Thoughts on switching REITs and Infra into passive equities

[Walkeia]

My portfolio has been 60% global equities; 20% infrastructure; 20% REITs with the infra and REITs been managed actively. It has performed very well for me; especially with the selective use of leverage.

My REITs and infra are small down / unchanged or even small up on the year. I am thinking of selling these and moving to a much more heavily weighted equity allocation over coming months for the long term.

Effectively I’d be moving to almost 100% global equities aside from keeping my absolute favourite REITs and income holdings (LXI, Grainger, Lloyds). I’d be interested in thoughts if people had any (I’d manage the currency hedging by selecting appropriate ETFs).

[xxd09]

For most amateur investors a global equities index tracker is the way to go for equity investment (same for bonds)
For those who can successfully invest in alternatives like REITs tc-well done-most investors cannot get any consistent results
For most of us alternative investments are complicated expensive and difficult to understand and therefore lose us money
xxd09

[Walkeia]

Thanks xx0d9

I guess what has changed for me is time available. I’ve enjoyed + had time to read reports and follow trusts closely. This is becoming harder to do as family commitments and my work take up more of my time. I think I am fairly certain I will continue to switch into passive equities but was wondering if any would caution against a 100% allocation. (I would own properties so not 100% of total wealth; more like 70/80% accounting for these).

[BullDog]

For most amateur investors a global equities index tracker is the way to go for equity investment (same for bonds)
For those who can successfully invest in alternatives like REITs tc-well done-most investors cannot get any consistent results
For most of us alternative investments are complicated expensive and difficult to understand and therefore lose us money
xxd09

Wow..... Talk about sweeping generalisations

[xxd09]

100% equity allocation is a position usually taken by young investors with no money saved starting to build their pot of money
100% bonds by retirees who have made enough and cannot afford volatility and to lose money any more
Most of us are in between
Most investors use bonds as opposed to alternative investments-easier to understand,cheaper and less liable to losses
Bonds are mainly to however reduce volatility in a portfolio then for money you cannot afford to lose and finally give a small regular return
70/30 equity/bond asset allocations gives the same returns as 30/70 over the long term
So choose the Asset Allocation that lets you sleep at night
Your age minus 10 for the % of your bond allocation is a rough guide
Concentrate on the day job and making money for your savings and leave the market alone (don’t meddle)to do its compounding miracle
Well done on being a successful active investor-it takes much time and most of us cannot pull off consistent returns
xxd09

[tjh290633]

100% equity allocation is a position usually taken by young investors with no money saved starting to build their pot of money
100% bonds by retirees who have made enough and cannot afford volatility and to lose money any more
Most of us are in between
Most investors use bonds as opposed to alternative investments-easier to understand,cheaper and less liable to losses
Bonds are mainly to however reduce volatility in a portfolio then for money you cannot afford to lose and finally give a small regular return
70/30 equity/bond asset allocations gives the same returns as 30/70 over the long term
So choose the Asset Allocation that lets you sleep at night
Your age minus 10 for the % of your bond allocation is a rough guide
Concentrate on the day job and making money for your savings and leave the market alone (don’t meddle)to do its compounding miracle
Well done on being a successful active investor-it takes much time and most of us cannot pull off consistent returns
xxd09

I fear that you have been indoctrinated by "the Wise". This whole business of asset allocation was shown long ago to be a fallacy.

What has worked is to concentrate on investments which provide a reasonable and growing income. If you do that then capital growth inevitably follows over time, subject to general market fluctuations. Bonds provide a fixed income in most cases. Their capital value at redemption is fixed, but fluctuates with interest rates in between issue and redemption. Passive funds can do no more than follow the index with which they are linked.

Diversification matters, but why single out REITs or infrastructure shares? Provided that they provide an adequate and growing yield, and most do, they have their place. The bigger risk is being overweight in certain sectors which is often where passive funds come unstuck. They cannot use equal weighting, which for the individual investor is a more practical method.

