HYP Complemented with Investment Trusts

[Darka]

For a variety of reasons discussed previously, I am adding a basket of (preferably High Yield) IT's to run alongside my HYP.

This will give me greater diversification in some cases and an approach going forward for my wife to follow should anything happen to me; as she's not going to be able to run a HYP portfolio herself with single share selections, the idea of that scares her (a lot) - so she could sell up the shares and buy more of the IT's if required later on in life.

Anyway, here is my initial list for selection, I already have the ones' marked with a (*) - I know City Of London (CTY) adds virtually no diversification over my HYP, but it's a good IT which covers the FTSE, so if she sold all the individual shares it would be a good one to hold - and the idea is to have a complete IT portfolio set up in one of her ISAs as an example for the future.

It's difficult to find IT's which are high yield and not UK based....

(*) = Already Own
(**) = Good Diversification from existing HYP



Others to Consider (Not necessarily HY):



Thoughts and comments are welcome as always.
regards,
Darka

[Dod1010]

I completely understand your logic and think it is good. One obvious IT missing is Edinburgh which is a good long term performer with a decent yield of 3.6%. As you are illustrating, it is difficult to get many ITs which have a high yield without compromising growth which at least maintains purchasing power. Merchants and possibly SCAM come to mind.

I would have Temple Bar (yield 3.1%) and Murray International (3.8%) in the mix.

Scottish Mortgage? It has had a great run but I think your wife might be put off because it will have a bout of volatility I have no doubt and it has virtually no income. I like it for the reason you say, good diversification and I happen to like the two managers and their views on investing. Something quite different from the usual.

I hold Edinburgh, Murray International, Temple Bar and Scottish Mortgage, inter alia, and am a somewhat reluctant holder of Murray Income ( It has a poor capital growth record)

Dod

[mickeypops]

Hi. I own many of the ITs already mentioned, and for further international diversification also have Middlefield Canadian, European Asssets, JP Morgan Global Emerging Markets - all are high yielders.

There's also some decent property and infrastructure ITs with decent yields if you want to include some alternatives for further diversification.

[Darka]

Thanks Dod,

Some great ideas and always appreciate your input.

I agree about Scottish Mortgage, suspect it will be very volatile and income is very low, but I may get a little anyway for long term total returns, but it's riding high at the moment so will hold off.

regards,

[Darka]

Hi. I own many of the ITs already mentioned, and for further international diversification also have Middlefield Canadian, European Asssets, JP Morgan Global Emerging Markets - all are high yielders.

There's also some decent property and infrastructure ITs with decent yields if you want to include some alternatives for further diversification.

Some great suggestions - will check them out, thanks!

[Dod1010]

Personally I have always been put off infrastructure ITs because I am never very sure of their underlying assets although HICL has been a great performer. It consistently is at a premium to NAV although if you are keeping it indefinitely that is not a big issue. I do not hold but have been tempted several times. may be worth looking at in detail.

Dod

[mickeypops]

Yes, I agree that the premium over NAV can be eyebrow raising for some of the infrastructure ITs but I wonder if the assets are being very conservatively valued. I hold the following in my SIPPs for income, and intend to hold indefinitely as long as the income stream holds up.

John Laing Infrastructure
The Renewables Infrastructure Group
Bluefield Solar
GCP Infrastructure Investments
Sequoia Economic Infrastructure

The last two are more asset finance related rather than direct investment in infrastructure projects.

MP

[Raptor]

I own MYI, HFEL, DIG and MRCH.

I also selected SCF:-

Schroder Income Growth Fund Overview
The Fund aims to provide real growth of income above the rate of inflation, and capital growth as a consequence of the rising income. The fund manager focuses on shares which trade at a relatively low valuation compared to the company’s assets or profit growth outlook. These shares tend to carry a high yield. The fund manager invests in shares where he believes the company will be able to continue to pay out a high level of income through growing profits. A typical portfolio holding will therefore have a track record of producing strong returns on capital employed.

Currently paying 3.74% Nav -9.2

Have been looking for more IT's, so will watch this thread with interest.

