Safe Haven Portfolio

[BusyBumbleBee]

As I ponder the scary heights all indices have reached and the ridiculous returns from gilts, coupled with the gadarene rush to buy any old VCT offering despite the radical change in investment rules making returns at best 'lumpy', I can only conclude that we're close to the top and heading inevitably for a downward correction - and probably a massive downward correction as Trump gets ever more rattled and the full implications of Brexit strike home so I have been assembling a Safe Haven Portfolio.

The parameters for an asset to go into to this portfolio are

1. It must provide a secure, above inflation (preferably index linked) income : target 6%
2. Where it is geared, have fixed the borrowings at today's low rates so they are inherently earnings positive in the medium to long term
3. have good liquidity and be easily traded
4. provide goods or services that are needed in good times and bad
5. not trade too far away from asset value

So I have come up with these stocks

BSIF : British Solar Infrastructure Fund
FSFL : Foresight Solar Fund
JLEN : John Laing Environmental
NESF : Nest Energy Solar Fund
TRIG : the Renewable Infrastructure Fund
UKW : UK Wind
~~ (the above backed by government RPI linked subsidies and power prices)
ESP : Empiric Student Property : ~~ lets high quality student property
~~ all the above are channel island companies and so no stamp duty on purchases.
RMDL : RM Secured ~~ new fund specialising in asset backed loans to SMEs : target yield 6.5% after the first year - 4.5% in first year
APAX : APAX Global Alpha ~~ World wide Venture Capital firm which distributes 5% of NAV each year

WAS1 : Wasps (rugger team) 6.5 % retail bond ~~ secured on the Ricoh stadium in Coventry
BUR2 : Burford Capital 6.5 % retail bond ~~ international litigation firm

VENTUS and VENTUS 2 VCTs Ordinary and "C" shares ~~Mature portfolio of wind and hydro businesses with government backed RPI linked revenues these yield above 7% tax free

Code: Select all

Share   Bid   Offer   Divs   2017 div   Bid Yield   Offer Yield   NAV   Disc to NAV
BSIF   107.00   108.50   Quarterly   7.25   6.78%   6.68%   105.07   -1.84%
FSFL   107.00   108.00   Quarterly   6.32   5.91%   5.85%   105.60   -1.33%
JLEN   107.25   108.25   Quarterly   6.14   5.72%   5.67%   100.00   -7.25%
NESF   110.50   111.50   Quarterly   6.31   5.71%   5.66%   102.60   -7.70%
TRIG   106.70   106.80   Quarterly   6.40   6.00%   5.99%   100.10   -6.59%
UKW   119.60   119.80   Quarterly   6.49   5.43%   5.42%   107.00   -11.78%
                        
WAS1   103.00   104.55   May & Nov   6.50   6.31%   6.22%      n/a
RMDL   101.00   102.50   Jun & Dec   6.00   5.94%   5.85%      n/a
APAX   150.25   151.75   Apr & Sept   8.26   5.50%   5.44%   163   7.82%
BUR2   106.10   108.40   Feb & Aug   6.50   6.13%   6.00%      n/a
ESP   110.50   110.75   Quarterly   6.00   5.43%   5.42%   105.23   -5.01%


Actually it is not a portfolio in one way as these investments are scattered through the several family portfolios I look after but now comprise from 40-100% of each portfolio. The 100% figure is in the newest JSIPP for a grand child and is only £3,600.

The average income from this portfolio - including a smattering of Ventus - is just about 6% - without Ventus it is 5.90%. But my stocks are showing an increase in value since purchase as I don't buy below a 6% yield.

In addition to this there are investments in the NFU Mutual 'with profits fund' which has consistently delivered smoothed good returns over many years and from which you can withdraw 5% per annum tax free and which is very 'liquid'

Has anyone else got other suitable investments for this portfolio?

[moorfield]

Has anyone else got other suitable investments for this portfolio?

You sound quite bearish there BusyBumbleBee. Have you considered (in this order):

Water
Beans
Diesel
Guns

?

