Help me rebalance my failing S&S ISAs Portfolio - Sept 2011

jamesd

Here's my current ISA mix. Aside from the 38% in cash it's generally a somewhat comparable to higher risk mixture than yours, moderated a little by not having so much in JPM Natural Resources but with risk picked up elsewhere.

37.9% Cash
10.4% Aberdeen Emerging Markets Class A
9.4% Standard Life Investments UK Smaller Companies Class R
7.9% Fidelity South East Asia Class A
5.9% JPM Natural Resources Class A
5.5% Threadneedle European Smaller Companies Class 1
2.8% Henderson European Smaller Companies Class A
3.1% Invesco Perpetual Income
2.7% First State Latin America Class A
2.4% JPM New Europe Class A
2.0% Jupiter Emerging European Opportunities
2.1% M&G Global Basics Class X
2.0% Jupiter Financial Opportunities
2.0% Neptune European Opportunities Class A
1.2% BlackRock Gold & General Class A
1.0% Allianz RCM BRIC Stars Class A
0.8% Neptune Russia and Greater Russia Class A
0.5% Threadneedle China Opportunities Class 1
0.3% First State Asia Pacific Leaders Class A

The cash is partly from selling down some particularly economically sensitive holdings like JPM Natural Resources, Neptune Russia and Greater Russia and a Latin American fund I no longer hold and partly from new subscription money.

Nobody should even remotely consider this sort of mixture unless they are willing to see drops in excess of 70% of the value. It's a mixture that is very strongly oriented towards global recovery and would suffer very severely in a period where that was in doubt. It's a very speculative mixture. It has massive holes in its coverage, lacking broad market trackers, bonds of all types, commercial property and Japan among other things.

Note also that I have a much lower but still high risk pension mixture and significant other cash and lower risk holdings. Also an income that is high enough that I would not hurt hugely if I lost a lot of the value of this ISA mixture.

There are some funds there that are near duplicates. That's partly when I'm moving between funds and partly when managers act differently and I deliberately want both. None of the duplicates are just accidental.

Now, aside from the high cash portion, this is a mixture to rival yours in dunstonh's high risk league table.

gadgetmind

jamesd wrote: »

Blackrock Gold and General might reduce volatility a little

What makes you say that? It's a very specialised and volatile fund that should theoretically be a leveraged play on the gold price, but doesn't even seem to have delivered that.

heathcote123

jabbahut40 wrote: »

Hi,

I am been investing in S&S ISAs for the last five years and currently have a portfolio consisting of the following funds:

JPM Natural Resources A Acc 21.2%
First State Asia Pacific Leaders Acc 19.7%
* Neptune European Opportunities Acc 11.3%
Gartmore China Opportunities Fund 11.0%
Schroder US Mid Cap Acc 8.7%
Aberdeen Emerging Markets Acc 7.1%
* Neptune Global Equity Fund Acc 5.5%
* Fid FIF Special Situations Fund 4.7%
* Jupiter Financial Opportunities Fund 4.3%
M&G Global Basics Fund A Acc 3.4%
Marlborough Special Situations Fund Acc 2.8%
First State Greater China Growth Fund 0.4%

I have been disappointed with the performance of funds marked with * and would welcome thoughts on what switches I could apply to rebalance my portfolio for longer term growth over the next 5 years.

Any recommendations would be gratefully received.

Jabba

Just my own tuppence worth, these things tend to be quite cyclical and a fund that performs badly for a year or two is often up at the top for the next year.

I have a tendency to sell out badly performing funds myself, and then end up kicking myself a year later.

So Sods law says sell out your well performing funds, and pile into the crappy ones....

gadgetmind

jamesd wrote: »

It's a very speculative mixture. It has massive holes in its coverage, lacking broad market trackers, bonds of all types, commercial property and Japan among other things.

That probably describes many people's fund ISAs, and certainly described mine during 2010. However, mine got a bit of a kick and some of the commodity funds, EM and gold miners were flogged off and the proceeds fed into Troy Trojan, Ruffer (Japan exposure!), and some UK equities that I've been picking up recently.

I'm still not sure if it was a cool head or just cold feet!

I'm still heavy on EM, and still hold a fair amount of commodities and smaller companies. but I'm reasonably happy with this. Regards bonds, I got out too early, but I like to think this is better than too late.