Raptor.

[moorfield]

I know City Of London (CTY) adds virtually no diversification over my HYP, but it's a good IT which covers the FTSE, so if she sold all the individual shares it would be a good one to hold - and the idea is to have a complete IT portfolio set up in one of her ISAs as an example for the future.

Currently I use the CTY yield as the benchmark for my HYP holdings, largely because I find it easy to reference and it covers the FTSE indices as you say. I won’t add or top up anything yielding below CTY, but am happy to hold existing that are below, as long as my overall HYP income remains on target.

In time I think I will start moving from HYP to ITs, probably when I commence retirement, and I’d be comfortable moving everything into just CTY actually. That raises debate about the management & governance risks of individual ITs but perhaps O/T here.

[mickeypops]

I posted on another thread a little while ago that I started out with a HYP in my SIPP about four years ago. Over the next couple of years the value of many of the holdings drifted quite significantly off the equally weighted starting point, with winners and losers. I realised that I wasn't suited to the kind of unease this caused. I liquidated the lot, selected a collection of income focussed ITs and left them to simmer very nicely. No stress! I consider the managers fees well worth the greater peace of mind.

[BreakoutBoy]

I also have ITs. One nice thing with ITs and other collectives is they can give some exposure to small caps that normally would be too volatile for me to handle individually.

[richfool]

Darka, There are a couple of other threads around that maybe of interest to you, one about a portfolio of IT's -v- a HYP.
Have a look at these:

viewtopic.php?f=8&t=6988
viewtopic.php?f=54&t=6911

Note that CTY, TMPL, MRCH, DIG & MUT are all from the same UK Growth & Income sector, which as you say may further overlap with a HYP. UK G&I's here:
http://citywire.co.uk/money/investment- ... ePeriod=12

If you are looking for income and want to avoid (or minimise exposure to) UK equities, I would suggest looking at Global Growth & Income trusts, such as MYI, JPGI, HINT, SCAM (rather than UK G&I's). That sector is here:
http://citywire.co.uk/money/investment- ... ePeriod=12

Note that SMT Scottish Mortgage is in the Global Growth sector and has a very low yield.

I hold CTY, TMPL, SLET from the UK G&I sector
and MYI, HINT, JPGI, SCAM, from the Global G&I sector (I hold primarily for income and some growth)

[TahiPanasDua]

I hold CTY, TMPL, SLET from the UK G&I sector
and MYI, HINT, JPGI, SCAM, from the Global G&I sector (I hold primarily for income and some growth)

Richfool,

I have a few UK G&I ITs, namely Luni's Basket of 8. If I weren't so indolent, I would ditch the likes of MUT and Merchants as they provide decent income but seemingly at the expense of growth. CTY and EDIN are a decent compromise in this sector. Growth is modest but it's acceptable if you want income now.

As I don't have any Global G&I ITs, I was contemplating MYI and JPGI but read an article somewhere recently that JPGI's dividend is only so huge because they add significant share sale proceeds to their natural income. They will be unlikely to be able to do that after a cyclical downturn. If they do, the NAV will surely drop a lot, almost certainly never to return.

I will stick to MYI for diversification even though they are not impressive on the growth side.

TP2

[richfool]

As I don't have any Global G&I ITs, I was contemplating MYI and JPGI but read an article somewhere recently that JPGI's dividend is only so huge because they add significant share sale proceeds to their natural income. They will be unlikely to be able to do that after a cyclical downturn. If they do, the NAV will surely drop a lot, almost certainly never to return.

I will stick to MYI for diversification even though they are not impressive on the growth side.

TP2

TP2, Yes I was aware that JPGI is targetting 4.00% dividend yield, if necessary by drawing on capital. A decision they made last year. I was happy to take that on, as they give me exposure to a different type of stocks, - more growth orientated stocks, - whilst still keep the income up. (For example, their holdings include Alphabet Inc and Prudential).

I would add at least one other to your Global G&I IT's to spread the risk, if not for further diversity or a different strategy.

