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How to increase defensiveness of IT portfolio

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richfool
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How to increase defensiveness of IT portfolio

#224758

Postby richfool » May 27th, 2019, 2:49 pm

This is my current (mainly IT) portfolio. The focus is income and diversity, and thus includes some trusts, such as infrastructure and alternative assets and which are hopefully less correlated with equities. The portfolio does include two directly held stocks (GSK & LGEN).

The yields quoted were correct when I purchased or last topped up, but are not the current ones. I included them solely as a guide.

I am currently looking for ideas as to how to increase the defensiveness of the portfolio, though still maintain its diversity, which is partly why the alternative assets and multi-asset trusts such as SIGT are included.

UK GROWTH & INCOME TRUSTS:

CTY.L CITY OF LONDON INV 4.00%
ASEI.L ABERDEEN STD EQTY 3.45%
FGT.L FINSBURY G&I TST 2.00%
SHRS.L SHIRES INCOME TST 4.78%
MRC.L MERCANTILE TST 2.31%
SLS.L STD LIFE UK SMALL 1.50%
MUT.L MURRAY INCOME TST 4.53%

FTSE 100 HYP STOCKS:

GSK.L GLAXOSMITHKLINE 5.40%
LGEN.L LEGAL & GENERAL 6.00%

GLOBAL G&I IT's:

HINT.L HENDERSON INTL INC 3.20%
JPGI.L JPMORGAN GBL GTH &INC 4.00%
MYI.L MURRAY INTL TRUST 5.40%

GLOBAL MULTI-ASSET IT's:

BMPI.L BMO MANAGED PFOLIO INC 4.33%
MATE.L JP MORGAN MULTI-ASSET 4.30%
SIGT.L SENECA GLOBAL INC 3.85%

ASIAN PACIFIC INV TRUSTS:

AAIF.L ABERDEEN ASIAN INC 5.40%
SOI.L SCHRODER ORIENTAL INC 4.35%
JAI.L JPMORGAN ASIAN IT 4.10%

NORTH AMERICAN IT's:
MCT.L MIDDLEFIELD CAN INC 6.60%

COMMERCIAL PROPERTY/REIT IT's:

PHP.L PRIMARY HLTH PROP 4.60%
RGL.L REGIONAL REIT LTD 7.30%
SLI.L STD LIFE INV PROP 4.75%
WHR.L WAREHOUSE REIT PLC 6.00%

INFRASTRUCTURE TRUSTS:

GCP.L GCP INFRASTRUCTURE 6.20%
INPP.L INT PUBLIC PARTNER 4.15%

ENVIRONMENTAL TRUSTS:

JLEN.L JOHN LAING ENVIRON 5.55%
TRIG.L THE RENEWABLES INF 5.34%

UTILITY TRUSTS:
EGL.L ECOFIN GBL UTILITI 5.00%

W/W PHARMAS:
WWH.L W/WIDE HLTHCARE 0.67%

RESOURCES/GOLD:

CYN.L CQS NATURAL RES 6.00%
SGLN.L ISHARES PHYSICAL GLD 0.00%

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Re: How to increase defensiveness of IT portfolio

#224767

Postby Wasron » May 27th, 2019, 4:11 pm

It looks to me like you have a decent level of diversity already, and adding to a couple of the more defensive ones wouldn’t upset that balance. To some extent it depends on what you’re trying to defend yourself from.

Traditional defensive HYP shares would be GSK, Imperial Brands and National Grid. You have one already and there are certainly fears surrounding the other two at present.

If Brexit is your fear then add to HINT and MCT, but if Trump is a concern then possibly go for the physical gold.

If you want to add something new, then GCP Student Living (DIGS) certainly provides something different. Yields over 4% and invests in high-end student accommodation around London.

The other i’m looking at but haven’t bought yet is Hipgnosis Song Fund (SONG). It provides an income from the royalties of songs it owns. It is ranked as high risk, but seems uncorrelated to other stocks. What’s stopping me investing at present is a way of measuring the real value of the songs over a period of years. Some artists won’t last the test of time.

