Boast / weep about your recent investment decisions HERE

grey_gym_sock

grey_gym_sock wrote: »

this will be boring ...

even more boringly, i've put through orders for a "bed & ISA", selling some vanguard US equity index (inc) in a taxable account, and buying vanguard US equity index (acc) in an ISA. i'm funding the cash for the purchase myself, before i get back the cash from the sale, so that they can go through at the same time (probably, tomorrow), and market movements (while the orders are going through) don't matter.

i prefer to hold (inc) in taxable account, to simplify CGT calculations, but (acc) in an ISA, to minimize "cash drag".

mark13

LLOY, HSBC, IAG, EZJ, DNLM all down.. waiting for the turn around. Nice thread though.

BananaRepublic

Atreyu107 wrote: »

Was the tracker a unit trust or an ETF?

In the case of the ETF, settlement takes two working days in the UK, so there will always be a delay.

In the case of the Unit Trust, dealing usually takes place over five days (or more for some funds).

These are not unusual timescales. If you don't like the rules, don't play the game.

It was a unit trust. When buying and selling unit trusts within a platform, the transactions have gone through overnight. My experience which may not be typical is that platforms are far more competitive and open than companies such as Standard Life or L&G.

bowlhead99

BananaRepublic wrote: »

L&G allow you to sell the shares, but take at least 3 working days to transfer the money. So, order to sell goes in on Sunday, shares sold on Monday 3pm. Money arrives in my account sometime on Friday morning. L&G enjoy my money during that time. And in the meantime the markets rise.

BananaRepublic wrote: »

It was a unit trust. When buying and selling unit trusts within a platform, the transactions have gone through overnight. My experience which may not be typical is that platforms are far more competitive and open than companies such as Standard Life or L&G.

With a platform, if you were trying to get the cash back into your own hand, it wouldn't have been any quicker than what you described. The only difference you're seeing is that with a platform which offers a wide range of investments you have been swapping from one investment to a different investment and it has seemed to go through right away. But if you were trying to get the cash back in your own hand it would take pretty much as long.

A trade in an L&G fund will have the same settlement terms whether it is dealt through a supermarket platform or direct with the manager. Similar to how a trade for a sale of shares on the stockmarket of a share in (e.g.) Lloyds or Tesco or BP will have the same settlement terms whether you use HL stockbroker or AJB stockbroker or the company registrar's stockbroker service.

For example. On Sunday you decide to sell £1000 of units in the (e.g.) L&G tracker and book an order for a £1000 sale. The fund is priced once a business day. On Monday at 3pm the manager calculates what the NAV of the fund is and how much per share they want to give to departing investors who put their orders in by the noon cut-off; and they decide £2.0000. So at that point your order can be confirmed along with all other subscribing and redeeming investors, you are going to redeem 500 units. Whether you told them you want to redeem 500 units and wait for them to tell you that's £1000 of value, or you tell them you want £1000 of value and wait for them to tell you you'll have to give up 500 units, either way the terms of the contract can only be struck at 3pm Monday when the price per unit is available.

So, on Monday afternoon you have a contract for £1000 / 500 units. Industry standard settlement is 3 business days meaning on the third day you will relinquish the units and the cash will be there for you to collect.

So Tuesday is one day. Wednesday is two days. Thursday is three days and the cash is available. If you were doing it in a platform it would be in your platform account at that time. If you were doing it directly with the manager it would be on your virtual cash account at that time. You want the cash physically delivered to your own bank account and you don't want to pay a premium fee for a sameday CHAPS or SWIFT transfer so you will get the money on the basic 'next business day' service - which is Friday. That is how long it takes. Platform or direct to manager, same deal.

However with a platform offering access to many funds, or a stockbroker offering access to many companies, if you are selling out of one company and buying another one, you don't usually need to wait until Friday to be able to do that.

So with a platform you can book your order on Sunday afternoon or Monday morning before the day's cut-off, to redeem your £1000 of value from the L&G Big Company Tracker OEIC. The platform knows you have made it in time for the cut-off on Monday to get a finalised price on Monday so the redemption proceeds will be physically available to them in the platform bank account on Thursday. You also want to buy £1000 of units in Invesco Awesome Income OEIC and you order that too. The platform knows that the exact number of IAI units will be known on Monday afternoon when the accounting is complete to calculate and publish the NAV per unit, and therefore that the £1000 cost of those units will be required to be delivered from its platform bank account to the fund manager three business days later, which is Thursday.

As they know you will be receiving £1000 on Thursday from L&G, they are happy to push the order through to deliver £1000 to Invesco on Thursday, without risk of anyone being out of pocket.

