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Personal Assets v Capital Gearing v RICA?

Closed-end funds and OEICs
Walrus101
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Re: Personal Assets v Capital Gearing v RICA?

#238804

Postby Walrus101 » July 24th, 2019, 12:24 am

Lootman wrote:
genou wrote:
Lootman wrote:So not exactly trading. But not buy, hold and forget either.

Go back and read what you wrote. You've just invented trying to time the market. There is quite a lot of research on that, and not a lot of it supports your view.

I know what I wrote. When you hold a position you should normally have an exit strategy, i.e the terms under which you will close out the position. That is hardly controversial. I'm just saying that I'd apply it to these so-called wealth preservers as well, at least unless you are content with lower, less volatile returns forever.

Of course, those vehicles themselves are trying to time the market, and I am aware that is hard for them, you and me. But I have no regrets about selling PNL when I did. The outcome was superior to staying in it over the last decade, although had markets gone all the way down to zero then I might have regretted it.

I did establish a smaller positon in PNL some years later, as again the markets were becoming sprightly.


I appreciate they have a place, just when I see someone holding a number of these type of funds I find it a bit of a head scratcher. Theoretically they are defensive but once you have multiple of these surely it becomes problematic understanding exactly what you are holding because as you say they are all effectively trying to time the market and are moving in and out of assets classes?

Perhaps I'm overthinking think it, Currently I just try to keep my Gold/Property/Bonds/Infrastructire/Trophy assets as separate pits to equities and cash. Personally I find it easier to think like this top down.

if I was to invest I think I'd just pick one of these type of holdings as I'd view it as subcontracting the asset allocation to the fund manager.

Aminatidi
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Re: Personal Assets v Capital Gearing v RICA?

#238816

Postby Aminatidi » July 24th, 2019, 7:42 am

I'll cop some flack for this no doubt but honestly, I don't understand how it's considered "difficult" or "complicated" to throw money into PNL, CGT, RICA and simply see it as not putting all your eggs in one basket and trusting the managers reputation to hopefully do a reasonable job of looking after it cautiously, yet you have hordes of people on here with spreadsheets tracking the exact yield and composition of "HYP portfolios" down to the last percentile :)

I get it, when you need it to live off you have to pay attention, but that does seem a touch inconsistent to think I'm overthinking things :)

Flame Suit on :mrgreen:

Walrus101
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Re: Personal Assets v Capital Gearing v RICA?

#238826

Postby Walrus101 » July 24th, 2019, 8:42 am

Aminatidi wrote:I'll cop some flack for this no doubt but honestly, I don't understand how it's considered "difficult" or "complicated" to throw money into PNL, CGT, RICA and simply see it as not putting all your eggs in one basket and trusting the managers reputation to hopefully do a reasonable job of looking after it cautiously, yet you have hordes of people on here with spreadsheets tracking the exact yield and composition of "HYP portfolios" down to the last percentile :)

I get it, when you need it to live off you have to pay attention, but that does seem a touch inconsistent to think I'm overthinking things :)

Flame Suit on :mrgreen:


I guess it depends how much you believe in asset allocation as a driver of returns for an investor. HYP is a 100 percent equity it is very straightforward from that perspective for those who run one. It is also quite clear what the strategy is.

If you don't believe in asset allocation, then having (I think it was 7 on the last count) absolute return fund managers macro trading and attempting to market time with no view to what each other is doing, may work also.

OhNoNotimAgain
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Re: Personal Assets v Capital Gearing v RICA?

#238855

Postby OhNoNotimAgain » July 24th, 2019, 10:00 am

Walrus101 wrote:
Aminatidi wrote:I'll cop some flack for this no doubt but honestly, I don't understand how it's considered "difficult" or "complicated" to throw money into PNL, CGT, RICA and simply see it as not putting all your eggs in one basket and trusting the managers reputation to hopefully do a reasonable job of looking after it cautiously, yet you have hordes of people on here with spreadsheets tracking the exact yield and composition of "HYP portfolios" down to the last percentile :)

I get it, when you need it to live off you have to pay attention, but that does seem a touch inconsistent to think I'm overthinking things :)

Flame Suit on :mrgreen:


I guess it depends how much you believe in asset allocation as a driver of returns for an investor. HYP is a 100 percent equity it is very straightforward from that perspective for those who run one. It is also quite clear what the strategy is.

If you don't believe in asset allocation, then having (I think it was 7 on the last count) absolute return fund managers macro trading and attempting to market time with no view to what each other is doing, may work also.


