UK Equity Income Trusts

[bonrepos]

I have the following UK Equity Income Trusts: Finsbury, Murray Income, Dunedin, Law Debenture and Claverhouse, all held for sometime.
I have them mainly for income but their capital performance apart from Finsbury has been negative.
I am now wondering if its worth hanging on to them in view of the current headwinds in UK or perhaps all that is already built into their price.
I have holdings in JP Morgan Growth and Income, Scottish American and Bankers which have given less income but much more capital appreciation.
I am wondering what members feel about this idea of moving away from UK orientated trusts now.
Just to add that I am looking at this from an investment viewpoint rather than a political engagement.

[baldchap]

I only have CTY remaining.
That will probably exit the stage as I continue to go Global. I hold the 3 you mention, plus others.
Is more than 3 Global IT's too many? Not in my opinion, they tend to have very different strategies under the bonnet
That being said, my X-ray currently shows a 19% UK exposure, I doubt it will go below 14% even when CTY leaves which is still enough.

It is not just UK focused IT's I am leaving though. I think in time I will probably be all Global plus one Asian Income.
Sacrificing an average of 1% of dividend yield for a little growth and confidence is a fair trade to me.

[JohnW]

Parts of one's portfolio do well, we hold on. Parts don't, and it's tempting to ditch them. We can run the risk of selling out at a bad time by falling to that temptation. It's in the nature of investments to do better and worse at different times.
But what if one's original decision making was flawed, and the investment choices were not well made? Of course you should clean it all up.
So how would you characterise your current investments? Well made, having a bad run; or fundamentally flawed?
If there's lots of the former, shouldn't you hold tight? If there's lots of the latter, don't you need to sort out why your original thinking was flawed and choose a strategy that you can stick with through thick and thin because it's the best strategy for you? Then, in the future, you won't have to worry again.

[Adamski]

I'd say yes go for it. We all have a tendency for home country bias. So by going international you'll diversify your investments lowering risks and potentially increasing returns. I've boosted returns with a world portfolio. Having said this if you're looking solely for yield can't do much better than CTY right now.

[Itsallaguess]

Parts of one's portfolio do well, we hold on. Parts don't, and it's tempting to ditch them.

We can run the risk of selling out at a bad time by falling to that temptation. It's in the nature of investments to do better and worse at different times.

Much is discussed about the benefits of a properly diversified portfolio when looking to protect against single-source risk, but I've always considered diversification as also having huge benefits in also allowing our investments to carry out their quite natural performance-based ebb and flow as well, whilst hopefully maintaining a level of performance at overall portfolio level that's acceptable to the holder whilst allowing the minimum of hard-acting intervention...

Mistakes will be made of course, and to think that no action is ever necessary is clearly going too far, but I think the idea that we must always be 'switched on' in some sort of monitor/act super-cycle is the last thing I want to be in a constant state of concern about, and as has been highlighted earlier in this thread, it's often the case that action is taken at exactly the wrong moment...

Collectives have boards to carry out a lot of these medium and long-term self-correcting processes, as part of the management job we all pay them to be cognisant of and to get on with. Better to just look to diversify enough in our portfolios to allow for that natural ebb, flow, and self-correcting to happen, and perhaps get on with the more interesting things we were originally hoping our investments would allow us to do...

Cheers,

Itsallaguess

[richfool]

I have the following UK Equity Income Trusts: Finsbury, Murray Income, Dunedin, Law Debenture and Claverhouse, all held for sometime.
I have them mainly for income but their capital performance apart from Finsbury has been negative.
I am now wondering if its worth hanging on to them in view of the current headwinds in UK or perhaps all that is already built into their price.
I have holdings in JP Morgan Growth and Income, Scottish American and Bankers which have given less income but much more capital appreciation.
I am wondering what members feel about this idea of moving away from UK orientated trusts now.
Just to add that I am looking at this from an investment viewpoint rather than a political engagement.

bonrepos, I slimmed down my holding of UK equity income trusts early this year. I am now left with MUT and FGT in that sector, (plus 2 trusts in the UK mid-cap and smaller coys sectors).

I too increased my holdings in the global growth & global growth & income sectors. In the former (Global growth), I now hold: Monks, SMT & MidWynd, and In the latter, I hold: JGGI, SAIN & HINT. I hold other trusts in other sectors.

[Dod101]

I would not call Finsbury Growth & Income a UK Income trust anyway, but Murray Income has not done badly until March this year. in fact I think it has done better than Murray International but as always it depends on the period over which you are measuring them. In any case you need to measure them, if you are into this sort of thing, on a total return basis. Not sure if that would make any difference or not, but for instance, Law Debenture has been getting a 'good press' on these Boards recently and it is very easy to be sweeping in your condemnation.

I would suggest that you take a period of at least 5 years and compare the total (that is capital gain/loss plus dividend income) return with those you may be contemplating as a replacement.

I think you need to look at the underlying holdings in addition to the total return. Those that are more or less replicating the average HYP constituents should probably go, and that disqualifies Murray Income and Dunedin. I think they are both managed by Aberdeen anyway and you certainly do not need both. Law Debenture as I have said, is a bit different and I would hesitate before ditching it. Claverhouse is again a bit different with a different manager

It is easy to feel that you want a change and no one can rationally argue with that if it makes you feel better but I do not think you need a wholesale clear out.
Dod

[bonrepos]

Thanks to you all who have taken the time to reply.
I am not considering a wholesale clear out of UK Equity Income ITs but just wanted the general
view on whether the sector could be more vulnerable than expected next year.
My portfolio is pretty well spread with only 43% UK bias so I'm not in 'frantic' mode.

