2023 Preliminary SIPP Portfolio Review

[yieldhog]

Following are some preliminary numbers for my 2023 Sipp portfolio:
Keep in mind this is for a SIPP for a 76-year old and it has been in draw down for about 15-years.
The SIPP provides a supplemental income for my wife and me. It will be passed on to my wife when I die. My wife currently has a much longer life expectancy than me and hence it may become a more important income source for her in the years after I am gone. When she dies, the SIPP will pass to our two sons.
The objective of the SIPP is to provide a dividend income in excess of the drawdown amount with any excess being reinvested to improve the income/growth of the fund.
A shorter-term objective is to reduce the number of holdings in the SIPP to make management simpler ahead of the handover to my wife.
Preliminary results for 2023.
2023 Portfolio Dividend Return +6.8% . Slightly up on last year’s 6.7%
Realized nett capital gain of 2.2%. BRWM, POLY, SANB, BWY and BDEV were all sold. Only loss was on POLY.
Change in value of portfolio based on current valuation is -7.4%
Change in value of portfolio of portfolio after adjusting for draw downs -3.7% (This is the change in value of investments in the fund.}
Current cash level 1.5%. Further surplus cash will be generated in November and December from dividends in excess of drawdowns. In addition, capital payments are expected from BVT and VSL.
SIPP drawdown for 2023 will be close to 4%.
Total Real Return after adjusting for Drawdowns looks like Plus 2.2% (Dividend Return of 6.8% PLUS Capital Gains of 2.2% MINUS Inflation of 6.8%). If this is how the year turns out I will be happy with that.
Apart from the disposals already mentioned, I’ve made some other changes ahead of year-end. Also, I’ve carried out a 10-year review and will report on this in the NEW Year along with an update on the portfolio that I will go forward with in 2024.

After the portfolio I have left the comments that I made about the portfolio last year.


Fixed Income Individual Issues
GACA 8.875 Cum Pref
GACB 7.875 Cum Pref
MBSP 6.75 PIBS
SANB Pref
High Yield Fixed Income
NCYF
SMIF
VSL
Large Cap UK Equities
AEI
BATS
IUKD
IMB
LGEN
MNG
PHNX
World ITs and ETFs
HFEL (Far East)
HINT (Non-UK Equity Income)
IAT (Asia x-Japan Equity Income)
IAPD (Asia)
JEGI (Europe G+I)
JGGI (Global G+I}
NAIT (North America)
Natural Resources
BWRM (World Mining and Metals)
Small Cap And VC
BVT
Speculative Equities
BDEV, BWY. POLY
THE FOLLOWING ARE MY COMMENTS FROM LAST YEAR
Total number of positions is 26. Allocations are not equal, and no position is more than 6% of the portfolio.
The top ten contributors to dividend income in descending order are: NCYF, IMPS, BRWM, BATS, BVT, HFEL, AEI, PHNX, MNG, IUKD.
On the agenda for next year is to continue to simplify.
BVT has become very illiquid. I have sold half and will sell the other half in 2023. The money will go into other existing positions.
I’d like to sell my remaining holding in MBSP. After holding them for several years without getting interest payments I eventually sold half my holding last year at about four times what they cost me. I would be giving up a running yield of close to 7.5% but it might be worth it to buy something more liquid and better quality.
One issue I am wary about is the use of leverage in most ITs. I’m not against leverage but it can have a devastating effect on a fund’s value if it becomes a forced seller in a bad market situation. With interest rates rising and the likelihood of more bankruptcies in 2023 it’s going to be critical for leveraged funds to have reliable financing available. I prefer low or unleveraged funds like IUKD.
In the Natural Resources sector BRWM and BERI have had a great run and I have already sold all my BERI and reduced my BRWM position. I wonder if we have seen the best in this cycle and I may take some more profits. The yields are no longer that good and I can move the proceeds somewhere else to improve the overall SIPP dividend yield.
The speculative stocks in my list are small positions that I think have some good potential for capital gains. POLY was a bet on Russia not invading Ukraine and, clearly, I lost that bet, but there is still hope for the company even if it takes a few years. I was probably a bit early to get into BDEV and BWY but I believe they will come good in a year or two and the yields will probably be reasonable.
With my weightings the prospective dividend yield for next year looks like 6.94% at my book prices but only 6.47% at current prices. I’d like to see the current yield back up to nearer 7%.
More fundamentally, setting all this information out is making me ask myself “Am I making my life too complicated by managing my SIPP the way I do and, if so, can I make it radically simpler without significantly undermining the results that I have been achieving for more than fifteen years”.
If the answer to that is “Yes” then what’s the alternative?
To take one simple alternative, I compared the results of my SIPP for 2022 with an investment in just two ETFs, IUKD and IAPD, both of which I already own in the portfolio.
On a very basic level, this is what it looks like:
SIPP Total Return YTD 0.70%
IUKD Total Return YTD -1.79%
SIPP Dividend Return 6.64%
IUKD Dividend Return 5.90%
IAPD Total Return -4.34%
IAPD Dividend Return 7.11%
SIPP Drawdown 3.70%