Unless they all trade the same way, and effectively give you one big bet, the most likely result is that they largely offset each other and give you the market return less a lot of unneeded costs.

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Re: Personal Assets v Capital Gearing v RICA?

#238871

Postby scotia » July 24th, 2019, 10:40 am

Lootman wrote:In my case I had a six-figure position in PNL when the 2008 market crash happened. PNL was down but the market was down a lot more. So I sold the whole lot and redeployed it in more mainstream equity vehicles.

So you foresaw the crash, and put your money in a fund that would not lose as much as the market? Surely leaving it in cash would have been a much better strategy?

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Re: Personal Assets v Capital Gearing v RICA?

#238877

Postby torata » July 24th, 2019, 10:50 am

scotia wrote:
Lootman wrote:In my case I had a six-figure position in PNL when the 2008 market crash happened. PNL was down but the market was down a lot more. So I sold the whole lot and redeployed it in more mainstream equity vehicles.

So you foresaw the crash, and put your money in a fund that would not lose as much as the market? Surely leaving it in cash would have been a much better strategy?


Lootman is not saying that he foresaw the crash at all. Only that relatively he lost less money, and redeployed it to take advantage of that fact.
torata

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Re: Personal Assets v Capital Gearing v RICA?

#238918

Postby scotia » July 24th, 2019, 12:46 pm

torata wrote:
scotia wrote:
Lootman wrote:In my case I had a six-figure position in PNL when the 2008 market crash happened. PNL was down but the market was down a lot more. So I sold the whole lot and redeployed it in more mainstream equity vehicles.

So you foresaw the crash, and put your money in a fund that would not lose as much as the market? Surely leaving it in cash would have been a much better strategy?


Lootman is not saying that he foresaw the crash at all. Only that relatively he lost less money, and redeployed it to take advantage of that fact.
torata

Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?

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Re: Personal Assets v Capital Gearing v RICA?

#238924

Postby Alaric » July 24th, 2019, 1:20 pm

OhNoNotimAgain wrote:Unless they all trade the same way, and effectively give you one big bet, the most likely result is that they largely offset each other and give you the market return less a lot of unneeded costs.


Or even that they cancel one another out on market returns and just give a cash return.


Back in the day when there was a respectable return on cash, you could get an equivalent return with a four way derivatives bet. Markets rise or fall, that's two. You collect or pay out, that's the other two. Tax rules could mean that you got a better return than leaving it on deposit. I believe HMRC saw through that trick and put some anti-avoidance measure in place.

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Re: Personal Assets v Capital Gearing v RICA?

#238927

Postby OhNoNotimAgain » July 24th, 2019, 1:21 pm

scotia wrote:
torata wrote:
scotia wrote:So you foresaw the crash, and put your money in a fund that would not lose as much as the market? Surely leaving it in cash would have been a much better strategy?


Lootman is not saying that he foresaw the crash at all. Only that relatively he lost less money, and redeployed it to take advantage of that fact.
torata

Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?


Beautiful

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Re: Personal Assets v Capital Gearing v RICA?

#238939

Postby mc2fool » July 24th, 2019, 1:56 pm

scotia wrote:Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?

In which "normal times" has PNL substantially underperformed which market?

http://mediacharting.digitallook.com/cg ... dicator_3=

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Re: Personal Assets v Capital Gearing v RICA?

#238947

Postby Lootman » July 24th, 2019, 2:35 pm

scotia wrote:
torata wrote:
scotia wrote:So you foresaw the crash, and put your money in a fund that would not lose as much as the market? Surely leaving it in cash would have been a much better strategy?

Lootman is not saying that he foresaw the crash at all. Only that relatively he lost less money, and redeployed it to take advantage of that fact.
torata

Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?

Torata is corect that I did not forsee the crash. I was worried about the housing/mortgage situation but had no idea that its failure would cause such widespread problems in the markets and the economy.

However I did predict that there would be some kind of crash at some point because that is virtually a certainty. And PNL was held, and was my largest position at the time, for that eventuality.

PNL has a distinct advantage over cash in that it does tend to grow organically and partly participate in bull markets, as the graph from mc2fool shows. So the returns are better than cash on the way up, and better than shares on the way down. Put another way, I am comfortable holding a much smaller cash cushion if I can hold vehicles like PNL because of their built-in safety margin.

You can certainly replicate the defensive features of PNL without owning it. You can instead hold some cash, some gold, some gilts or treasuries, and so on. And if you are more confident than me that you can predict the next crash then maybe that is better because you can perform your own changes to your asset allocation rather than rely on the manager. I suppose that utimately I did a bit of both.