I do also hold income focused IT's from other sectors including Asia Pacific, Europe and North America, and Commercial Property, Infrastructure & Private Equity.

Regards
Richfool

[TahiPanasDua]

As I don't have any Global G&I ITs, I was contemplating MYI and JPGI but read an article somewhere recently that JPGI's dividend is only so huge because they add significant share sale proceeds to their natural income. They will be unlikely to be able to do that after a cyclical downturn. If they do, the NAV will surely drop a lot, almost certainly never to return.

I will stick to MYI for diversification even though they are not impressive on the growth side.

TP2

TP2, Yes I was aware that JPGI is targetting 4.00% dividend yield, if necessary by drawing on capital. A decision they made last year. I was happy to take that on, as they give me exposure to a different type of stocks, - more growth orientated stocks, - whilst still keep the income up. (For example, their holdings include Alphabet Inc and Prudential).

I would add at least one other to your Global G&I IT's to spread the risk, if not for further diversity or a different strategy.

I do also hold income focused IT's from other sectors including Asia Pacific, Europe and North America, and Commercial Property, Infrastructure & Private Equity.

Regards
Richfool

Thanks richfool.

Your suggestion is good that I should have more than one international diversification IT. My post, however, was a bit misleading as I already have just under 15% portfolio overseas diversification through ETFs. (EUE, IDVY, VHYL, EMDV,VERX). I want to up that figure but can't really find any ideal candidate that has: a nearly 4% dividend (I am 73 so value short term income), chances of a modest capital increase and not too much USA content (short term US prospects not great IMHO). I think I am being a bit overoptimistic but welcome all suggestions. I already have Asian exposure of about 17% through legacy shares held in Hong Kong.

TP2

[richfool]

Thanks richfool.

Your suggestion is good that I should have more than one international diversification IT. My post, however, was a bit misleading as I already have just under 15% portfolio overseas diversification through ETFs. (EUE, IDVY, VHYL, EMDV,VERX). I want to up that figure but can't really find any ideal candidate that has: a nearly 4% dividend (I am 73 so value short term income), chances of a modest capital increase and not too much USA content (short term US prospects not great IMHO). I think I am being a bit overoptimistic but welcome all suggestions. I already have Asian exposure of about 17% through legacy shares held in Hong Kong.

TP2

TP2, Ah right. I didn't know that you had other holdings in the form of ETF's. I know little of ETF's as I preferred to go the active managed route.

The only other IT I am aware of in the Global G&I sector that has a yield of c 4.00% is FMPI (F&C Managed Income trust), yield currently: 4.04%, though it is currently at a premium of 3.8%. Besides the premium some would not like that trust because there will be an element of double charging, as it holds a portfolio of other IT's. (It's worth seeing which ones it actually holds):
http://citywire.co.uk/money/investment- ... undID=2917

Another trust I do hold, (though in the North American sector), - which has a good yield is: MCT (Middlefield Canadian Income trust). It currently yields: 4.89% and according to Citywire is at a discount of: 11.6%. Though as the name suggest it invests predominantly in Canadian stocks plus a few US stocks, - with a focus on energy, property/REITS, and financials. It doesn't hedge currency. (I have held MCT for about 6 years and have enjoyed a very good income stream).
http://citywire.co.uk/money/investment- ... undID=3096

The only other thoughts that spring to mind would be something like Infrastructure e.g. JLIF or INPP, or Environmental Assets e.g. JLEN, or commercial property, e.g. SLI. Whilst their dividend yields are good - all well above 4.00%, they trade at significant premiums.

Or, a sudden afterthought, if I can amend this in time - EAT - European Assets Trust (European medium sized companies). EAT draws on capital to support a higher than normal dividend yield (which it sets at the beginning of each year), yield currently 5.72%. Note it is domiciled in the Netherlands, and thus best held in an ISA.
http://www.hl.co.uk/shares/shares-searc ... -0.46-regd

You may feel you have adequate diversification through your ETF's and IT's.

Regards

Richfool

[TahiPanasDua]

Thanks richfool.