In summary, taking a 50/50 split of IUKD and IAPD, produced a dividend return of about 6.50%, only slightly below the SIPP dividend return but well above the SIPP drawdown rate of 3.70%.
As to whether this is the way forward for me, I will need to do an analysis over a longer time period to see if a longer history produces a similar picture. But it’s certainly food for thought.
There are several considerations that are unique to my situation as well as the more general considerations that would apply to anyone else thinking along these lines. Has anyone else been thinking of drastically simplifying a SIPP portfolio or already done so for whatever reason? If so, I would be grateful if you could share your thoughts/experience with us.
Best wishes and happy New Year to all TLF watchers/posters.
Y

[Dod101]

It seems much too complicated especially if you expect your wife to have to manage it once you are gone.
Also ITs do not have liquidity problems as they are closed end funds so there are o redemptions as such. It is OEICs that need to worry about being forced sellers.
Dod

[yieldhog]

Dod,

Thanks for your comment.

You are absolutely correct about my wife not being able to manage a fund of over twenty positions. The fund will need to be drastically simplified to no more than 3-5 funds.
The dilemma is how to compromise the overall performance of the fund for the sake of simplicity. I will have to do some serious thinking about this in the next few years.
I don't like to put too many eggs in the same basket so narrowing down to a handful of ITs worries me slightly.
The biggest sacrifice will be in yield. VHYL for example is a quality fund with low fees and no leverage but it yields only 3.36%.

Some ITs do (or could) have liquidity problems so I will need to avoid any smaller funds and more esoteric types. For example, I currently own BVT which has virtually no liquidity left. I will also need to avoid funds like SMIF that offers a 10% plus yield with no leverage but could suffer liquidity issues because of the type of securities it owns (MBSs for example).

Y

[kempiejon]

Keep in mind this is for a SIPP for a 76-year old and it has been in draw down for about 15-years.
The SIPP provides a supplemental income for my wife and me. It will be passed on to my wife when I die. My wife currently has a much longer life expectancy than me and hence it may become a more important income source for her in the years after I am gone. When she dies, the SIPP will pass to our two sons.
The objective of the SIPP is to provide a dividend income in excess of the drawdown amount with any excess being reinvested to improve the income/growth of the fund.
A shorter-term objective is to reduce the number of holdings in the SIPP to make management simpler ahead of the handover to my wife.

As you've 15 years of management under your belt you'll know how much work might be needed to cope with corporate actions or similar.
My portfolio is over 40 positions, I've been running my portfolio for a similar amount of time, my management has been to mostly buy new things each month with earning and accumulated dividends and bit a tax planning with unsheltered holdings, not a problem for your SIPP in drawdown.
I don't think a big portfolio is necessarily a big problem.
I have a mind to organise my holdings, get rid of some rumps and make everything a bit neater, I've been saying that for years though. There are not that my corporate actions and they often have a relatively benign outcome.
I think a simple rule like letting corporate events run their course would be OK, alternatively take cash whenever offered and invest in a global tracker.
For now I'm accumulating, there are a few things to deal with each year but not too onerous.
As your natural yield exceeds your drawdown that looks easy. My instruction, should the SO survive me, is as I stated, let corporate actions follow their natural course and any cash thrown off should be spent as a bonus or larger amounts into a global tracker.
For the next few years you can continue with holding reduction and test that suggestion.

[Dod101]

Dod,

Thanks for your comment.

You are absolutely correct about my wife not being able to manage a fund of over twenty positions. The fund will need to be drastically simplified to no more than 3-5 funds.
The dilemma is how to compromise the overall performance of the fund for the sake of simplicity. I will have to do some serious thinking about this in the next few years.
I don't like to put too many eggs in the same basket so narrowing down to a handful of ITs worries me slightly.
The biggest sacrifice will be in yield. VHYL for example is a quality fund with low fees and no leverage but it yields only 3.36%.

Some ITs do (or could) have liquidity problems so I will need to avoid any smaller funds and more esoteric types. For example, I currently own BVT which has virtually no liquidity left. I will also need to avoid funds like SMIF that offers a 10% plus yield with no leverage but could suffer liquidity issues because of the type of securities it owns (MBSs for example).