Jegersmart

As a comparison some of my current holdings across ISA's, non-ISA and SIPP's are:

M&G Optimal Income Fund A Acc 15.96%
M&G Global Dividend Acc 12.89%
Aberdeen Emerging Markets Acc 9.74%
Ecclesiastical Higher Income Fund 9.11%
First State Indian Subcontinent Acc A 5.98%
Marlborough Special Situations Fund Acc 5.77%
Fid FIF Emerging Eur Mid East & Africa 5.56%
GLG Global Corporate Bond Fund A Acc 5.10%
First State Greater China Growth Fund 4.65%
First State Latin America Fund Acc 4.22%
Threadneedle Emerging Market Bond Fund 3.53%
Investec Enhanced Natural Resources Acc 2.93%
First State Global Emerging Mkts Leaders 2.09%
Fid FIF South East Asia Fund2.06%
Newton Asian Income Fund 1.87%
BlackRock Gold & General Acc 1.31%
INVESCO PERPETUAL Global Smaller Cos Acc 1.19%
JPM Natural Resources A Acc 1.17%
BlackRock European Dynamic Acc 1.16%
Threadneedle Pan Eur Smaller Companies 1.16%
Investec Global Energy Fund Acc 1.16%
Cash Asset Net 1.03%
Neptune Russia & Greater Russia Fund 0.35%

I reduced risk on the Monday of the start of the falls so was a little late but this is the curent scenario. I have been using M&G Optimal Income and Ecclesiastical Higher Income when I "de-risk" recently which has worked out quite well although I always review regularly.

I have some tidying up to do as there is some unnecessary duplication - and some phased buys going through over the past 4-8 months.

gadgetmind

Ark_Welder wrote: »

Trustnet article today: http://www.trustnet.com/News/Research.aspx?id=252273

I'm using a combination of direct holdings in high (and reliable!) yield FTSE blue chips with international exposure, some capital preservation ITs, some ITs with good private equity exposure, and funds to access more EM and small/mid caps. The high yield and capital preservation parts are going well, and I have high hopes for the EM, PE and small cap.

I may switch from funds to trackers, ITs and ETFs once things settle down a bit.

jamesd

jamesd wrote: »

Blackrock Gold and General might reduce volatility a little

gadgetmind wrote: »

What makes you say that? It's a very specialised and volatile fund that should theoretically be a leveraged play on the gold price, but doesn't even seem to have delivered that.

If you look at its daily performance you'll find that it's not uncommon for it to move upwards while markets in general are moving downwards. Not always, particularly when there are large and broad market moves. That move in the opposite direction can reduce overall portfolio volatility even though it's a highly volatile fund.

Not delivering on tracking the gold price is why I've been increasing my holdings in this fund recently. I assume that the mismatch in movements will close.

jamesd

gadgetmind wrote: »

I'm still not sure if it was a cool head or just cold feet!

There's no rule that says someone with a high risk tolerance has to use that high risk tolerance all the time. I certainly don't. I don't mind adjusting the risk level up and down and the cash proportion shows that well at the moment, since I'm normally almost fully invested.

I'm also conscious of a two month lag between bonds and equities in 2008. That may not repeat this time but it's a risk.

I agree with your move on bonds. I think they are in a bubble but it'll take inflation and obvious global recovery to deflate it. The longer that takes, the longer they will stay high.

gadgetmind

It does rather worry me that my twin-pronged EM/yield approach is becoming trendy again.

http://citywire.co.uk/money/income-vs-emerging-market-plays-two-ways-to-surf-the-sell-off/a520145

Ark_Welder

I had expected the OP's portfolio to be quite risky, but when I fed it into Trustnet (with nominal numbers of units to return the approximate percentages held) I was surprised that it had a risk score of 99 - 100 being the FTSE 100. JPM NR is the highest at 138, so reducing this would bring it down a tad. Substituting for either of the global income funds also brought the risk score down: 98 with M&G (and slightly higher volatility) and 96 with Threadneedle (slightly lower volatility).

As well as geographic allocation, sector allocation can be considered. Although I did wonder about leaving the financials fund, using either of the two globals as suggested does result in roughly the same percentage allocation to Financials. The main difference was a halving of the exposure to China and a doubling of the exposure the the USA - take your pick on that one!

Some things to remember about bonds is that different types should do well at different times. Some sovereign bonds might be overpriced, e.g. Treasuries and Gilts, but that depends on whether a 'Japanese Decade' is to come (assuming that we are half-way through a Japanese-style deflationary period). And there are bonds in emerging markets too - both sovereign and corporate. Also to consider are inflation-linked (and not just in the UK), and higher-yield (or Junk). High-yield corporate bonds tend to have a closer correlation to stock markets because the companies are seen to have a greater chance of folding so a better performing economy should benefit them, even if interest rates do start to rise - but not too fast. Hence he suggestion for looking at strategic bond funds because these can change between the different types of bond - although always read the relevant prospectus, especially the Risk Factors section.