Unbalanced portfolio?

PippiShortsock

I’m due to inherit holdings shortly in the following funds and investment trusts. Over time, I hope to balance these out along with my inherited shares and cash to produce a sensibly diversified portfolio. At the moment, many of these funds/ITs seem to be investing in broadly similar areas to one another - focused on FTSE 100 shares.

Obviously I need to do some detailed analysis, but I do want to sell some of these before April to use my capital gains allowance. Are any of these investments either ‘keepers’ or particularly poor bets? Would you rationalise the holdings which largely duplicate one another or does it make sense to keep a larger number of holdings since that’s the way I’ve acquired them?

I’d be grateful for any general views on my next steps.

Aviva Investors Distribution Fund Class 1 Inc
AXA Framlington European Fund R Acc
Henderson UK Alpha Fund Acc
L&G Global Growth Trust E Inc
Standard Life Global Equity Income Fund Founder Acc
Standard Life UK Equity High Income Fund Inc

Alliance Trust plc
British Assets Trust plc
City of London Investment Trust
F&C Capital & Income Trust
Henderson High Income Trust
JP Morgan Fleming Claverhouse IT
JP Morgan Income & Capital Trust plc
Scottish American Investment Company
Standard Life Equity Income Trust
Standard Life Equity Income Trust (subscription)

bigadaj

I think the basic thinking should be that you have these assets but if you had the same amount of money in cash would you buy these now or not.

Plugging them into a virtual portfolio on trustnet will provide an easy overview on your geographical and sector spreads, and a view on risk both individually and as a group, and this can be compared against what your personal view is of your ideal portfolio.

This can be added to any current holdings but I think the bottom line is that a number if these holdings aren't likely to be ones you'd buy with free cash now so you may well be better to sell these and re-allocate to better investments.

Others may have views on the individual funds, but to me this is largely a personal view and the normal recommendtion of do your own research applies as ever.

Linton

Some random thoughts....

I agree there is a large degree of overlap in this portfolio and a resultant lack of diversification.

Its a bit difficult to recommend ones for the chop since we dont know the relative proportions of each fund, nor how many of them you want to sell. Also we dont know the shape of your proposed portfolio.

Are these held within a platform which would make buying and selling very simple, or separately held having been bought from the individual fund managers? If the latter I understand your problem

Another factor is the total value. If its £5K I would say sell the lot and buy one global balanced fund. If its £500K, then you could sensibly consider professional management and professional help with regard to tax planning.

As to where you should go, given a sufficiently large pot I would suggest a top down specification giving what % of you fund value you want in equity and bonds appropriate for your objectives. Then what % of the equity you want in the various geographic areas or globally etc etc. Then its a matter of deciding which funds go where or if they have no part to play.

I have only had time to look at a few of the funds. Assuming the pot is sufficiently large to make focused funds viable I would suggest getting rid of the Aviva fund and Standard Life Global Equity Income Founder because they seem rather broad funds when my strategy would lead to more focused ones. Henderson UK Alpha seems to have a pretty poor track record as has L&G Global Growth. The AXA Framlington Europe has performed better than average in its sector. In general all the funds seem pretty run-of-the-mill. You can look them up on www.trustnet.com for further info.

Onto the Investment Trusts. Certainly City of London Trust is held by many people for its reliable dividends. The others I know little about.

Incidentally why do you need to sell for CGT purposes - wont the clock restart when you inherit them?

pip895

Were any of the funds in an ISA? I'm no expert - What would the tax position be for any funds held in an isa? My guess would be that you would only have to consider the gains made after your relative/friend died. Can anyone confirm that?

PippiShortsock

Thanks everyone. I knew the wise folk on MSE would give me some good pointers about what to focus my attention on!

I think the basic thinking should be that you have these assets but if you had the same amount of money in cash would you buy these now or not.

Thank you, bigadaj. I probably wouldn’t buy most of these if I had cash instead. But I’m very new to investing, so that doesn’t mean I’d be right! I’ll analyse them on Trustnet as you suggest along with the shares.

Its a bit difficult to recommend ones for the chop since we dont know the relative proportions of each fund, nor how many of them you want to sell. Also we dont know the shape of your proposed portfolio.

Thank you Linton. Sorry for the lack of information. I’m not sure I know the shape of my proposed portfolio either! I was under threat of redundancy until a month ago so was planning for maximising income, but at the 11th hour I moved into a permanent role and now have to plan to minimise higher rate tax instead!

I’ll receive about £90,000 worth of units in the funds and ITs I listed. The biggest holdings are in Alliance Trust, British Assets Trust and Standard Life Equity Income Trust which make up about £60,000.

Were any of the funds in an ISA? I'm no expert - What would the tax position be for any funds held in an isa? My guess would be that you would only have to consider the gains made after your relative/friend died. Can anyone confirm that?

Thanks for your response, pip895. Some of the trusts were in ISAs when my uncle died, but an ISA’s tax protection disappears on death. At that point they all got valued and inheritance tax was calculated. Capital gains tax will be due on any gains made on top of the probate valuation when the beneficiary or executor comes to sell them. As it’s been getting on for 18 months since my uncle died and the market has been, on the whole, very buoyant since then, there would be tax to pay if I sold all the shares/units at once.

kidmugsy

I suppose you'll be selling enough to use your annual CGT allowance and putting part of the capital released into an S&S ISA every year. Would using bed-and-ISA save you on costs?

The surplus capital released you can put towards the cost of living while you divert salary into a pension to avoid higher rate tax.