My wife and I retired in May 2018. We'd been building this portfolio in our SIPPs with Hargreaves Lansdown for some years, and it was completed in July 2018 upon the transfers-in from DC funds from our final employers. For reporting purposes I use close of business 31/07/2018 as the cut off point.
This income supplements income from guaranteed sources, i.e. legacy DB pensions and the State Pension and it is about 45% of our total income. I think of it it as an annuity substitute, accepting the trade off between lack of guarantee versus the prospect of retaining and growing the capital.
The portfolio consists of 20 income focused ITs, diversified across markets and themes, consisting of:
4 UK equity trusts; Dunedin Income Growth, Merchants, Shires Income, Henderson High Income
5 International equity trusts: Murray International, Europeans Assets, Blackrock North American, Middlefield Canadian, Henderson Far East
2 Private Equity Trusts; Apax Global Alpha; Princess Private Equity
2 Bond/Debt trusts: Twentyfour Income, CQS New City High Yield
3 Property trusts: Abrdn Property,Income Trust (formerly Standard Life,) Real Estate Credit Investment; Regional Reit
4 Infrastructure based Trusts: Renewables Infrastructure, John Laing Environmental Assets, GCP Infrastructure, Sequioa Infrastructure.
I've rebased the portfolio's starting value to £100,000 for these reports, so all the figures below are pro rata to that amount. This is a buy and hold portfolio and there has been no trades since its inception. All income is removed (not necessarily spent.)
The initial investments weren't quite evenly balanced: the equity trusts were a little overweight so as to achieve a 60/40 equity/others balance.
Income
This portfolio is first and foremost an income generator, and to be fair, it has done a decent job of providing a consistent and growing supply of cash through what has been an extraordinary and challenging period for markets. This year, there has been a couple of minor dividend cuts (GCP, Twentyfour income) but some decent gains from Apax, European Assets and others. Inflation, regrettably, is running ahead of the income growth, but I suspect very few income strategies have kept pace with this year's unusual leap in RPI. Of the 20 trusts, 18 pay out quarterly and 2 bi-annually, making 76 payments into the SIPP accounts annually. Not a single payment has ever been missed in the four year history of the portfolio's completion.
I believe there is evidence here of the suitability of such a portfolio of Investment Trusts for income in retirement and I am quietly pleased with its performance. Four years is not a lengthy period for such an opinion to be formed, but considering the turmoil we've been through...
Capital
Code: Select all
Inv Trust Income Portfolio | Capital | Year on Year | From Start
Start (31.07.2018) | £100,000 | |
Year 1 (to 31.07.2019 | £102,712 | 2.7% | 2.7%
Year 2 (to 31.07.2020) | £85,843 | -16.4% | -14.2%
Year 3 (to 31.07.2021) | £103,081 | 20.1% | 3.1%
Year 4 (to 31.07.2022) | £99,817 | -3.2% | -0.2%
The capital value of the portfolio has fallen 3.2% this year, to leave it almost exactly where it started. in an environment of accelerating inflation, this is not a good result, but considering the economic, political and societal shocks we have endured, perhaps this is not as bad as it could have been. I don't think expect many portfolios have made significant capital growth over the last four years. I don't do benchmarks, but the FTSE100 is down 6% over the life of the portfolio.
This year (to end of July) the worst performers have been European Assets, Seqouia Infrastructure, Apax Global Alpha, and Regional REIT. The best performers were John Laing Environmental Assets, Middlefield Canadian, Blackrock North American, Murray International.
Over the entire four year life cycle, the worst performers are Henderson Far East, Seqouia, Regional REIT and European Assets. The best gains have come from The Renewables Infrastructure Trust, Middlefield, Apax Global, Blackrock North American and John Laing Env. Assets.
I have detailed records of all the data, so will be happy to ask any questions.
Cheers
MP