[TimR]

Many also hate leveraged ETF's, especially if you suggest holding them longer term. I've held them buy-and-hold (with rebalancing) for years and have been more than satisfied. Some just don't get-it that when scaled down they can work well

Interesting - Leveraged ETFs aren't available on my platform - My platform has PHGP and SLGN ETFs for Gold, and a wide selection of the most common ETFs and investment trusts on the LSE.

TimR

[BusyBumbleBee]

Well : 1nv35t, TimR, Moorfield : I don't think your suggestions and erudite knowledge actually meet the parameters I set for this thread

If you read other threads in investment strategies you will see a number of pleas to give safe income producing investments within SIPPs and ISAs. This thread was intended to help folks there and your contributions do nothing to help those folks.

and yes, I am bearish - very bearish - as I was at the height of the dot com bubble and other similar events.

[dspp]

BBB,

Your list is very heavy on plays on some UK wind & solar projects that are a) in GBP, and b) in the UK and c) could get deliberately targeted by the Treasury, even if they were not to go so far as ripping up the FIT etc schemes in retrospect (though the Spanish did). So long as only a few people play that game it may work. More widespread adoption would drive pricing high / yield low. Personally I think it over-concentrated but I don't know what % you have elsewhere (eg your APAX pick).

Regards, dspp

[richfool]

BBB, I was interested in your OP and suggested havens, I did myself look at a number of the environmental/infrastucture funds you refer to, last year, particularly: BSIF, JLEN and TRIG. However I was put off by the substantial premiums they were trading at, plus some uncertainties about taxation issues. The Goverment had changed, to the detriment, some aspects of the latter a year or so back.

BSIF : British Solar Infrastructure Fund
FSFL : Foresight Solar Fund
JLEN : John Laing Environmental
NESF : Nest Energy Solar Fund
TRIG : the Renewable Infrastructure Fund

I hold some UK stocks directly with an emphasis on global income, plus a large portfolio of IT's.

Currently, I am staying fairly fully invested, maintaining a global diversity through IT's, and hold some "Flexible" sector IT's including: Personal Assets, Capital Gearing Trust (CGT) and HAST Henderson Alternative Strategies (HAST), plus BRWM and BRCI for commodity exposure.

[mswjr]

Primary Health Properties (PHP)?

Own Health centres then lease to GPs.
From 2016 report-
LTV 53.7%, with a max 60% medium term.
Av. cost of debt 4.65%

Curent yield 4.64%, so lower than your target.

[BusyBumbleBee]

BBB, I was interested in your OP and suggested havens, I did myself look at a number of the environmental/infrastucture funds you refer to, last year, particularly: BSIF, JLEN and TRIG. However I was put off by the substantial premiums they were trading at, plus some uncertainties about taxation issues. The Goverment had changed, to the detriment, some aspects of the latter a year or so back.

BSIF : British Solar Infrastructure Fund
FSFL : Foresight Solar Fund
JLEN : John Laing Environmental
NESF : Next Energy Solar Fund
TRIG : the Renewable Infrastructure Fund

I hold some UK stocks directly with an emphasis on global income, plus a large portfolio of IT's.

Currently, I am staying fairly fully invested, maintaining a global diversity through IT's, and hold some "Flexible" sector IT's including: Personal Assets, Capital Gearing Trust (CGT) and HAST Henderson Alternative Strategies (HAST), plus BRWM and BRCI for commodity exposure.

I agree that a portfolio of ITs is a good thing - trouble for me is that they are looking a bit toppy. The NFU with profits investments largely replace them in the portfolio. And the income is smoothed so even in the expected down years to come they will still be positive - and the 5% tax free is a bonus. Cos I am getting lazier as I grow older I will eventually liquidate the Safe Haven positions and put the dosh into ITs

The six wind/solar investments are interesting because they actually go on a pricing walkabout during the year and so there is often the opportunity to sell one high and buy another low. And the Channel Island residence helps cos there's no stamp duty.

I currently have very little cash in the portfolios - just enough to buy any new issues that come along. I live off my pensions and some of the dividends.

Osbornes removal of the LECs was far too clever by half but it is not the same as the FiT and the ROC regime which are not really susceptible to government intervention unless things turn out even worse than my worst fears.

kind regards - BBB

[Hariseldon58]

One of the difficulties in preparing for a downturn is that you are correct about the ultimate direction of travel but early....
The end result may be very similar to doing nothing.