Regards

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Re: How to increase defensiveness of IT portfolio

#224769

Postby EthicsGradient » May 27th, 2019, 4:30 pm

I think the main problem is that your percentages add up to about 130%, even with the last one being 0.00%. Are some of those figures out of date?

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Re: How to increase defensiveness of IT portfolio

#224771

Postby monabri » May 27th, 2019, 4:41 pm

EthicsGradient wrote:I think the main problem is that your percentages add up to about 130%, even with the last one being 0.00%. Are some of those figures out of date?


They're yields.

richfool said

"The yields quoted were correct when I purchased or last topped up, but are not the current ones. I included them solely as a guide."

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Re: How to increase defensiveness of IT portfolio

#224772

Postby EthicsGradient » May 27th, 2019, 4:46 pm

monabri wrote:They're yields.

richfool said

"The yields quoted were correct when I purchased or last topped up, but are not the current ones. I included them solely as a guide."

Ah. Good point. :oops:

That does leave the question of how well others can judge how defensive or not the portfolio is, if they don't know the amounts in each investment. Just assume they're all roughly equal in size?

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Re: How to increase defensiveness of IT portfolio

#224773

Postby richfool » May 27th, 2019, 4:53 pm

Wasron wrote:It looks to me like you have a decent level of diversity already, and adding to a couple of the more defensive ones wouldn’t upset that balance. To some extent it depends on what you’re trying to defend yourself from.

Traditional defensive HYP shares would be GSK, Imperial Brands and National Grid. You have one already and there are certainly fears surrounding the other two at present.

If Brexit is your fear then add to HINT and MCT, but if Trump is a concern then possibly go for the physical gold.

If you want to add something new, then GCP Student Living (DIGS) certainly provides something different. Yields over 4% and invests in high-end student accommodation around London.

The other i’m looking at but haven’t bought yet is Hipgnosis Song Fund (SONG). It provides an income from the royalties of songs it owns. It is ranked as high risk, but seems uncorrelated to other stocks. What’s stopping me investing at present is a way of measuring the real value of the songs over a period of years. Some artists won’t last the test of time.

Regards

Thanks for your thoughts Wasron.

I should maybe have indicated the size of my holdings. MYI is my largest holding, followed by MCT and then JPGI. I do like MCT for its dividend yield and non sterling exposure. My smallest holding is CYN.

Property already constitutes 12% of the portfolio, so I'm wary of adding any more property.

I've taken the view that I am getting exposure to fixed interest (and enhancing income) through multi-asset trusts like Seneca (SIGT) & JP Morgan Multi-Asset Trust (MATE), along with Shires (SHRS) and Murray International (MYI).

I recently added TRIG to complement JLEN., and topped up Gold (SGLN) and SIGT. The latter is increasing its defensive stance (and reducing equity exposure).

I hold NG (ULVR, HSBA, PRU & SLA) in a separate stock only portfolio. NG and SLA both being "underwater" there. The higher exposure to financials & risk noted there. I have been watching NG with a view to getting out, unless of course JC resigns!

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Re: How to increase defensiveness of IT portfolio

#224777

Postby Dod101 » May 27th, 2019, 5:17 pm

If JC resigns that might simply leave the field open to a more electable left winger.

As a matter of interest why do you want to increase the defensiveness of the portfolio? If for personal reasons please do not answer but I was wondering if you know something we do not.

Dod

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Re: How to increase defensiveness of IT portfolio

#224778

Postby richfool » May 27th, 2019, 5:18 pm

Yes, sorry about not indicating size of holdings. As a rough guide, they are between 2 - 4% of portfolio, apart from MYI, MCT and JPGI, which are greater.