So on Monday 3pm when the subscription and redemption prices are announced, you are committed to both trades and effectively have an economic interest in 333 Invesco units (simply waiting for cash settlement but your entry price is fixed); and you no longer have any economic interest in those 500 L&G shares because you have a contracted exit price and you are simply waiting for cash settlement.

So, the platform can update your portfolio on Monday afternoon or evening or maybe Tuesday morning, to say your L&G holding has gone down by 500 and Invesco went up by 333. The cash doesn't physically settle until Thursday but you're not interested in that anyway because you do not pay or receive it from your own bank account. You just want to understand which funds you're economically interested in.

So with the platform sale and re-purchase, you see the information update right away on Monday night or maybe Tuesday morning. Whereas when you were instructing L&G to redeem your holdings and physically put the cash in your own bank account, you are frustrated that it takes until Friday. But this is not due to some inherent inefficiency of the manager being less 'competitive and open' than a platform. It is because in the 'platform' case you are just waiting for a screen to update, instead of waiting for physical cash delivery.

If you had asked the platform to not spend the proceeds from L&G on Invesco but physically deliver you the cash instead, you would not be able to have it on Monday or Tuesday or Wednesday. Because all subscriptions and redemptions work on a multi-day settlement period. You would only get the cash in your platform account on Thursday and could then take it back to your own bank account probably by Friday morning. Or maybe Thursday night with 'faster payments' on the banking system these days, if supported, but that is still officially a 'by end of the next working day' cycle from the banks.

Similarly if you were direct with L&G instead of via a supermarket platform, and you just wanted to switch a holding from L&G Big Companies OEIC to L&G Small Companies OEIC, it would not take you an entire week from Sunday to Friday to get the cash and another week to the next Friday to deploy the cash resulting in your being out of the market for a fortnight. Once the order is received and accepted they would redeem and subscribe at the same point resulting in no wasted time.

So I think you are just misunderstanding how settlement works in practice and thinking that these nice new whizzy supermarkets are lovely and efficient and the experience via a manager is terrible. It's true that a manager offering a very limited range of funds may not have bothered to invest in a fancy new system within the last decade because his customers (platforms and institutions and the odd retail customer) don't really want to pay higher management fees to cover it... and so it can be a less impressive experience. But fears of huge delays are overblown.

Another factor may be just that since you last dabbled with 'direct' transactions a decade ago, industry standard settlement times have reduced so perhaps the platforms you use these days seem quicker but you haven't gone back to compare like with like. For example, all exchange traded funds and company shares on LSE now settle T+2 instead of what they had been doing for decades (T+3) which is an EU-wide change introduced for all the main markets in the last couple of years. If I sell Tesco on Wednesday in business hours these days I will get cash delivered to my brokerage account on Friday.

OEIC or unit trust Funds themselves are not exchange traded, so are outside the scope of that rule; for example Vanguard's prospectus says "Settlement of purchase monies is due within three Business Days following the relevant Valuation Point". This would apply whether you used a supermarket platform or went to Vanguard direct; the supermarket can't magically get your cash from Vanguard any quicker than the operating parameters set out in the prospectus rules.

Pincher

Bought some HSBR (BRIC ETF) back in July 2015, at around $22, and it sank to $16 at one point. Climbed back up to $19 recently and still climbing. So might even break even soon.


Letter dated 14th April 2016:


"The directors of the Company have resolved to redeem all of the shares of the fund and subsequently close the fund."


I can choose to receive USD, EUR, or GBP. :mad:


I was happy to let it ride long term. It was even paying dividend. Not a lot, but tax free from 6th April 2016, so had the potential to do as well as a 1.1% cash ISA, with the possibility of upside gain.


HSBC Investdirect has no custodian charges, so it costs me nothing to hold it long term.




Packing up the toys, and don't want to play any more?


The strange thing is, on 24th July 2015, the Net Asset Value was only US$1.9million, but is currently US$4million, so people are pouring money in.


How do you buy shares in Russia, with all these sanctions?
Isn't Brazil going bankrupt?


With people dumping China, and then piling in when the wind changes, maybe the portfolio managers are fed up with selling up and then buying back all the time.


The fund size is probably too small to be viable.

bowlhead99

Pincher wrote: »

Packing up the toys, and don't want to play any more?

on 24th July 2015, the Net Asset Value was only US$1.9million, but is currently US$4million

The fund size is probably too small to be viable.