Unlike say 1999 we don't have an optimistic surge in a particular sector to identify but fairly high valuations of stocks in general and it's possible that a meaningful rise in profits might justify today's valuations or not. The lack of decent yield from safe bonds tends to support high stock prices.

There Is an argument for a globally diversified portfolio of stocks , bonds, cash and property and then just sitting it out, it's likely to do ok.

[flyer61]

BBB

You picked NFU with profits for your grandkids...I picked Wesleyan With Profits for my kids.....curious to know if NFU is better!

Whether my kids will ever thank me for it is another matter....however I am planning on the next few years of transferring all their monies to accounts I can manage.

Why don't you just buy Johnson and Johnson, Nestle, Microsoft, Imperial.....if you are worried. Read Terry Smiths latest missives, there is a lot too worry about, he had a vast list of things to give us indigestion...however buying 'Quality' and keeping buying quality would be my hedge for bad times ahead....

[BusyBumbleBee]

BBB

You picked NFU with profits for your grandkids...I picked Wesleyan With Profits for my kids.....curious to know if NFU is better!

Why don't you just buy Johnson and Johnson, Nestle, Microsoft, Imperial.....if you are worried. Read Terry Smiths latest missives, there is a lot too worry about, he had a vast list of things to give us indigestion...however buying 'Quality' and keeping buying quality would be my hedge for bad times ahead....

Given equal performance the I would expect NFU mutual to be better as their charges are generally lower as they sell through a network of Group Secretaries who are largely paid to run the NFU itself. But I guess we will never know. I am a member of the NFU and put all my insurance through them as well.

I do have another portfolio containing stocks such as Apple, Unilever etc which has done well over the years. Unilever has just hit £40 per share and they were bought for £1.64. Resist tinkering on this one but am considering selling Apple as Samsung must make a comeback soon.

Curiously - if I separate out the Safe Haven Portfolio it has returned north of 15% in the past 12 months.

[flyer61]

I will be writing to check exactly what AMC the kids are paying...

http://www.wesleyan.co.uk/pdf/58127/wes ... w=Standard
https://www.nfumutual.co.uk/personal/in ... _insights/

It would appear that NFU has done better on a 5 year view...

[mc2fool]

ESP : Empiric Student Property : ~~ lets high quality student property
:
Has anyone else got other suitable investments for this portfolio?

Well, you might consider GCP Student Living (DIGS). It does have a lower yield than ESP but offers the chance for doubling up in that sector.

I bought both DIGS & ESP in August 2014. I'd had my eye on DIGS for a while and when I went to actually do something about it I discovered a new kid on the block, ESP, who'd launched a month or two previously, so I split the investment and bought both. Both were targeting a 6% yield and were just below that at my time of purchase, with ESP yielding a little more than DIGS but there wasn't much in it.

The much larger difference in yields now is due to their relative capital performance since.

[UncleEbenezer]

Um, traditionally if you're that bearish, you buy gold. Or go short. Or variants on the theme.

I'd rather go short locally by buying assets elsewhere in the world. Predominantly Asia, which might be hit short-term if Trump plays sillybuggers with trade, but might very well stand to benefit a lot medium-term from boosting non-US trade. They're big markets in their own right now.

In the UK, I might buy a house. That's a store of value regardless of how much the price drops, in that it releases me from paying rent. If market forces operated, one would expect houses to crash more than the majority of shares in a downturn, due to the leverage. But nowadays politics says that can't be allowed to happen. The crash of a decade ago was stopped by printing a vast wall of money, that has also been a major driver of the equities boom. Which begs the question ...

Politically speaking, how does government react to the next house price correction? Will they dare to allow it to happen? If not, what will they do to try and stop it? It's not easy to see how house prices can be saved without further inflating other assets.

[BusyBumbleBee]

Um, traditionally if you're that bearish, you buy gold. Or go short. Or variants on the theme.
...
In the UK, I might buy a house. That's a store of value regardless of how much the price drops, in that it releases me from paying rent. ,,, It's not easy to see how house prices can be saved without further inflating other assets.

