Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Bhoddhisatva,scotia,Anonymous,Cornytiv34,Anonymous, for Donating to support the site

The Growth Ten: 2006-20

General discussions about growth strategies which focus primarily on investing for capital growth
Luniversal
2 Lemon pips
Posts: 157
Joined: November 4th, 2016, 11:01 am
Has thanked: 14 times
Been thanked: 1163 times

The Growth Ten: 2006-20

#374593

Postby Luniversal » January 8th, 2021, 12:01 am

The Growth Ten (G10) arose fortuitously. I intended to create only a rough-and-ready yardstick for UK investment trusts which concentrate on capital gain: it would follow the biggest generalists from the turn of the millennium, mostly old stagers.

I was not out to plug them. But it transpired on jobbing back to 2000 that a portfolio invested with equal amounts would have fared rather well. So I began to treat the Ten as a tool for timorous wealth-builders, reporting on progress at The Motley Fool.

Here is an update for 2020. Earlier years after TMF's boards were scrapped were reviewed at:

viewtopic.php?f=96&t=21397

Constituents:

Aberforth Smaller Companies (ASL)
Alliance (ATST)
BMO Global Smaller Companies (BGSC)*
F&C (FCIT)+
Law Debenture (LWDB)
Monks (MNKS)
Scottish (SCIN)
Scottish American (SAIN, prev. SCAM)
Scottish Mortgage (SMT)
Witan (WTAN)

* formerly F&C Global Smaller Companies (FCS)
+ formerly Foreign & Colonial (FRCL)

Long-term holders who wish to accumulate without too much speculating can fish among these trusts. Most focus on larger and more developed foreign markets, though not always on the biggest or staidest companies therein; Scottish Mortgage and to a lesser extent Monks relish whizzy 'disruptors'. The G10 houses a British specialist in smaller issues, Aberforth, and an overseas counterpart, BMO Global Smaller Companies. One mainstream trust, Law Debenture, has a trading arm which is doing well and expanding by acquisition.

The broadest based ITs, Alliance, F&C, Scottish and Witan, together hold hundreds of positions. Alliance and Witan are funds of funds, cracking the whip over subcontracted managers. F&C and Scottish are do-it-yourselfers. Scottish American stresses size of dividend as well as asset growth more than the rest.

I have no idea how this olla podrida breaks down between countries, sectors or market cap size, or how it stands up against a world equity index. Nor do I care. Doubtless Wall Street, FAANGs, global brands and consumer staples loom large. I leave the mostly sobersided managers of these portfolios to do the business. The 'Doris' principle of picking a differentiated bunch and leaving it be applies here as with income baskets. No fooling around with rebalancing after purchase either.

Results to the calendar year end are comparable with those of my imaginary 'HYP06' High Yield Portfolio (see the Dec. 31 post on the HYP Practical board). Outcomes are calculated on the same £75,000 gross outlay-- £7,500 per trust-- on the same start date of Jan. 13, 2006. Tabled below are anniverary values; percentage changes year by year; real changes deflated by the Retail Prices Index/and performance against the FT All Share Index in percentage points, where a minus means underperformance.


CAPITAL (at Dec. 31)
2006: £81,604, +8.8, +4.4/-2.5
2007: £85,190, +4.4, +0.4/2.4
2008: £56,446, -33.7, -34.6/-1.0
2009: £72,365, +28.2, +25.8/1.2
2010: £90,109, +24.5, +19.7/11.6
2011: £80,336, -10.5, -15.6/-4.2
2012: £93,149, +15.9, +12.8/7.7
2013: £119,650, +28.4, +25.7/11.8
2014: £123,560, +3.3, +1.7/3.4
2015: £137,020, +5.8, +4.6/8.3
2016: £154,392, +18.1, +15.6/5.7
2017: £187,067, +21.2, +17.1/12.2
2018: £173,543, -7.2, -9.9/5.7
2019: £212,432, +22.4, +20.2/8.2
2020: £260,136, +22.5, +21.6*/34.9

The G10 topped £250,000 for the first time in 2020, more than tripling 2006's investment. The G10's latest outperformance of the All-Share Index was its widest yet. It outran that benchmark by 8.2 percentage points on share price, and has outpaced it in 12 of 15 years, including the past nine. The 'terrifying' bug with the 99%-plus recovery rate alarms our politicians and media mouthpieces rather more than it scares those who handle hard cash.