As a guide the sector sizes as a percentage of the whole portfolio are:

UK - 22.5% (includes mid & small cap trusts)
UK direct stocks - 7.7%
Global G&I - 19.5%
Multi-Asset - 9.3%
North America (MCT) - 6.7%
Asia Pacific - 7.3%
Property - 12.1%
Environmental/Renewables - 4.8%
Infrastructure 4.4%
Utilities - 1.6%
Pharma - 1.9%
Gold & Resources 2.2%
Last edited by richfool on May 27th, 2019, 5:27 pm, edited 2 times in total.

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Re: How to increase defensiveness of IT portfolio

#224780

Postby richfool » May 27th, 2019, 5:22 pm

Dod101 wrote:If JC resigns that might simply leave the field open to a more electable left winger.

As a matter of interest why do you want to increase the defensiveness of the portfolio? If for personal reasons please do not answer but I was wondering if you know something we do not.

Dod

Just anticipating the next correction or bear market, which I feel must come soon (2020?). (I'm less worried about Brexit implications than global/US bear markets or recessions).

I suppose the question is really, am I positioned defensively enough?

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Re: How to increase defensiveness of IT portfolio

#224795

Postby tjh290633 » May 27th, 2019, 6:01 pm

richfool wrote:I suppose the question is really, am I positioned defensively enough?

With 31 holdings, I would have thought that you were more than adequately defensive, bearing in mind so many are collective investments. Many people would be happy with five or six.

TJH

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Re: How to increase defensiveness of IT portfolio

#224805

Postby monabri » May 27th, 2019, 6:35 pm

richfool wrote:I suppose the question is really, am I positioned defensively enough?


From your earlier post - you listed the holdings which I've grouped :-

Group 1 = "Shares" 64%
UK - 22.5%
UK direct stocks - 7.7%
Global G&I - 19.5%
North America (MCT) - 6.7%
Asia Pacific - 7.3%

To see how they would behave in a downturn, go back as far as Dec 2018 and look at the share prices. But Dec 2018 might only be a taster!

Group 2 - Multi-Asset - 9.3%
Being "multi-asset" I suspected they contain a percent of individual shares similar to "Group 1" - for example, JP Morgan "MATE" contains share in Cocacola/Pfizer/Novartis/Verizon etc.

"SIGT" and "BMPI" - similar story. Underneath the hood, they are investing in shares - to what degree, you might need to dig further! BMPI contains holding in Murray International, Law Debenture , Henderson International Income (HINT). I hold MYI so I know that beneath the hood are individual shares - i.e. Group 1.

So, the "share" asset class is maybe 70% +


Group 3
Property - 12.1%
Environmental/Renewables - 4.8%
Infrastructure 4.4%

I guess you might be including PHP in "property" which I'd put in Group 1.

Group 4 - Will these behave in a similar manner to Group 1 ?
Utilities - 1.6%
Pharma - 1.9%

I honestly don;t know - try plotting the share price (if that is what is of interest) compared to an Index (FTSE?)


Group 5 - at 2.2% it isn't going to provide much defence simply because there is not a lot of it.
Gold & Resources 2.2%

Are you positioned "defensively enough" - I don't know and I doubt anyone other than yourself could provide a definitive answer. For example, one asset class being "cash" which you need to factor in along with any pensions (personal, state), income from other sources, whatever they might be. Defensiveness might be simply an ability to ride out the storm for a year or three.

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Re: How to increase defensiveness of IT portfolio

#224808

Postby Dod101 » May 27th, 2019, 7:12 pm

Methinks that richfool worries too much. I suspect that he is too defensive. Seldom does the whole world sink at the same time yet that seems to be what he is defending against. Short of going into cash, yes I think he is defensive enough/too much.

Dod

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Re: How to increase defensiveness of IT portfolio

#224811

Postby richfool » May 27th, 2019, 7:46 pm

monabri wrote:
richfool wrote:I suppose the question is really, am I positioned defensively enough?