Your suggestion is good that I should have more than one international diversification IT. My post, however, was a bit misleading as I already have just under 15% portfolio overseas diversification through ETFs. (EUE, IDVY, VHYL, EMDV,VERX). I want to up that figure but can't really find any ideal candidate that has: a nearly 4% dividend (I am 73 so value short term income), chances of a modest capital increase and not too much USA content (short term US prospects not great IMHO). I think I am being a bit overoptimistic but welcome all suggestions. I already have Asian exposure of about 17% through legacy shares held in Hong Kong.

TP2

TP2, Ah right. I didn't know that you had other holdings in the form of ETF's. I know little of ETF's as I preferred to go the active managed route.

The only other IT I am aware of in the Global G&I sector that has a yield of c 4.00% is FMPI (F&C Managed Income trust), yield currently: 4.04%, though it is currently at a premium of 3.8%. Besides the premium some would not like that trust because there will be an element of double charging, as it holds a portfolio of other IT's. (It's worth seeing which ones it actually holds):
http://citywire.co.uk/money/investment- ... undID=2917

Another trust I do hold, (though in the North American sector), - which has a good yield is: MCT (Middlefield Canadian Income trust). It currently yields: 4.89% and according to Citywire is at a discount of: 11.6%. Though as the name suggest it invests predominantly in Canadian stocks plus a few US stocks, - with a focus on energy, property/REITS, and financials. It doesn't hedge currency. (I have held MCT for about 6 years and have enjoyed a very good income stream).
http://citywire.co.uk/money/investment- ... undID=3096

The only other thoughts that spring to mind would be something like Infrastructure e.g. JLIF or INPP, or Environmental Assets e.g. JLEN, or commercial property, e.g. SLI. Whilst their dividend yields are good - all well above 4.00%, they trade at significant premiums.

Or, a sudden afterthought, if I can amend this in time - EAT - European Assets Trust (European medium sized companies). EAT draws on capital to support a higher than normal dividend yield (which it sets at the beginning of each year), yield currently 5.72%. Note it is domiciled in the Netherlands, and thus best held in an ISA.
http://www.hl.co.uk/shares/shares-searc ... -0.46-regd

You may feel you have adequate diversification through your ETF's and IT's.

Regards

Richfool

Thanks Richfool for such a helpful response.

I will study your suggestions. I want to sell a couple of UK shares and reinvest the proceeds in a more international collective. I have stopped HYP purchases. If I can't find a suitable new IT or ETF, I will simply top up some of my present holdings plus buy Murray International.

TP2

[richfool]

Thanks Richfool for such a helpful response.

I will study your suggestions. I want to sell a couple of UK shares and reinvest the proceeds in a more international collective. I have stopped HYP purchases. If I can't find a suitable new IT or ETF, I will simply top up some of my present holdings plus buy Murray International.

TP2

TP2, You're welcome.

I've just been trawling through a few older threads. These below maybe of interest to you. They are looking at IT's with higher yields, and/or overlap with some of the IT's mentioned in our above dialogue.

Incidentally, I forgot to mention my most recent addition (which is mentioned in at least one of the threads below), Ecofin Global Utilities & Infrastructure (EGL) (Yield 4.88%. Discount: 10.33%):

http://citywire.co.uk/money/investment- ... undID=3949

Threads which maybe of interest:

viewtopic.php?f=54&t=4647

viewtopic.php?f=8&t=3099&p=30575#p30575

viewtopic.php?f=54&t=4634&p=47211#p47211

viewtopic.php?f=8&t=92&p=82100#p82100

viewtopic.php?f=54&t=4569&p=46480#p46480

Happy Reading!

[arty]

Perhaps a dumb question, but when I see a yield of, say 5% quoted, along with a TER/OCF of, say 1%, should I assume that the actual yield is 4%, or is the quoted yield equivalent to income received after costs?

[richfool]

Perhaps a dumb question, but when I see a yield of, say 5% quoted, along with a TER/OCF of, say 1%, should I assume that the actual yield is 4%, or is the quoted yield equivalent to income received after costs?

The yield is what you get net of any charges, TER/OCF's.