Market value's increase since inception is 247% against c. 52% inflation*. The Basket of Seven has doubled, HYP06 risen by two-thirds. The B7 has flowered less since 2005 than in the prior reaction against the tech boom, when the G10 got some fingers burned by internet mania. Now tech is the rage all over again, but the land which birthed Babbage and LEO has few champions, whereas America...

The FE Trustnet Risk Score measures volatility in 2018-20, weighted towards the present. The FTSE 100 is the benchmark on 100 where cash is 0. For the Ten the blended score is 107 (114 a year ago), skewed by Aberforth's 194 as the taste for smaller companies has fluctuated. For the B7 it is 114; the G10 is reasonably stable, although it lost one-third of its worth in the darkest year of the global crisis and would be less cushioned by its revenue stream in any general slump.

Average discount of 2.9% at financial year ends in 2019-20 is half the 5.8% of the G10's whole life. Discount contracted by 1.4 points from 2018-19. This species of fund has become more popular: the discount is near its tightest, 2.7% in 2015-16, after languishing in double figures for most of the prior 15 years. Then it was the fashion to predict extinction at the hands of voracious pension funds for dozy global dinosaurs.


INCOME
This is not the name of the G10's game, but dividend growth has been spirited and can be treated as a reward en passant for patience.

Law Debenture was the sole member with a markedly above-average yield-- 4.0% at its latest year end. Scottish American's price rise pushed its yield down from 3.3% to 2.8%. Monks pays almost nothing by design. Scottish Mortgage has downplayed the payout as it goes more and more for futurological punts. Others have moved to quarterly distributions, courting one-stop-shop investors; but typically this portfolio yields less than half the All-Share Index and far less than the Baskets of Seven or Eight.

Actual amounts produced including specials, plus nominal and real percentage changes each year:

2006: £1,377
2007: £1,679, +21.9, +17.9
2008: £1,850, +10.2, +9.3
2009: £1.948, +5.3, +2.9
2010: £1.849, -5.0, -9.8
2011: £1,994, +7.8, +3.0
2012: £2,210, +10.8, +7.7
2013: £2,362, +6.9, +4.2
2014: £2,428, +2.8, +1.2
2015: £2,587, +6.6, +5.4
2016: £2,585, -0.1, -2.6
2017: £2,729, +5.5, +1.4
2018: £3,069, +12.5, +9.8
2019: £3,241, +5.6, +3.4
2020: £3,741, +15.4, +14.5*

Last year the Ten lifted dividends by 14.5%* after inflation. This was more than three times the real rise of 4.5% pa over 14 years. Nevertheless, the Growth Ten has generated only £35,647 from £75,000, compared with £53,555 from the 'growth-of-income' B7, £62,169 from the 'juicier' mainstream HYP06-- before income reserving-- and £53,315 from HYP06's replicant, the Basket of Eight, which has a built-in revenue reserve.

The B7's receipts never suffered reduced purchasing power between years. The G10's shrank in 2010 and immaterially in 2016 (1). Dividends in 2006-20 compounded at 7.4% pa nominal versus the B7's 8.1% from a much larger first-year haul. But the Ten set the pace nowadays.

Moreover, latest annual valuations put the G10.'s unrealised capital profit at three times the B7's. Hence its combined return to date (capital gain plus income) is £220,783, approaching twice the basket's £117,572. The tradeoff between income production and capital is obvious.