TJH

[xxd09]

I can only speak as a 76 year old investor-18 years retired with a large enough pot in a 33/62/5 -equities/bonds/cash portfolio for many years who is coming to the end of the game with a system that worked for me
“There are many roads to Dublin” as we all know
You pays your money and takes your choice!
xxd09

[Boots]

This whole business of asset allocation was shown long ago to be a fallacy.

TJH

I would be very interesting in reading some of the evidence for this fallacy. Could you point us at some references?

[Dod101]

And of course REITS are equities in the first place. The OP seems to be proposing to move to different equities, nothing more or less.

Dod

[AWOL]

I am sitting in a bar in France so am perhaps not paying enough attention but why are you making the change? What are your objectives?

I could imagine it's to avoid charges but that would be me projecting and you would end up invested like me following my advice which may be wrong for you.

If you like developed world equities then SWDA and HMWO are both good candidates. Others like some emerging markets with VWRL.

What are your thoughts on hedging? Personally I don't hedge equity currency exposure. In fact I revel in it. There is a good argument for hedging currency for bonds. Although one may choose not to.

[Walkeia]

I am sitting in a bar in France so am perhaps not paying enough attention but why are you making the change? What are your objectives?

Thanks to everyone above for the responses. Useful food for thought as always in helping me clarify my thinking. It sounds stupid saying this - but my gut was telling me this was the way for me to go but I had not asked myself AWOL'S above simple questions to understand why (reasons for making the change and objectives) - hence my post. Here is my answer, as much to myself:

Why make the change? What is the objective

It seems the latest, and perhaps final, iteration of a process I started 3 to 4 years ago. When I reached an asset base I was comfortable gave me a multiple of what I required for financial security I reviewed my investments and decided to exit all funky / illiquid investments (development loans, EIS). I found I enjoyed a more slim line financial life and so have continued the process - BTL properties have also gone, VCTs in the process of selling down. Now I look at my remaining equity portfolio and I'm thinking 'perhaps 100% global equities or lifestrategy is the way to go'.

Financial security was always a huge goal for me. While, overall, investing has worked out well in total return my real asset growth has been time spent working on a business I effectively have an equity share in - per hour invested this has been the real thing that has grown my asset base. I also wish to highlight the more complex / illquid products I trialled I wish I had never got involved with - the exception is VCTs. As family commitments increase with children and aging parents it would make sense to focus on family first and foremost and then the business. This I guess reflects a changing objective from asset growth to enjoying more leisure / family time (which is the aim for all investing really) - this requires freeing up time and given I enjoy my work the time spent managing my portfolio is going and I'm moving to a very passive approach

Lastly - on currency exposure AWOL I do plan to manage it a bit more actively - I'm targeting EUR, GBP 33% hedged each and 33% unhedged global equities (so mainly dollars). If you were sat at a bar in the US it may feel differently after my recent trip - sat in Washington airport I was shocked at the prices given the currency moves. I have an okay % dollar income from work hence I get to the above weights in the vain of keeping everything very simple.

Thanks all

[Hariseldon58]

Interesting thread, I have moved away from my mainly passive World/regional Index Funds and ETFS. ( I have a good chunk of TIPs)

I have moved into some Factor ETFs, the times they are a changing…maybe, in addition I have added property Reits andInfrastructure Alternatives etc.

I considered the scenarios that may play out in the next 2 to 5 years, we are seeing the possibility of further rising interest rates and the recent surge in inflation may persist at a higher level than anticipated, the possibilities of recession. I do not know the likelihood of these events but I can can consider scenarios where one or more of these play out.

Thus I plan for these possibilities, infrastructure and property in some areas, offers attractive features in some of these scenarios, thus new investment.

I took inspiration for the particular REITS/Infrastructure investments from Capital Gearing Trust and its portfolio list, using annual reports as a starting point for further research ( plus a few others I have held before) I have bought 20 so far and will add another 10 or so, I have take a view that it is economic for me to hold my own mini ‘fund’ its a fairly low stress way to gain exposure, (I have used the CGT portfolio as a starting point for research to save time.)