mc2fool wrote:Of course HICL isn't a REIT, although it is in part a property company.
The fact that HICL & UKW etc are ITs doesn't change the fact that they are infrastructure & renewable energy (wind) companies as well.
PHP builds/buys and runs GP facilities, and happens to be a REIT.
UKW builds/buys and runs wind turbines, and happens to be an IT.
DIGS builds/buys and runs student accommodation, and happens to be a REIT.
HICL builds/buys and runs hospitals, schools, roads, railways and a few other things, and happens to be an IT.
I don't suppose you have a nice collective term for these companies in whose underlying investments one cannot directly invest?
There seem to me to be two interrelated key points about this, namely who manages the underlying investments
. HYPs are basically distinguished from portfolios of high-yield 'funds' (*) by the fact that it's the HYPer themself who manages the investments (and especially their diversification), not a fund manager or a computer. The TMF HYP Practical board was originally intended to be about how one goes about that in practice and the TLF HYP Practical board was originally intended to be a continuation of the TMF HYP Practical board, and if that intention is unchanged (see near the end of this post), then discussing approaches that delegate the job of managing the investments to a fund manager or a computer is about as welcome as a heckler at a Woodworking Practical workshop who tells the attendees that it's far easier to pay someone else to do the job.
That is basically the motivation behind the rule against 'funds' in a HYP, which was the slightly-too-prescriptive (**):
"The type of strategy discussed on this board invests in shares:
• As a diversified portfolio of directly-held shares, to reduce risk and costs. Holding shares indirectly via funds is not part of the strategy, due to the fund management fees - this includes not using investment trusts and ETFs (also known as iShares).
A HYP strategy doesn't have to adhere 100% to these hallmarks. But if a strategy deviates from them in a major way, such as having a significant proportion invested in funds or frequently selling shares after a shorter holding period, then it is off-topic for this board.
, is the arguably-oversimplified:
"Investment Trusts or open ended funds should not be included, although REITs are acceptable.
, and that various HYPers have their own variants of - mine (from earlier in the thread) being:
"As far as my own HYP is concerned, the rule is that investment trusts and similar companies are not permitted into it if a substantial proportion of their underlying investments are ones that my HYP could invest in directly.
They're all aimed at saying that what matters is that the board is basically about the practical details of managing a portfolio's underlying investments and their diversification in line with HYP strategies oneself. Not in every last detail - the HYPer does delegate the job of choosing exactly which power stations, housebuilding sites, wind turbines, commercial properties, etc, to invest in to the managers of the companies - but the HYPer does
decide on the high-to-medium-level split of the investments, and arguments about whether they should be doing that don't belong on a board about the practical details of doing it.
So my view is that at least as a reasonable approximation, it's "generalist investment trusts" that the guidance should be against, rather than an unqualified "investment trusts". I can invest in UKW or HICL and still be in control of my HYP's split between alternative energy, infrastructure and other sectors, whereas if I invest in City Of London IT (CTY) or Merchants Trust (MRCH), I'm handing over that control to a fund manager. That approximation does need a bit of careful interpretation, as most investment trusts have some degree of specialisation - e.g. CTY's investment objective is "To provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange.", so it's specialised to the extent of investing mainly in LSE-listed shares and not in shares of the many thousands of other publicly-traded companies in the world. So perhaps the guidance should be "Investment trusts and open-ended funds should not be included, except that REITs and other sector-specialised investment trusts are acceptable.
That still leaves the issue of country/region-specialised generalist investment trusts, such as those specialising in US, European or Far-East companies - personally, I permit them, but it's only on the basis that they're restricted to being a small proportion of my HYP (10% of it maximum for all such investment trusts combined, and it's currently only 2-3%) and so their effect on my HYP's sector diversification is small. I.e. basically, I include them under the TMF guidance's "A HYP strategy doesn't have to adhere 100% to these hallmarks.
" let-out, which isn't explicitly in the TLF guidance but various moderator comments about not rules-lawyering, nit-picking, etc, lead me to believe are effectively in it.
So basically, I think the restriction is basically a consequence of the intended purpose of the HYP Practical board. That does of course mean that "if that intention is unchanged" above is a very
big "if"! And I'm not saying that it must be unchanged - that's up to stooz and Clariman as owners of the site. I am however saying that until and unless they change that intention and tell us clearly what their revised intention is
(and if so, renaming the board to match it would probably also be a good idea), there is only that original intention to go by when writing the board's rules/guidance. Furthermore, this thread's subject is clearly about a detail of the rules/guidance rather than about the much broader question of what the intention should be - so if anyone wants to discuss whether it should be changed, I'd suggest they start a separate thread about it. At least IMHO, such a change would require a much wider review and probably rewrite of the board guidance to avoid it being out of step with whatever that changed intention is - and the changed intention needs to be decided upon before that review/rewrite can sensibly be embarked on.
(*) By 'funds', I mean unit trusts, OEICs, investment trusts, ETFs, etc, generically.
(**) It's slightly too prescriptive because all that really matters is that the HYPer has chosen to manage the portfolio themselves - whether they've done so because of the management fees, because they want to do so or for any other reason doesn't really matter.