By keeping higher cover the Ten hold back more earnings for recycling, which pumps up net asset value. G10 income remains parsimoniously dispensed: cover for payouts averaged 1.16 times in latest financial years, above the average this century of 1.11 times. The aggregate revenue reserve has averaged 25 months of current payout since 2000, and has levelled off at 24 months since 2016-17. Many income ITs get by on half as thick a cushion.

G10 reserves were fuller just before the Global Financial Crisis, but remain high enough to be confident that dividend growth can go on outpacing baskets'. Underlying trends in the newer capitalist powerhouses are auspicious: governments such as Japan's and India's urge freer disbursement of corporate earnings, while China's rulers may prod boards to shell out more as part of its strategic turn from investment to consumption.

Ongoing Charges Ratios vary a lot, but the trend is down. Averaging 0.82% this century, they were 0.59% (0.64%) in 2019-20, assisted by rising asset values but also by pressure from open-ended funds. Scottish Mortgage is notably cheap at 0.35%; Aberforth with its elaborate and academic research technique the dearest, but down from 1.2% to 0.87% in 2020.


CONSTITUENTS
Briefly, individual contributions: share price change since launch; number of financial years when share price trailed the All-Share index; average year-end discount or (premium) during past decade/Risk Score:

ASL: +88.4, 4, 10.5/194
ATST: +160.7, 2, 9.9/105
BGSC: +273.1, 2, 1.7/135
FCIT: +201.9, 2, 7.7/111
LWDB: +131.7, 3, (4.2)**/135
MNKS: +387.8, 2, 5.8/107
SAIN: +103.9, 3, (3.6)/88
SCIN: +80.9, 4, 12.5/103
SMT: +885.0, 2, 2.1/130
WTAN: +175.3, 2, 6.1/118
-----------------------------------------
G10: +246.8, 2, 5.8/107

** Magnified by overheads of fiduciary businesses.


Performance rotated more among the best constituents than the worst. In the first five years the most valuable at each year's end was Aberforth. Then BMO Global Smaller Companies notched up eight wins on the trot, while for the past three Scottish Mortgage has swept all others aside. The bottom marker most often was Scottish American, thirteen times, partly because of its leanings towards running yield. In Year 1 Witan claimed the wooden spoon and in Year 15 it went to Scottish IT.

A spread of generalists on these lines continues to seem a less hazardous way to accumulate wealth, e.g. for retiral, than betting on 'bagger' equities. The casserole is slower than the flambe pan, but safer. Quieter, too. The Global Growth 'space' has been spared the consolidation afoot among income trusts, which are generally smaller. No corporate actions would have required a response since 2006.

-----------------------------------------------------------------------------------------------------------------------
* Nov.'s 0.9% pa inflation (RPI) is used pending Dec.'s announcement.

(1) Income could have been 'derisked'-- the same way I protect receipts in the baskets-- to provide an initial spendable withdrawal rate of 1.50% pa, rising to 2.54% with inflation protection in three increments by 2015. Holding back that much, one-tenth of the inflow, would have filled a reserve presently worth a reassuring 18 months' indexed spendable income. The B7 accommodates 4.3%+RPI with 15 months' worth. That said, the G10 is not tasked to pay regular bills.

Mulberry
Posts: 12
Joined: November 4th, 2016, 9:35 am
Has thanked: 40 times
Been thanked: 5 times

Re: The Growth Ten: 2006-20

#375978

Postby Mulberry » January 11th, 2021, 5:43 pm

Thanks very much for this Luni. I always appreciate your Basket reviews.