Y

When mentioning ITs I was thinking of the likes of the big generalists such as Alliance and F&C but even the smaller specialist ones will never have liquidity problems. If they are likely to, dispose of them. I run a significant portfolio and live off the income, infact rely on the income as my only other income is the State Pension.
I have about 24 income producing shares and about another 5/6 growth share which produce some income. Nothing fancy and a mixture between individual companies and ITs. I have been in hospital for the last week at no notice and reckon it can run itself subject to my transferring dividends periodically to my bank accounts.
Obviously I have cash resources in cash or cash equivalent of about 3 years expenses but have never had to touch it.
My daughter holds a P of A and I have told her how to generate care home fees if necessary without altering anything on the capital front. Keep it simple!
Dod

[TahiPanasDua]

I am with you all the way.

All our income, less my wife's £6k pension, comes from dividends. We have no old age or other pensions despite being in our mid and late 70s.

Over 50% of our investments are in ITs and ETFs. We are in the process of converting to all ITs and ETFs as they offer diversity and minimal involvement. We also have about 3 years cash on hand.

The balance of the current portfolio is in "solid" companies. Our dividend income is targeted at a "safe" 4%. Hopefully by the time I go gaga (self-evidently, signs are there already!!!) or worse, the whole should require almost no involvement by my wife. She has no interest in investment and I have to plan totally around that.

We are lucky enough to spend only about 80% of our monthly income. That's not because we are loaded or skinflints. Rather, we are by nature not particularly big spenders mainly by not being big on "stuff", namely houses, cars, jewellery, clothes, gizmos, etc. This allows us to indulge in experiences such as travel, eating out etc. We feel no compulsion to spend up to the hilt. That is a blessing I feel.

We are lucky enough to be able to survive a big market drop without economising.

Surely there are lots of others who feel the need to plan for disinterested spouses on the increasing probability of the call to "on high".

TP2

[ignotus20]

The biggest sacrifice will be in yield. VHYL for example is a quality fund with low fees and no leverage but it yields only 3.36%.

TDIV (VanEck Morningstar Developed Markets Dividend Leaders) - https://www.vaneck.com/uk/en/investment ... /overview/ yields circa 5% and has a performance similar to VHYL. The charges are higher than VHYL but not a great deal (0.38% vs 0.29%).

Not all platforms offer it, but ii and AJ Bell do (you need to phone the latter to deal, however).

[yieldhog]

Thank you for all your comments. It looks as though there are a few on the TLF site who are in a very similar situation to my wife and I.

Dod, have you posted your portfolio anywhere on this site? I would be interested in seeing it.
Sorry to hear of your recent hospitalization and hope you are doing better.

Ignotus, thank you for your suggestion of TDIV but I don't buy any open ended funds, mostly for the reason mentioned by Dod. i.e. In a market meltdown they become forced sellers of the underlying portfolio positions whereas closed end funds can keep the portfolio intact (unless they are heavily geared with weak funding).

Just to update the preliminary 2023 results for my SIPP. The portfolio was listed at the start of this thread:
Dividend Yield is estimated at 6.8% compared with 6.7% last year. Just a few holdings to report Nov and Dec dividend dates and amounts, notably NCYF, HINT, IMB, IUKD, IAPD, SMIF and VSL. Most of these are fairly predictable. IUKD and IAPD are usually the slowest in confirming figures. SMIF is also a bit erratic.
VSL is unusual because the fund is being wound up. The managers have indicated there may be a first payment of the liquidation in the final quarter but I'm not sure this will be a return of capital, special dividend, or a combination of the two. Even if it takes place at all.

I'm going to be housebound for the next couple of days so hopefull can report a few more facts and figures.

Y

[moorfield]

https://www.investorschronicle.co.uk/id ... portfolio/

There's an article in last week's IC that might be useful here. Unfortunately it's behind a paywall which I can't access further.

[Itsallaguess]

There's an article in last week's IC that might be useful here.

Unfortunately it's behind a paywall which I can't access further.

Investors Chronicle articles can be fully accessed via a Google search of the headline -

https://www.google.com/search?client=firefox-b-d&q=My+wife+has+no+interest+in+investing+%E2%80%93+how+do+I+simplify+my+%C2%A31mn+portfolio%3F

The top link returned via above Google-search URL is the one you're referring to.

Cheers,

Itsallaguess

[Dod101]

Thank you for all your comments. It looks as though there are a few on the TLF site who are in a very similar situation to my wife and I.

Dod, have you posted your portfolio anywhere on this site? I would be interested in seeing it.
Sorry to hear of your recent hospitalization and hope you are doing better.

Ignotus, thank you for your suggestion of TDIV but I don't buy any open ended funds, mostly for the reason mentioned by Dod. i.e. In a market meltdown they become forced sellers of the underlying portfolio positions whereas closed end funds can keep the portfolio intact (unless they are heavily geared with weak funding).