From your earlier post - you listed the holdings which I've grouped :-

Group 1 = "Shares" 64%
UK - 22.5%
UK direct stocks - 7.7%
Global G&I - 19.5%
North America (MCT) - 6.7%
Asia Pacific - 7.3%

To see how they would behave in a downturn, go back as far as Dec 2018 and look at the share prices. But Dec 2018 might only be a taster!

Group 2 - Multi-Asset - 9.3%
Being "multi-asset" I suspected they contain a percent of individual shares similar to "Group 1" - for example, JP Morgan "MATE" contains share in Cocacola/Pfizer/Novartis/Verizon etc.

"SIGT" and "BMPI" - similar story. Underneath the hood, they are investing in shares - to what degree, you might need to dig further! BMPI contains holding in Murray International, Law Debenture , Henderson International Income (HINT). I hold MYI so I know that beneath the hood are individual shares - i.e. Group 1.

So, the "share" asset class is maybe 70% +


Group 3
Property - 12.1%
Environmental/Renewables - 4.8%
Infrastructure 4.4%

I guess you might be including PHP in "property" which I'd put in Group 1.

Group 4 - Will these behave in a similar manner to Group 1 ?
Utilities - 1.6%
Pharma - 1.9%

I honestly don;t know - try plotting the share price (if that is what is of interest) compared to an Index (FTSE?)


Group 5 - at 2.2% it isn't going to provide much defence simply because there is not a lot of it.
Gold & Resources 2.2%

Are you positioned "defensively enough" - I don't know and I doubt anyone other than yourself could provide a definitive answer. For example, one asset class being "cash" which you need to factor in along with any pensions (personal, state), income from other sources, whatever they might be. Defensiveness might be simply an ability to ride out the storm for a year or three.


Thank you for those thoughts, Monabri.

Re Group 1 - Yes, good point. I did take note back in Dec 2018, which ones suffered more in the falls at that time. (I've just checked my notes). It was mainly SHRS, MRC, mid caps) ASEI, SLS (small caps), RGL (prop), [also Global Grth and European trusts, since sold], though the Global G&I's did suffer too, though recovered well and quicker. I have MRC in mind for possible disposal once any Brexit recovery has taken place.

GROUP 2 - Noted MATE holds equities particularly US & some European, though it does also have other holdings in other asset classes, Infrastructure, Gov't and Fixed Interest/bonds, and targets low volatility. BMPI holds more equities (than the others in group), along with the other trusts you mention, though its holdings also include Private Equity, Healthcare & Biotech. It held up well in Dec 2018's falls, though I think it could be more volatile. SIGT (added this year) is very well diversified, defensive and v low on equities, so anticipate that one being more defensive.

Group 3 - I am looking to this group to be less correlated with equities, and be more defensive. Your comment about PHP noted (currently at c 12% premium). Prop includes Regional REIT and Warehouse REIT.

Group 4 - Utilities - EGL - has international holdings, not just UK, and it's a relatively small holding with good dividend yield.

Group 5 - Gold holding small and no yield. CYN yield 6.00%. - yes, cyclical.

I have state and occupational pensions, so am not dependent on the portfolio for income. The portfolio income (within an ISA) is reinvested.

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Re: How to increase defensiveness of IT portfolio

#224813

Postby Itsallaguess » May 27th, 2019, 8:08 pm

richfool wrote:
I have state and occupational pensions, so am not dependent on the portfolio for income.

The portfolio income (within an ISA) is reinvested.


Is it possible that you're trying to overthink this?

If you stopped any re-investment and simply allowed cash to accumulate, or diverted it towards your Gold holdings, would you achieve the bulk of your 'defensive intentions' with the least amount of work and disruption?

Cheers,

Itsallaguess

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Re: How to increase defensiveness of IT portfolio

#224816

Postby monabri » May 27th, 2019, 8:15 pm

The last sentence is encouraging and I take it that you can ride out any downturn and that's probably a big defensive asset.