Yes, the fund size needs to be about a hundred times bigger to run it efficiently. iShares has a BRIC50 etf which is about $260m and in USA they also have a MSCI BRIC etf which is about $180m. Both of those are quite expensive with expense ratios over 0.7%. But on a $4m fund, 0.7% is not even thirty grand a year.

If you look at asset allocation, in an MSCI BRIC etf,if you had only $4m to play with you would need to put $280k in Tencent and $180k in China Mobile (5-7% of the index each) but at the smaller end of the scale, you have 80 of your 300 holdings valued at under $4k.It's just not practical to try to maintain that sort of portfolio and offer it to the public cheaply.

If as you suggest, people were trying to 'pour money in', they would create new shares. Say the result of that on a crazy busy day of creating new shares was the fund increasing in size by a whole percent. That would mean they were taking on new assets: getting on for another $3000 of Chinese company Tencent Holdings, and a whole $20 of Indian firm Reliance Communications.

However slick and efficient your operations are, you can't run a fund efficiently with those sort of numbers. It might have been costing you nothing incremental to hold long term because HSBC are a generous broker and already charging you a quarterly fee on your Investdirect account; but it would certainly be costing the ETF a lot of money to pay its brokers, custodians, administrators and other counterparties etc.

Some of the obvious things to look at when doing your due diligence on a potential ETF or other fund for your portfolio are things like does it use physical holdings to replicate its index or synthetic instruments, what are the risks in how it runs itself, is it going to be long term viable, what could go wrong and so on. The idea that you'd look at it last July and think, "well, it doesn't even have two million dollars worth of assets to its name, but I'm sure it'll be fine..." seems like there is something lacking in your process

Sorry if that sounds like a criticism on a thread where we're admitting mistakes and weeping about investment decisions, but at least you've learned a lesson about why you shouldn't pile into an investment opportunity just because it has your preferred sector in the product name, without any consideration as to whether it's a good one or not.

Pincher

bowlhead99 wrote: »

Sorry if that sounds like a criticism on a thread where we're admitting mistakes and weeping about investment decisions, but at least you've learned a lesson about why you shouldn't pile into an investment opportunity just because it has your preferred sector in the product name, without any consideration as to whether it's a good one or not.

Believe it or not, I was toying with the idea that they are bound to have a reserve, so that on winding up, I might be up a few quid just for staying till the end of the party.


Being denominated in US$, I got lucky on the exchange rate between July 2015 and now.


Buying BRIC wasn't investment. What with Russia under sanction, and Brazil going bankrupt, it was a bet that somehow these flee ridden countries can recover. China was worth a punt.


At least they didn't wind up when it was $16.

bowlhead99

Pincher wrote: »

Believe it or not, I was toying with the idea that they are bound to have a reserve, so that on winding up, I might be up a few quid just for staying till the end of the party.

Buying into a fund which hasn't yet announced liquidation (like HSBR last summer), the reported NAV is going to be presented on a going concern basis rather than a break-up basis, so you aren't buying something that has a reserve that isn't already in the price. The costs to wind down, distribute the residual assets as cash and close the fund will not have been recognised when calculating the (e.g.) $1.6m of value; the true realisable value is lower.

It's quote costly to wind up a fund and dispose of all those tiny holdings, so good luck with that. At some stage of the process they'll get to the point where the liquidation costs becomes 100% of the remaining assets and you can well and truly kiss the low "operating cost ratio" of the ETF goodbye. So whether you see it as an "investment" or a "punt", it's still boot worth getting involved with a tiny ETF when there's equivalent and bigger ones elsewhere.

sabretoothtigger

Last week I bought shares in Tesla Motors Inc

I dont know this is right or wrong but tech shares are high risk when alot of the gains are already in the share in expectation of growth. He does seem a clever innovative chap but he even said himself the shares have already valued future growth as a certainty and he hopes to deliver that end of the bargain

I have a holding in williams companies which may become the largest pipeline infrastructure company in USA this year. Its mid merger and not a happy marriage but we'll see and obviously oil prices super risky.
Also took some phillips 66 which is just copying Buffet, seemed good reasoning steady reinvestment based on hopefully long term sound refining arbitrage as per his usual line of thinking

Thrugelmir

Had a spring clean over the past few weeks. Now that reporting season is in full flow.

Sold 75% of HSBC
Sold 50% of Shell
Sold 100% of Burford Capital - 140% gain, time to bank profits.
Sold 100% of WH Ireland
Sold 100% of Record
Sold 100% of Cenkos

Added to existing holding in UK Mortgage Limited.
Added to existing holding in BP Marsh.
Started new position in Ecofin Water & Power Opportunities plc .