Mulberry

seagles
Lemon Slice
Posts: 490
Joined: August 19th, 2017, 8:37 am
Has thanked: 153 times
Been thanked: 235 times

Re: The Growth Ten: 2006-20

#379608

Postby seagles » January 22nd, 2021, 12:36 pm

Have just started looking at "Growth" ITs. So this is much appreciated. My granddaughter arrived in August last year and I got my Daughter to open a JISA for her. First tranche went in and I brought FCIT in november, currently showing a 5.10% increase in value. Next tranche will be added in April, so will look at another of your G10, thoughts are either MNKS or SMT, we will see. I have realised in this unusual year that I really do not need "income" from my SIPP and have decided on switiching it to ITs (less work needed.....), have only one Share left (SEE) which I will be selling and buying a growth IT. I did make a small purchase of SMT in November, showing a 14.9% increase. Will be looking at a much larger purchase when SSE sold though. Will keep my Income ITs (orignally based on B7/B8) but all future purchases will be "Growth" looking.

Again, much appreciated for the time you take.

toofast2live
Lemon Slice
Posts: 494
Joined: November 4th, 2016, 2:24 pm
Has thanked: 2 times
Been thanked: 98 times

Re: The Growth Ten: 2006-20

#379909

Postby toofast2live » January 23rd, 2021, 11:14 am

Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...

richfool
Lemon Quarter
Posts: 3477
Joined: November 19th, 2016, 2:02 pm
Has thanked: 1182 times
Been thanked: 1277 times

Re: The Growth Ten: 2006-20

#379918

Postby richfool » January 23rd, 2021, 12:10 pm

toofast2live wrote:Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...

Do any of the IT companies offer SIPP's?

swill453
Lemon Half
Posts: 7943
Joined: November 4th, 2016, 6:11 pm
Has thanked: 982 times
Been thanked: 3625 times

Re: The Growth Ten: 2006-20

#379919

Postby swill453 » January 23rd, 2021, 12:16 pm

richfool wrote:
toofast2live wrote:Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...

Do any of the IT companies offer SIPP's?

The normal thing would be to open a SIPP (at any provider) then buy ITs within it.

Scott.

seagles
Lemon Slice
Posts: 490
Joined: August 19th, 2017, 8:37 am
Has thanked: 153 times
Been thanked: 235 times

Re: The Growth Ten: 2006-20

#379920

Postby seagles » January 23rd, 2021, 12:18 pm

toofast2live wrote:Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...


She will inherit 1/2 my SIPP so I think that covers it on that front, as well as my trading account (put in a trust for her).

TUK020
Lemon Quarter
Posts: 2038
Joined: November 5th, 2016, 7:41 am
Has thanked: 761 times
Been thanked: 1175 times

Re: The Growth Ten: 2006-20

#380070

Postby TUK020 » January 23rd, 2021, 7:13 pm

toofast2live wrote:Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...

Not sure of the age qualifications, but possibly a better route is to open a LISA and buy ITs. £4000 becomes £5000, and it is accessible without penalty on retirement or to buy a first house (which might be viewed as a much more pressing problem for a younger person).

Also, the money is accessible in a real emergency anyway, albeit with penalties. Less subject to the government moving the goalposts around without you being able to do anything about it.

HL offer a S&S LISA, not sure about others.

For long term horizon, performance over decades is of interest
https://www.itinvestor.co.uk/2020/06/20 ... -compared/

PinkDalek
Lemon Half
Posts: 6139
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1589 times
Been thanked: 1800 times

Re: The Growth Ten: 2006-20

#380073

Postby PinkDalek » January 23rd, 2021, 7:21 pm

TUK020 wrote:
toofast2live wrote:Even better open a low cost sipp for her. £2880 immediately becomes £3600. The buy some ITs and wait 60 years. You’ll forever be in her memory...

Not sure of the age qualifications, but possibly a better route is to open a LISA ...


Lifetime ISA

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. ...


https://www.gov.uk/lifetime-isa

Plenty more there, such as Buying your first home
You can use your savings to help you buy your first home if all the following apply:

the property costs £450,000 or less ...
but probably going off-topic given the title of the topic.


Return to “Growth Strategies”

Who is online

Users browsing this forum: No registered users and 2 guests