Yup - but gold doesn't give an income and I am just as bearish on other equities (less so on Asian equities except China). Shorting could go horribly wrong if the markets continue to go up irrationally.

Houses - traditionally a store of value as well as being a place to live. But don't forget the maintenance!!! My house cost £3000 in 1967 and cost me more to paint last year than it did to buy. Every year costs several thousand to maintain.

As you know I also have a portfolio of venture capital assets - some of which I am locked into but which I value as a really good portfolio - as do you but it would be interesting to know if you did a calculation whether a house purchase by you wold have returned more than the VCTs you have bought. Each year house prices have gone up up- so much so that I don't think I would buy one now - unless I was down sizing but then I have been wrong for a very wrong time. And as you say the gov't has a real problem if they do fall. Have to go back to the mid nineties to see what the gov't did with the last house price crash caused by Lawson - the self-styled 'best chancellor of the modern age'

[DRB79]

BBB


Curiously - if I separate out the Safe Haven Portfolio it has returned north of 15% in the past 12 months.

I agree very much BBB with your overall views about the markets being very frothy, and extremely good expectations about Trump/the Fed/global economy etc all priced in.

However, given there hasnt been even a minor sell off for some time I would think even the stocks you outlined in your original post would susceptible to a sell off. Perhaps not as severe as the rest of the market, they would likely perform well on a relative basis. Of course there income would be unaffected but it would potentially be a great time to load the truck up with these types of stocks next time the market has a woble.

The fact they too have gone up significantly with the general market makes be think they wont be unaffected when the next sell off occurs, even if its a minor sell off. Liquidity is key, stocks like these are a source of liquidity next time there is a bump in the road.

Of course the risk there is no sell off and the markets keep on going up, buying these stocks will give a reasonable return in the interim.

Decisions!

[Retiringat51]

"While stand the housing market of England, England stands; when fall the housing market of England, England falls!"

This mantra has been of the utmost importance to the sustainability of successive baby boomer administrations in the UK. Woe betide any government in office at a time in the cycle when house prices should fall.

I suspect it has its origin in Mary Poppins.The above misquotation should of course refer to "banks" rather than "housing market", but in the UK the two are inseparably conflated.The 2008 "bank" bailout was, by choice, a national burden designed primarily to save the national housing market.

What would PL Travers have made of the consequences for GBP and its assets as the current PM's fickle finger of fate hovers over "the Trigger" this week?

Admiral : "Good-day, Banks! How's the world of finance these days?"

Mr Banks: "Excellent, Admiral. Credit rates are moving up, up, up, and the British pound is the envy of the world."

or do you prefer

Bert: "Winds in the east, mist coming in, like somethin' is brewin' and bout to begin. Can't put me finger on what lies in store, but I fear what's to happen all happened before."

Not too clear, is it?

[UncleEbenezer]

but it would be interesting to know if you did a calculation whether a house purchase by you wold have returned more than the VCTs you have bought.

For what it's worth, what I've spent on VCTs is around half what the house I live in would cost to buy, and the income from the VCTs has (more than) covered the rent every year since 2013. In an area of the country where house prices have moved sideways since about 2005 - which is before I bought my first VCTs in 2008/9 - I think that's worked well financially speaking. I wouldn't buy a house now for financial reasons, but sadly I now have "doctors orders" that are incompatible with the conditions imposed on the vast majority of rentals.

While there's a lot of variation between the stars and the duds, I'd consider the VCT portfolio as a whole to be a success. But I wouldn't call them a safe haven, except insofar as they represent diversification alongside other assets.

[BusyBumbleBee]

I prefer

"Winds in the east, mist coming in, like somethin' is brewin' and bout to begin. Can't put me finger on what lies in store, but I fear what's to happen all happened before."

[UncleEbenezer]

"While stand the housing market of England, England stands; when fall the housing market of England, England falls!"

This mantra has been of the utmost importance to the sustainability of successive baby boomer administrations in the UK. Woe betide any government in office at a time in the cycle when house prices should fall.

John Major got reelected in 1992, in a falling housing market!

Of course, the corrections of last decade can only be discussed in "what if"s. The point of no return may well have been the Ballsian stimulus that prevented the correction in 2005 becoming a crash.