It's not so much that I recommend PNL but rather that, if you do choose to hold it, then it is useful to know in what circumstances you would get out of it..

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Re: Personal Assets v Capital Gearing v RICA?

#238959

Postby scotia » July 24th, 2019, 3:15 pm

Lootman wrote:PNL has a distinct advantage over cash in that it does tend to grow organically and partly participate in bull markets, as the graph from mc2fool shows. So the returns are better than cash on the way up, and better than shares on the way down. Put another way, I am comfortable holding a much smaller cash cushion if I can hold vehicles like PNL because of their built-in safety margin.
It's not so much that I recommend PNL but rather that, if you do choose to hold it, then it is useful to know in what circumstances you would get out of it..

Clarification accepted! I tend to prefer the cash cushion - but I understand your policy.

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Re: Personal Assets v Capital Gearing v RICA?

#239549

Postby buzz » July 26th, 2019, 6:34 pm

Walrus101 wrote:It would be more straightforward for you to decide the optimal asset allocation for your desired risk profile and then select the funds/trusts accordingly.

If you want 50 equities 40 bonds 10 Gold or whatever split/ it can be fairly simply manufactured selecting your funds of choice. Then again you can split those equity funds/bond forms however you choose fit.

Is choosing "the optimal asset allocation" ever going to be "straightforward" without some precision in knowing the risk of each asset class over the projected time period, not merely the recorded historic risk, and knowing how each will interact?
Walrus101 wrote:As soon as you get into the absolute return fund/wealth preservation game/ you are paying managers to determine the correct asset allocation and then effectively ignoring it by having 5 or 6 different absolute return funds. I'd imagine it's challenging to understand exactly what your allocation is at any point in time and for all you know Pnl is selling gold to CGT and you are paying them both for the pleasure.

That's an argument for never holding any collective other than passive - of itself entirely valid and a view held by many. Woodford published a list of all his holdings but that alone wasn't nearly enough to eliminate the risk.

I'm not the greatest fan of abs return funds as such, some have had excessive fees and the overall track record hasn't been great; but perhaps the best approach if that's the choice is to regard each one as a self-contained investment, perhaps use it as a benchmark for the rest of your investments. Have more than one if you choose and treat each as free-standing in the same way. You'll be buying professionally managed multi-asset portfolio of stuff run with the intention of being lower risk.

If you are saying that such funds shouldn't be thought of as an asset class in their own right then I'd agree with you but your entire wealth needn't be regarded as a single lump with a uniform strategy. There's nothing wrong, and likely some benefit, in having separate investment baskets.

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Re: Personal Assets v Capital Gearing v RICA?

#239561

Postby Lootman » July 26th, 2019, 7:07 pm

buzz wrote:If you are saying that such funds shouldn't be thought of as an asset class in their own right then I'd agree with you but your entire wealth needn't be regarded as a single lump with a uniform strategy. There's nothing wrong, and likely some benefit, in having separate investment baskets.

I do think of them as a separate asset class. Not that I have a good name for it - neither "absolute return funds" nor "alternative assets" nor "asset allocation funds" really satisfy. But you know what I mean. For me the key is that their returns should not correlate to any other single asset class but rather go its own way. That is a form of diversification in its own right, which means one can increase or decrease one's exposure to it as deemed appropriate. In other words your allocation to asset allocation funds is itself something you might vary.

One benefit that PNL has often touted for itself is that an investment trust can do switches in the underlying asset allocation without incuring a CGT liability for the holder. If you take a DIY approach then moving around between shares, bonds and precious metals could create a CGT liability if not held in a tax-sheltered account. I hold mine (PNL and CGT) in a taxable account, so need to be mindful of that.

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Re: Personal Assets v Capital Gearing v RICA?

#239636

Postby Aminatidi » July 27th, 2019, 8:44 am

@Lootman that's not too far off how I think of them. Almost a bucket that you don't know entirely how it will be allocated but you know you should be able to sleep and leave it to the people doing it.

Probably one of the reasons I'm wary of the passives is that, and I don't know how true it is, you read stories of "When algorithms go bad" so far as algorithms driving trade.

Now I'm not sure it's related to this thread but as I've had some really useful replies, I was looking at ITs that seem to have low correlation with the likes of Fundsmith and Lindsell Train.

MYI was one I was looking at. Using it as an example (there are plenty more), given you have 100% stocks exposure and seemingly dire returns, what's the attraction?

