Critique My Fund Portfolio

Coeus

Hi B Blank. Thanks for the post!

Small companies funds, if run correctly, generate greater returns which has worked well for me in the past (one of my strongest performing funds). I agree with you and Mike88 that this presents risk in my portfolio but it is a personal preference. Innovation in tough times is lucrative as smaller companies tend to achieve (then being bought out by larger ones). I have varied the sectors for these smaller companies to mitigate some of the risk.

Income vs Capital is another personal preference - mine being capital. I prefer to let my returns generate bigger returns rather than extract the income. My main income fund [Chelverton UK Equity Income (Accumulation) - UK Equity Income] itself is an income accumulator thus income received will be re-invested to generate more income.

I think along the lines of inflation erroding income thus I would rather build the capital (tax free ). Could be wrong here though!

JamesU

Coeus wrote: »

I would likely want to withdraw funds within the next 3-5 years for a FTB deposit.

I see no strategy to the portfolio asset allocation.

Growth expectation?

Ongoing costs vs growth?

If % annual profit = X% growth - (Y% inflation + Z% annual costs), how does this shape up with your costings and strategy? 1-2% annual costs above, choose a figure for inflation.

Are choices sufficiently non-correlated to rebalance and lock in growth?

Time framework for this? (probably no point if 3 yrs)

Risk vs growth expectation vs timeline?

How the current asset allocation meets the above.


And on the asset allocation itself.

Perhaps insufficient diversity.
Over-correlation in the equity based choices
Overlap in UK and EU small caps between CF and Threadneedle
Why Aberdeen EM (global?) and Schroder EM (Asia/Pacific exJp)?

Need to check alpha on the UK/EU small cap funds carefully relative to basic trackers (e.g HSBC FTSE 250 fund tracker etc) as these do not look overly alpha.

Global resources and global tech allocations excessive at 17.5% each.

JamesU

mike88

If you are looking to buy a house in the next 3 -5 years personally I would not want my decision to be influenced by stock market performance. Your need for early access to your money changes everything in my book. What do others think?

Let's say for example that house prices plummet this year and the early part of next year presenting an ideal buying opportunity in 2012. House prices begin to rise and you decide to bring forward your decision to buy. But.........................you cannot. Your risky portfolio has fallen by 60% and you cannot afford the deposit. I have been in a similar position myself and lost in excess of 70% on one Emerging Pacific Investment Trust, 60% on a Tech unit trust and 40% on an Emerging Market Unit Trust in the 1990's over a 2 year period. So for the sake of your high risk strategy you may have forfeited the chance to buy a property at the bottom and thereby lost more than you could ever gain by investing in your proposed portfolio. All hypothetical of course. But possible especially given current concerns.

Investing monthly into high risk funds is fine and you should do that. But my strategy would be to preserve what I have; instead of emerging markets, technology, small companies and the Far East I would be looking to invest existing capital into Absolute Return Funds with limited downside. You might then be able to access your capital without much loss and possibly reasonable upside. Artemis Strategic Assets has for example increased by 19.1% in the past 12 months and the Newton Real Return fund has a long term track record. I am not necessarily recommending these funds although I hold both.

I suspect there are some on here who have seen gains in the last couple of years and may have become locked into the belief that markets only rise and that Emerging Markets rise faster than others. But those of us who have seen how they can also fall may think differently.

You asked .....................and that is my opinion. But you must follow your own path because it is equally likely that my conservative approach might be completely wrong and you could come out of it well. Its largely a question of luck and timing.

B_Blank

Coeus wrote: »

Hi B Blank. Thanks for the post!

Small companies funds, if run correctly, generate greater returns which has worked well for me in the past (one of my strongest performing funds). I agree with you and Mike88 that this presents risk in my portfolio but it is a personal preference. Innovation in tough times is lucrative as smaller companies tend to achieve (then being bought out by larger ones). I have varied the sectors for these smaller companies to mitigate some of the risk.

Income vs Capital is another personal preference - mine being capital. I prefer to let my returns generate bigger returns rather than extract the income. My main income fund [Chelverton UK Equity Income (Accumulation) - UK Equity Income] itself is an income accumulator thus income received will be re-invested to generate more income.

I think along the lines of inflation erroding income thus I would rather build the capital (tax free ). Could be wrong here though!

As far as I understand it, bigger companies can pass on inflation to comsumers alot easier than smaller companies (due to having more resources to advertise etc).

On your last point I think you are wrong. It would make sense to me to put more money in income funds (inc or acc) to protect against inflation.

I would get rid of half your money in the small uk comapnies fund and reinvest that money in balanced income funds (inc or acc) which are preferably worldwide.

Again I am just an enthusiastic amateur starting out in the investing world! So what I say could be way off mark. But I would feel anxious about your portfolio and I am certainly not risk adverse (in fact I have a adventerous portfolio)

mark13

Good to see you are putting money into cash savings as well .

Neptune India / First State have similar management fees, the initial charge on First state is lower than Neptune, but may be discounted though H-L. Neptune is geared slightly more to services whereas First State leans toward manufacturing.

If it was my money I'd look at First State .( but as my funds are with Fidelity I have their own India Focus fund).

Mark.

mike88

mark13 wrote: »

Good to see you are putting money into cash savings as well .

Neptune India / First State have similar management fees, the initial charge on First state is lower than Neptune, but may be discounted though H-L. Neptune is geared slightly more to services whereas First State leans toward manufacturing.

If it was my money I'd look at First State .( but as my funds are with Fidelity I have their own India Focus fund).

Mark.

As you have mentioned Neptune this is what their Director Of Investment Strategy said in January:

"Emerging markets are no longer at a discount to the developed markets, but there is still value to be found. We tend to be underweight on India as we think shares there are too expensive," McDowell said (pictured right).