Just to update the preliminary 2023 results for my SIPP. The portfolio was listed at the start of this thread:
Dividend Yield is estimated at 6.8% compared with 6.7% last year. Just a few holdings to report Nov and Dec dividend dates and amounts, notably NCYF, HINT, IMB, IUKD, IAPD, SMIF and VSL. Most of these are fairly predictable. IUKD and IAPD are usually the slowest in confirming figures. SMIF is also a bit erratic.
VSL is unusual because the fund is being wound up. The managers have indicated there may be a first payment of the liquidation in the final quarter but I'm not sure this will be a return of capital, special dividend, or a combination of the two. Even if it takes place at all.

I'm going to be housebound for the next couple of days so hopefull can report a few more facts and figures.

Y

Unfortunately I am not able to produce my current portfolio but it is unchanged from what was posted some months back but I cannot remember where. If we can find it, it runs itself more or less.
Dod

[monabri]

Thank you for all your comments. It looks as though there are a few on the TLF site who are in a very similar situation to my wife and I.

Dod, have you posted your portfolio anywhere on this site? I would be interested in seeing it.
Sorry to hear of your recent hospitalization and hope you are doing better.

Ignotus, thank you for your suggestion of TDIV but I don't buy any open ended funds, mostly for the reason mentioned by Dod. i.e. In a market meltdown they become forced sellers of the underlying portfolio positions whereas closed end funds can keep the portfolio intact (unless they are heavily geared with weak funding).

Just to update the preliminary 2023 results for my SIPP. The portfolio was listed at the start of this thread:
Dividend Yield is estimated at 6.8% compared with 6.7% last year. Just a few holdings to report Nov and Dec dividend dates and amounts, notably NCYF, HINT, IMB, IUKD, IAPD, SMIF and VSL. Most of these are fairly predictable. IUKD and IAPD are usually the slowest in confirming figures. SMIF is also a bit erratic.
VSL is unusual because the fund is being wound up. The managers have indicated there may be a first payment of the liquidation in the final quarter but I'm not sure this will be a return of capital, special dividend, or a combination of the two. Even if it takes place at all.

I'm going to be housebound for the next couple of days so hopefull can report a few more facts and figures.

Y

Unfortunately I am not able to produce my current portfolio but it is unchanged from what was posted some months back but I cannot remember where. If we can find it, it runs itself more or less.
Dod

End of March 2023.
viewtopic.php?p=579199&sid=38e9b9a62c7241c46c595b7641fbfcce#p579199

[yieldhog]

Thank you for the link to Dod's portfolio and for links to useful articles. I will take a closer look at these as and when.

Some more stats from my SIPP:

Weighted Return on Capital for Portfolio - 3.7 %
Dividend Return +6.8 %
Nett Realized Capital Gains +2.2 %

With inflation at 6.8%, that appears to add up to a real return for 2023 of around negative 1.5%
Hopefully inflation will fall a little before year-end and hence improve real returns, but it could be negated by realized losses on BVT and VSL.

Current cash position is around 1.5% and is likely to grow before year-end.

Y

Y

[yieldhog]

I see that NCYF has just reported a November dividend of 1p, which is what I assumed in my preliminary 2023 SIPP results. That just leaves HINT to announce it's dividend for November. I have estimated 1.85p.

Y

[Dod101]

Unfortunately I am not able to produce my current portfolio but it is unchanged from what was posted some months back but I cannot remember where. If we can find it, it runs itself more or less.
Dod

End of March 2023.
viewtopic.php?p=579199&sid=38e9b9a62c7241c46c595b7641fbfcce#p579199

Thanks Monabri for finding that. Just to update things, despite what I said in that thread, I sold Treatt, added some spare dividends and bought Greencoat UK despite my earlier comments because they looked to be at a good price. Not done me much good so far!

Dod

[yieldhog]

A few more preliminary states for my 2023 portfolio:

Top ten in order of price performance (percentages):

Price Dividend Total Return
JGGI +9.7 4.98 14.68
MNG +4.8 9.20 14.00
MBSP +4.20 31.20 35.00
JEGI +3.20 4.50 7.70
GACA 0.0 7.44 7.44
SMIF -1.20 7.75 6.55
NCYF -8.40 8.27 -0.13
IAPD -8.70 5.97 -2.73
IUKD -8.80 5.02 -3.78
IAT -11.20 4.46 - 6.74

MBSP looks odd but reflects the dividend yield on my cost price.

For comparison, following are some estimated YTD 2023 total returns on some popular investment trusts, some of which I own in various portfolios:

FCIT -6.20
SMT -12.77
PC +26.00
ATT +22.30
CTY -4.69
RCP -14.47
MNKS -6.05
WWH -8.94

Food for thought. Hope some of you find the stats of interest.
Personally, going through this exersize now has given me some ideas on what I am going to do to adjust my portfolios for 2024.

Y