Is it purely that it has a reasonable yield?

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Re: Personal Assets v Capital Gearing v RICA?

#239650

Postby OhNoNotimAgain » July 27th, 2019, 9:43 am

mc2fool wrote:
scotia wrote:Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?

In which "normal times" has PNL substantially underperformed which market?

http://mediacharting.digitallook.com/cg ... dicator_3=


Comparing the total return of a collective with the capital only return of an index does not inform the discussion, but actively misleads it.

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Re: Personal Assets v Capital Gearing v RICA?

#239668

Postby mc2fool » July 27th, 2019, 10:58 am

OhNoNotimAgain wrote:
mc2fool wrote:
scotia wrote:Well if he didn't foresee the crash, why did he have a 6 figure sum in a fund that would substantially underperform the market in normal times?

In which "normal times" has PNL substantially underperformed which market?

http://mediacharting.digitallook.com/cg ... dicator_3=

Comparing the total return of a collective with the capital only return of an index does not inform the discussion, but actively misleads it.

The chart shows capital only return of both. A TR-of-both chart would be slightly different but not significantly enough so to change the point being made.

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Re: Personal Assets v Capital Gearing v RICA?

#239674

Postby Walrus101 » July 27th, 2019, 11:14 am

Lootman wrote:
buzz wrote:If you are saying that such funds shouldn't be thought of as an asset class in their own right then I'd agree with you but your entire wealth needn't be regarded as a single lump with a uniform strategy. There's nothing wrong, and likely some benefit, in having separate investment baskets.

I do think of them as a separate asset class. Not that I have a good name for it - neither "absolute return funds" nor "alternative assets" nor "asset allocation funds" really satisfy. But you know what I mean. For me the key is that their returns should not correlate to any other single asset class but rather go its own way. That is a form of diversification in its own right, which means one can increase or decrease one's exposure to it as deemed appropriate. In other words your allocation to asset allocation funds is itself something you might vary.

One benefit that PNL has often touted for itself is that an investment trust can do switches in the underlying asset allocation without incuring a CGT liability for the holder. If you take a DIY approach then moving around between shares, bonds and precious metals could create a CGT liability if not held in a tax-sheltered account. I hold mine (PNL and CGT) in a taxable account, so need to be mindful of that.


Personally I struggle with how something predominantly invested in bonds/equities and gold could be considered a separate asset class. I can see how buying puts and other derivatives adds some useful hedging.

I guess also there is an argument that they would provide a portfolio manager diversification to my own asset amallocation. Provided I don't run my portfolio through an x ray tool and rebalance back to my desired allocation :)

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Re: Personal Assets v Capital Gearing v RICA?

#239739

Postby Lootman » July 27th, 2019, 2:53 pm

Walrus101 wrote:
Lootman wrote:
buzz wrote:If you are saying that such funds shouldn't be thought of as an asset class in their own right then I'd agree with you but your entire wealth needn't be regarded as a single lump with a uniform strategy. There's nothing wrong, and likely some benefit, in having separate investment baskets.

I do think of them as a separate asset class. Not that I have a good name for it - neither "absolute return funds" nor "alternative assets" nor "asset allocation funds" really satisfy. But you know what I mean.

Personally I struggle with how something predominantly invested in bonds/equities and gold could be considered a separate asset class. I can see how buying puts and other derivatives adds some useful hedging.

Just to be clear I do not think such funds are a distinct asset class. Only that I find it useful to mentally put them in a different bucket from my other more genuine buckets.

Or to put it another way, I manage them differently and so it helps to see them as distinct.

I do use calls and puts as well, but that is more of a trading strategy than a hedge. I do have to take account of the underlying security that the option is based on, but since I use both calls and puts, it's more of a long/short strategy than any attempt at an asset allocation overlay.

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Re: Personal Assets v Capital Gearing v RICA?

#241433

Postby Aminatidi » August 3rd, 2019, 9:37 am

Interesting week with things seeming to yo-yo around between Brexit and £:$ and Trump and just about everything else.

Yesterday seems to have been a bit of a rough day worldwide.

My "defensive" funds have performed as follows:

CGT +0.23%
SIGT -0.14%
RICA -0.23%
PNL -0.59%

For comparison

VWRL was down -2.72%

Global Aggregate Bond UCITS ETF (VAGP) was up +0.35%

According to HL I was down £-243.48 whilst if I was 100% in VWRL I'd be £-3400 down.

So that doesn't seem awful to me.

Of course, I'll make less on the upside, but you have to be able to sleep :)


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