Just a note on SIGT - I had a very cursory look at them - I downloaded the factsheet from HL (link below). They appear to be approx 50% equities.

https://www.hl.co.uk/shares/shares-sear ... st-ord-25p



I would also suggest a perusal at Pensioncraft (short video of ~15mins) - (ignoring the title of the video) for the discussion on correlation..There might be something there of use that can increase defensiveness at low cost through the use of Vanguard bonds.

https://www.youtube.com/watch?v=tHvlU1WGjpU

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Re: How to increase defensiveness of IT portfolio

#224824

Postby richfool » May 27th, 2019, 9:06 pm

Itsallaguess wrote:Is it possible that you're trying to overthink this?

If you stopped any re-investment and simply allowed cash to accumulate, or diverted it towards your Gold holdings, would you achieve the bulk of your 'defensive intentions' with the least amount of work and disruption?

Yes, to the first point. I enjoy the investment experience and like to challenge my thinking. I've already had my fingers disabled, to stop myself tinkering (joke).

And probably yes to your second point. If no other action comes out of this "review", I may top up SIGT and/or TRIG and then accumulate cash pending reinvestment during any corrections, or just to act as a safety buffer.

Thanks for your thoughts.

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Re: How to increase defensiveness of IT portfolio

#224829

Postby richfool » May 27th, 2019, 9:27 pm

monabri wrote:The last sentence is encouraging and I take it that you can ride out any downturn and that's probably a big defensive asset.

Just a note on SIGT - I had a very cursory look at them - I downloaded the factsheet from HL (link below). They appear to be approx 50% equities.

Yes, to your first point.

Yes, I do look at all the fact sheets, via HL, and also the Citywire summaries. I look at their holdings, objectives and their current market assessment and thinking, where they give that information. MATE's factsheet is quite informative regarding the various asset classes it holds, which include fixed interest, EM bonds, infrastructure and currencies.

From the factsheets, I picked up on the fact that infrastructure trust INPP also holds some renewables, a slight duplication with JLEN & TRIGs., as well as MATE also holding some infrastructure.

Thanks for the video link. I have watched the Vanguard videos previously. I did in fact hold a couple of ETF's, (VEVE & VAPX), but decided I would prefer to hold actives in case of market falls. I felt trackers would track the market down, whereas an active manager might serve/protect me better.

Thanks for your thoughts and ideas.

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Re: How to increase defensiveness of IT portfolio

#224876

Postby richfool » May 28th, 2019, 7:57 am

monabri wrote:I would also suggest a perusal at Pensioncraft (short video of ~15mins) - (ignoring the title of the video) for the discussion on correlation..There might be something there of use that can increase defensiveness at low cost through the use of Vanguard bonds.

https://www.youtube.com/watch?v=tHvlU1WGjpU

Apologies, monabri, I was just re- reading your post and noticed you were referring to the video being helpful in terms of correlation (rather than about ETF's as I had assumed). I will watch that later today. Thanks again.

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Re: How to increase defensiveness of IT portfolio

#225051

Postby richfool » May 28th, 2019, 7:06 pm

Further to the above thread, would anyone suggest any bond funds to increase defensiveness?

I am aware that the likes of PNL and CGT would give some exposure, albeit at a price. Another option, after watching Monabri's suggested Vanguard video, could be an ETF such as VIGBBD, IGLH or VGOV.

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Re: How to increase defensiveness of IT portfolio

#225073

Postby Wasron » May 28th, 2019, 9:22 pm

richfool wrote:Further to the above thread, would anyone suggest any bond funds to increase defensiveness?

I am aware that the likes of PNL and CGT would give some exposure, albeit at a price. Another option, after watching Monabri's suggested Vanguard video, could be an ETF such as VIGBBD, IGLH or VGOV.


I use SLXX, a corporate bond etf yielding around 3%. In response to my annual review Hariseldon suggested the etf IS15. I think it’s shorter dated and slightly lower yielding, but could suit your needs based on your objective in this thread.

Regards


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