Retirement IT Income Portfolio - half year report
Posted: February 1st, 2019, 3:47 pm
Background
Six months ago I posted details of my and Mrs MP's SIPPs which contain a portfolio of income producing Investment trusts here:
viewtopic.php?f=8&t=13160
The portfolio is a John Baron-esque collection of 20 diversified trusts covering UK and International/Private Equities, Fixed Interest, Property and Alternatives/Infrastructure. The original post attracted considerable interest and many comments, which was very pleasing: a lot of the discussion centred around the viability of the high forecast yield of the PF (5.69%) and also whether this "natural yield" approach is lesser that a Total Return approach.
The SIPPs are with Hargreaves Lansdown. We benefit from the £200 pa fee limit and this keeps our platform costs under 0.1% of the total. The two SIPPs are managed and reported as a single consolidated PF. For ease of reporting I have pro rata'd all the figures to represent a starting value of £100,000. There has been no trades in the period.
Income
!8 of the trusts pay dividends quarterly, and two twice yearly. Therefore 38 payment events were expected, and 38 were duly received. HL are very efficient: the vast majority of these payments dropped into our SIPP accounts on the nominated payment date.
The forecast yield for a full year was £5,676. For the half year then(without bothering to look into finals v. interims etc.) I was expecting £2,838. This was very accurate: the sum received in the half year was £2,844.
Going forward, European Assets has announced a dividend cut for 2019 of 23% to reflect its shrunken NAV (see below), reducing the total income for the PF by just over 1%. Hopefully this will be made up elsewhere, but no major problem.
Capital
I have a HYP-ish philosophy to this portfolio. Accordingly, the capital value is of lesser importance to me than an income stream which at least matches inflation over the years. Nevertheless, it would be pleasing to see it grow over the years.
The last six months have been particularly torrid of course, with all sorts of geo-political and economic problems. At the end of July, the start period for this PF for reporting purposes, the FTSE100 was riding high at 7748. At the end of January it sat 10% down at 6969. Hi ho!
The diversified nature of the PF has helped minimise the capital loss though: The portfolio is down 3.42% over the period; 7 of the 20 are actually in profit and a further 2 are under 1% down. here are some comparisons:
Individual Trust Performance
The dog of the PF is European Assets, whose European small/mid cap sector has taken a particular hammering. This trust targets a 6% yield partially funded out of capital. As mentioned above, there is to be a 23% cut for 2019, which is probably sensible.
Also noteworthy is the lack of a diversification benefit from the pure fixed income trusts, Twentyfour Income and CQS New City High Yield, down 7% and 9% respectively. High yield bonds have not performed well over the half year, although the projected income has been duly received and there's no reports of upcoming cuts.
Blackrock American and Murray International equity funds have done very well considering, and the UK equity funds (Dunedin Income Growth, Shires, Henderson High, Merchants, have all done a little better that the FTSE100.
Infrastructure funds have helped the PF hold up.
I'll be back at the end of July with a full year report, in the meantime thanks for your interest.
MP
Six months ago I posted details of my and Mrs MP's SIPPs which contain a portfolio of income producing Investment trusts here:
viewtopic.php?f=8&t=13160
The portfolio is a John Baron-esque collection of 20 diversified trusts covering UK and International/Private Equities, Fixed Interest, Property and Alternatives/Infrastructure. The original post attracted considerable interest and many comments, which was very pleasing: a lot of the discussion centred around the viability of the high forecast yield of the PF (5.69%) and also whether this "natural yield" approach is lesser that a Total Return approach.
The SIPPs are with Hargreaves Lansdown. We benefit from the £200 pa fee limit and this keeps our platform costs under 0.1% of the total. The two SIPPs are managed and reported as a single consolidated PF. For ease of reporting I have pro rata'd all the figures to represent a starting value of £100,000. There has been no trades in the period.
Income
!8 of the trusts pay dividends quarterly, and two twice yearly. Therefore 38 payment events were expected, and 38 were duly received. HL are very efficient: the vast majority of these payments dropped into our SIPP accounts on the nominated payment date.
The forecast yield for a full year was £5,676. For the half year then(without bothering to look into finals v. interims etc.) I was expecting £2,838. This was very accurate: the sum received in the half year was £2,844.
Going forward, European Assets has announced a dividend cut for 2019 of 23% to reflect its shrunken NAV (see below), reducing the total income for the PF by just over 1%. Hopefully this will be made up elsewhere, but no major problem.
Capital
I have a HYP-ish philosophy to this portfolio. Accordingly, the capital value is of lesser importance to me than an income stream which at least matches inflation over the years. Nevertheless, it would be pleasing to see it grow over the years.
The last six months have been particularly torrid of course, with all sorts of geo-political and economic problems. At the end of July, the start period for this PF for reporting purposes, the FTSE100 was riding high at 7748. At the end of January it sat 10% down at 6969. Hi ho!
The diversified nature of the PF has helped minimise the capital loss though: The portfolio is down 3.42% over the period; 7 of the 20 are actually in profit and a further 2 are under 1% down. here are some comparisons:
Individual Trust Performance
The dog of the PF is European Assets, whose European small/mid cap sector has taken a particular hammering. This trust targets a 6% yield partially funded out of capital. As mentioned above, there is to be a 23% cut for 2019, which is probably sensible.
Also noteworthy is the lack of a diversification benefit from the pure fixed income trusts, Twentyfour Income and CQS New City High Yield, down 7% and 9% respectively. High yield bonds have not performed well over the half year, although the projected income has been duly received and there's no reports of upcoming cuts.
Blackrock American and Murray International equity funds have done very well considering, and the UK equity funds (Dunedin Income Growth, Shires, Henderson High, Merchants, have all done a little better that the FTSE100.
Infrastructure funds have helped the PF hold up.
I'll be back at the end of July with a full year report, in the meantime thanks for your interest.
MP