @snowy but it’s a interesting list too. It might be easier if we break it up a little. There are a few trusts there I am not most up to date with. If someone doesn’t get in there before me I’ll come back to you tomorrow after I’ve done a wee bit of research.

Not sure if they still offer this service but the @whichinvest guys used to be happy to do research on trusts when requested.

Your query looks like a good candidate for their Investor Clinic too.


#3

We do still review trusts upon request @rabsteel and @snowy but it can take some time for them to be done.

We’ll mention @snowy seperately on Investor Clinic.


#4

@snowy might be worth considering financial advice - for example could your wife contribute to her own pension (e.g. the non-earner £3600 limit) to minimise the income tax you pay in retirement.

The ability to access bonds through trusts is limited and you might want to consider ETFs for that category.

With regard to the trusts you mention - they all sound like viable choices - so far I’ve generally avoided the flexible investment/cautious sector but I wouldn’t argue against allocating 20% to reduce risk. I’m not sure I would bother with BH Macro if you are including trusts like CGT.

I’ve also just picked TR Property for my first property trust.

You don’t have any explicit UK smaller company exposure (Diverse Income - DIVI, or Right & Income RIII) might fit the bill.
Nothing in commodities (BlackRock World Mining - BRWM) or healthcare (Worldwide - WWH) but these are risky.

A few comments on some of the trusts you mention
Temple Bar - a contrarian choice, been through a rough patch but very recent performance has picked up (after I’ve sold my holding unfortunately)
Henderson Far East Income - I would stick with Schroder Oriental - slightly cheaper and generally better performance
Pacific Assets - I like the investment approach (sustainable) by the managers on this trust
Utilco Emerging Markets - I’ve held this one for years - you should probably consider in the emerging markets asset allocation though
F&C Private Equity (FPEO) & Harbourvest (HVPE) - I’m a big fan of Private Equity, these are sound choices (Pantheon International is another possibility - PIN/PINR) - given you timescale I would consider ~15% a reasonable allocation as discounts can be found in this sector.

Given your portfolio size I don’t think ~20 holdings is too many, I have a lot more than that (but I should really try and consolidate).