Coeus

Wow! That’s a lot of information and insight! Thanks very much all

I got confirmation from Hargreaves Lansdown today that the funds should reach within 10 working days – so that long ideally to cement my strategy.

JamesU

Firstly, my jaw dropped at the detail and effort put into your post – thank you very much! Must have been doing this for a while 

To answer your posts:
1. Growth expectation – 18.0% p.a. (lower expectation)
2. Average cost vs. Growth expectation – 1.47% : 18.0%
3. Cost effect on returns – 6.0% (suggested) - 1.53% = 4.47%
4. Non-correlation of funds – fund choices being updated for highlighted correlations
5. Timeframe – 3-5 years (likely the latter)
6. Risk vs. Growth vs. Timeline – unsure how to accurately measure risk in this regard?
7. Current allocation achieving 1-6 – not currently, in development

I agree on the overlap for CF Amati UK Smaller Companies (Accumulation) and Threadneedle Pan European Smaller Companies (Accumulation). Threadneedle Pan European Smaller Companies (Accumulation) will be removed.

I agree on the overlap for First State Global Resources (Accumulation) and Schroder Asian Alpha Plus (Accumulation). I will put some time into researching fund trackers for exposure to global markets. Schroder Asian Alpha Plus (Accumulation) will be removed.

I have noted the excessive allocation to AXA Framlington Global Technology (Accumulation). This has been moderated to 15%.

See next ‘Mike88’ section for further actions.

Mike88

Firstly I’m sorry to hear of your loss in the 1990’s, and thank you for sharing your experiences.

As such I have decided that my initial investment will be split in a 40:30:10:10:10 ratio between:
- 40% - Newton Real Return (Class A) (Income) (Absolute Return) (searched through Hargreaves Lansdown – this was the one you highlighted which caught my eye when analysing the funds too!)
- 30% - Prudential Growth Accumulation (Active Managed)
- 10% - CF Amati UK Smaller Companies (Accumulation) (UK Smaller Companies)
- 10% - AXA Framlington Global Technology (Accumulation) (Technology and Telecoms)
- 10% - Chelverton UK Equity Income (Accumulation) (UK Equity Income)
In all 30% of my initial investment will be equally spread into the higher risk funds. Do you have an opinion on the Aviva Inv SF Absolute Growth (Accumulation) (Active Managed) fund?

As per JamesU notes have freed up 25% of my fund. As such to further manage risk I have allocated 5% to investing in the Newton Real Return (Class A) (Income) (Absolute Return) and 5% to Prudential Growth Accumulation (Active Managed) in my subsequent investment strategy.

B Blank

To cover concerns here I have added Newton Real Return (Class A) (Income) (Absolute Return) as 40% of my initial fund in addition to a further 5% of my subsequent funding. As such I will instruct Hargreaves Lansdown to re-invest and income received into this fund to achieve an accumulation income fund.

As per your and JamesU suggestion a further 2.5% has been removed from the CF Amati UK Smaller Companies (Accumulation) (UK Smaller Companies) fund. In addition to this 30% of my initial fund will be invested into Aviva Inv SF Absolute Growth (Accumulation) (Active Managed) – a counterpart of a balanced fund.

Glad you’re as enthusiastic as I am! Also hope your getting some benefit from these posts as well

Mark 13

Thanks for the post! I have decided to leave my exposure to India as included in the First State Global Resources (Accumulation) (Specialist) fund as listed earlier. Mike88 has raised concerns over the potential benefit from investing into emerging markets thus I will not seek to further any exposure beyond my stated asset allocation.

HL MM Special Situations Fund

From the rebalances of funds per the above discussion I had a 10% surplus to invest – I thought it might be reasonable to invest in a HL MM fund. It suffers a higher TER ratio (2.11%) however (hopefully) the returns will validate this.

I’m open to criticism on this one



AGAIN THANKS ALL FOR THE CONTINUING SUPPORT! LEARNING A LOT

mike88

Aviva Inv SF Absolute Growth (Accumulation) (Active Managed) Why? 51/102 in Active Managed Sector over 3 years. A fund from this sector is a good choice but I would select one from this chart here:

http://citywire.co.uk/money/fund-and-fund-manager-performance/-/unit-trusts/active-managed/fund-league-table.aspx?CitywireClassID=103&RankModelID=9

Only a suggestion of course.

Coeus

mike88 wrote: »

Aviva Inv SF Absolute Growth (Accumulation) (Active Managed) Why? 51/102 in Active Managed Sector over 3 years. A fund from this sector is a good choice but I would select one from this chart here:

http://citywire.co.uk/money/fund-and-fund-manager-performance/-/unit-trusts/active-managed/fund-league-table.aspx?CitywireClassID=103&RankModelID=9

Only a suggestion of course.

Thanks Mike88 for the heads up - I didn't cross check it against CityWire so missed its low ranking.

I have substituted it for Prudential Growth Accumulation (Active Managed) - has a more beneficial TER ratio of 1.71% than the other top few

masonic

Savings_Dave wrote: »

PROPOSED FOUR NEW FUNDS IN APRIL 2011 (£1335 EQUAL IN EACH)

Investec Global Gold
HSBC European Index
Invesco Perpetual Corporate Bond
First State Global Emerging Mkt Leaders Class A

I already have £50k in various cash savings and 13.5k in other investments.

You have a large cash position. With that in mind, does the bond fund make sense? Personally, I wonder if you might end up getting a better return from your cash in the short term. If I were in your position, I'd be inclined to save the bond fund until later, when their prospects look a little more attractive.