Can I compare my HYP to CTY annual growth?

[TopOfDaMornin]

I am still in the building stage of my HYP and investing once yearly annual amounts of money. No dividends have been withdrawn. I am trying to compare my HYP total value to the City of London IT (CTY) i.e. how would my HYP compare to CTY.

To try and do this I have calculated how much the HYP has grown (the capital value includes dividend) over 3, 5 and 10 years and compared this to the CTY over the same period using the CTY NAV (not sure if this is the correct comparison).

Could someone please confirm or correct me if the below are wrong?

Source figures for my HYP are here: https://www.lemonfool.co.uk/viewtopic.php?t=17269
Source figures for City of London are here: https://www.theaic.co.uk/companydata/335/performance


My HYP Performance



If £1000 invested in HYP 3 years ago

HYP Start Value                  | £1,243 | £1,199 | £1,165 | £1,000
HYP Capital Annual Growth %      |   3.7% |   2.9% |  16.5% |       
HYP 3 year Growth %              |  24.3% |        |        |       
                                 |        |        |        |       
3 years City of London Ord NAV   |  23.6% |        |        |

If £1000 invested in HYP 5 years ago

Start Value                    | £1,234 | £1,190 | £1,157 |   £993 | £1,055 | £1,000
HYP Capital Annual Growth %    |   3.7% |   2.9% |  16.5% |  -5.8% |   5.5% |       
HYP 5 year Growth %            |  23.4% |        |        |        |        |       
5 years City of London Ord NAV |  30.4% |        |        |        |        |

If £1000 invested in HYP 10 years ago

Start Value                     | £2,307 | £2,225 | £2,163 | £1,856 | £1,971 | £1,869 | £1,647 | £1,277 | £1,411 | £1,189 | £1,000
HYP Capital Annual Growth %     |   3.7% |   2.9% |  16.5% |  -5.8% |   5.5% |  13.4% |  29.0% |  -9.4% |  18.7% |  18.9% |       
HYP 10 year Growth %            | 130.7% |        |        |        |        |        |        |        |        |        |       
10 years City of London Ord NAV | 205.0% |        |        |        |        |        |        |        |        |        |

At the moment I am comparing my HYP Total Value to the IT NAV. I get the impression from the above figures this may not be a valid comparison. Clearly there is a big difference between the 10 years figures of my HYP vs CTY.

Regards
ToDM

[tjh290633]

As I understand it you are comparing your total return with the share price of CTY. The latter does not include reinvested dividends, whereas yours does.

If you were to unitise your records, so that each reinvestment bought additional units, then you could compare your income unit price with that of CTY or the index

As it is, your only valid comparator is the TR version of an index or accumulation units of an OEIC

TJH

[Hariseldon58]

A quick and dirty comparison suggests your performance is very similar to city of London over 7 years.

I presume your figures are to April 1st , your unit value goes from .96 to 1.78 over 7 years , a compound rate of return of 9.2%.

City of London had a share price total return of 73.7% from 31/3/2012 to 31/3/2017, on 31/3/2017 the share price was 4.17, on 31/3/2019 the share price was 4.15. (down about 0.5%) the yield is presently 4.24% on a share price of 4.17, the yield from 2017 to 2019 would have been very similar, this equates to a compound total rate of return of around 9.4% (I have AIC records covering the period form 2012 to 2017)

The return from the NAV would have been slightly higher, the discount/ premium on City of London is pretty stable and I don't think it makes much difference which you choose.

City of London is a pretty good benchmark to compare yourself against, its not been a stellar performer but has a sound manager, excellent dividend track record and is fishing in the same pool, with a similar aim to an HYP.

[TopOfDaMornin]

Thank you for your replies tjh290633 and Hariseldon58

[nmdhqbc]

As I understand it you are comparing your total return with the share price of CTY. The latter does not include reinvested dividends, whereas yours does.

It's from the AIC which does give total return. A quick guesstimate of the 5 year NAV without dividends on HL and it seems the 5 year share performance without dividends is in the region of 10%. Much lower than the 30.4% quoted in the OP. So I think total return for CTY is being looked at here.

[moorfield]

I have pondered this question before when looking at HYP1 - see Luniversal's post at viewtopic.php?f=15&t=14752&hilit=hyp1#p180406, and my post previous.

[Luniversal]

I have pondered this question before when looking at HYP1 - see Luniversal's post at viewtopic.php?f=15&t=14752&hilit=hyp1#p180406, and my post previous.

Here is a more recent comparison.

In Jul. 2011 I started the 'classic HYP' LuniHYP100, which is all-Footsie and cost £17,901 gross. I forecast it will produce £1315 of income in its eighth year, for a total of £9173 so far.

If bought at the exact same date, a 'Basket of Eight' of investment trusts-- UK Equity Income sector, mostly invested in the same kind of big Footsie share as a High Yield Portfolio-- would have generated £7283 of income, including £1043 in 2018-19*. Thus the raw revenue from the HYP has been 26% higher.

However, the basket's inflow has been far more placid, with 'market trading' events and needful recycling taken care of by the managers and revenue reserves to smooth payouts. With the LuniHYP I had to do it myself.

'Derisking' both vehicles to provide spendable cash plus a reserve and inflation protection (belt and braces for the basket, since it has its own reserves) would have permitted a withdrawal rate of 4.0%+RPI from the LuniHYP at the outset, rising to 5.6% wef the fourth year. The B8 would have paid a derisked 3.9%+RPI, increasing to 4.9% after five years.

By Jul. the HYP should hold an income reserve worth 14 months of current payout, the B8 only eight months. The basket can probably get by with less because of such trusts' orientation towards 'dividend-hero' status, aiming never to cut payouts.

My takeaway from this and many similar exercises is that directly held shares do furnish more income, after safety factors are applied to stabilise the spendable-- but they make you work. The choice boils down to whether you enjoy stockpicking and tolerate administration, and on how badly you need the income to be predictable rather than maxed-out.

*If City of London IT (CTY) alone had been bought, income to date would total £7693, including £1126 (+5.4%) in the latest year. Not a lot more than from diffusing the capital over eight trusts.

[TUK020]

My takeaway from this and many similar exercises is that directly held shares do furnish more income, after safety factors are applied to stabilise the spendable-- but they make you work. The choice boils down to whether you enjoy stockpicking and tolerate administration, and on how badly you need the income to be predictable rather than maxed-out.

*If City of London IT (CTY) alone had been bought, income to date would total £7693, including £1126 (+5.4%) in the latest year. Not a lot more than from diffusing the capital over eight trusts.

Really useful perspective Luni, much appreciated.
How do you rate the relative sequence of returns risk between directly held, Basket, and CTY?