[richfool]

Thanks to you all who have taken the time to reply.
I am not considering a wholesale clear out of UK Equity Income ITs but just wanted the general
view on whether the sector could be more vulnerable than expected next year.
My portfolio is pretty well spread with only 43% UK bias so I'm not in 'frantic' mode.

Re your second sentence, well yes, I think the UK Eqty Income sector is going to be particularly vulnerable for the next few months, at least until the dust settles after the Brexit trade deal or no deal.

[mark88man]

To what extent do we think the bad news is already built in - I have my doubts that the EU zone or the Americas are not due bumpier rides. To be fair I haven't exited them, but I have reduce Emerging / ASIA and gone for Vanguard UK Income as the best home in my limited selection of options

[JohnW]

To what extent do we think the bad news is already built in -

100% surely. With so many hundreds/?thousands of attentive investors out there, there can't be any bad, good or indifferent news that hasn't contributed to current prices, or someone would act on it and move those prices until there was nothing to push them further up or down; at least that's the theory of an efficient market. The prices are fair, for what we know now. The future of course is anybody's guess with an upper case 'g'.

[SoBo65]

Most of these funds (exception FGT) are somewhat like the FTSE, holding a lot of companies that you would not touch with a bargepole. I dumped mine, there maybe a time to buy back, but not yet. Instead I have increased Global Trusts, Alliance and Mid Wynd. I am thinking of also buying some direct holdings so do not pick up the dross.

[Avantegarde]

I have the following UK Equity Income Trusts: Finsbury, Murray Income, Dunedin, Law Debenture and Claverhouse, all held for sometime.
I have them mainly for income but their capital performance apart from Finsbury has been negative.
I am now wondering if its worth hanging on to them in view of the current headwinds in UK or perhaps all that is already built into their price.
I have holdings in JP Morgan Growth and Income, Scottish American and Bankers which have given less income but much more capital appreciation.
I am wondering what members feel about this idea of moving away from UK orientated trusts now.
Just to add that I am looking at this from an investment viewpoint rather than a political engagement.

Dump them. UK focused trusts have been a deplorable investment in the past decade compared to global ones. You would have done much better to invest in a simple, cheap, global tracker.

[flint]

I read an article on Citywire IT Insider entitled CTY Heroic Pretensions.
A pretty good analysis with some interesting statistics.
It concluded by comparing the CTY TR of 83.6 % with FGT TR of 265 %.

I cannot understand why CTY is trading at close to NAV with that
track record and the virtual certainty that they have now have a policy
of paying out dividends at a significantly higher level than their income.

[Dod101]

I read an article on Citywire IT Insider entitled CTY Heroic Pretensions.
A pretty good analysis with some interesting statistics.
It concluded by comparing the CTY TR of 83.6 % with FGT TR of 265 %.

I cannot understand why CTY is trading at close to NAV with that
track record and the virtual certainty that they have now have a policy
of paying out dividends at a significantly higher level than their income.

Absolutely. CTY has a totally unjustified following simply because it is a 'dividend hero'. At least that is the only reason I can think for its popularity.
The trouble is that income investors (including me) can be mesmerised by the income and forget to check the capital growth and so the Total Return. I have never seen the attraction of City of London I must say.

Dod

[AlumniLawn]

You could always consider Fundsmith (14% UK exposure) or even iShares Global Momentum tracker (2.1% UK exposure). Sell some off when you need income.

[Dod101]

You could always consider Fundsmith (14% UK exposure) or even iShares Global Momentum tracker (2.1% UK exposure). Sell some off when you need income.

That is a somewhat random selection of trusts as far as I can see, helpful as these numbers are, thank you. You might have included say Edinburgh IT and Murray Income as two other UK income trusts and then say Alliance and Scottish Mortgage in the international generalist category to help complete the picture. Certainly I think City of London is being shown for what it is; much like other UK income trusts, sacrificing capital growth for income.

Dod

[AlumniLawn]

You could always consider Fundsmith (14% UK exposure) or even iShares Global Momentum tracker (2.1% UK exposure). Sell some off when you need income.

That is a somewhat random selection of trusts as far as I can see, helpful as these numbers are, thank you. You might have included say Edinburgh IT and Murray Income as two other UK income trusts and then say Alliance and Scottish Mortgage in the international generalist category to help complete the picture. Certainly I think City of London is being shown for what it is; much like other UK income trusts, sacrificing capital growth for income.

Dod

They are not random but as per the trusts quoted in the OP except that I included Murray International instead of Murray Income (thanks for pointing that out). I have also included EDIN as you suggest. I have sorted from highest 5 year returns to lowest and as you say, some make for grim reading.

[richfool]

The OP was referring to UK Equity Income trusts and Murray Income (MUT) as opposed to Murray International (MYI) trust.

It might have been more interesting to have included FGT in the comprison, which is in the UK Equity Income sector, though focuses less on income and more on capital growth.

[Dod101]

Thanks for the revised list AumniLawn. That is now very helpful. I recently got fed up of Edinburgh doing absolutely nothing and your figures amply confirm that although they appear to have had an uptick since Majedie became the manager. Murray Income is often regarded as not much good but they are to me acceptable.

Dod