switch out of your property investment fund

JDinho

jon3001 wrote: »

Even if a particular asset is very volatile, if it has a low correlation with the rest of the portfolio then a small amount will actually lower the overall risk. You should rebalance annually to get the full benefit.

For instance consider two portfolios:
Portfolio A: 100% Bonds
Portfolio B: 93% Bonds 7% Stocks

Because B holds uncorrelated assets it will be less volatile while having slightly higher long-term returns.

So you could use say a 5% exposure to gold or diversified commodities as a counterweight to your equities to get the benefit of an uncorrelated asset.

You can find more info on these ideas in William Bernsteins's book "The Intelligent Asset Allocator".

Prior to the credit-crunch-market-falls property & equities were uncorrelated ... equities were still rising whilst property was losing you money :rotfl: !

munk

Yant1 wrote: »

BlackRock UK Absolute Alpha (Class P) (Accumulation) perhaps, an equity with hedge capabilitys thus apparently less risky.

I actually have this in my own more risky portfolio to help tame it a little
Certainly seems to be doing ok for now and as you say not so volatile. This is perhaps a good idea for the more cautious portfolio also.

edit, the global bonds seem to still be making money, comes back to my theory of trying to find the value world wide, these bonds under the remit to search global.

http://www.h-l.co.uk/fund_research/security_details/sedol/0143972.hl

Hehe, I very nearly switched out the cazenove euro fund last night into the neptune global fund after checking the info on it on trustnet (plus citywire rankings are rock solid, top 3 for all periods iirc? Looks to have been managed well). May well still go ahead with this idea tbh... I have some holding in the m&g global basics already which is good but might top that up with another global fund with less emphasis on resources.

Cheers.

munk

cheerfulcat wrote: »

Have you looked at gilts? Another option is global generalist investment trusts, particularly those with a mandate to preserve value such as RIT.

I'm looking for alternatives to bond and property funds for a cautious/balanced portfolio (downside risk tolerance of 10-15%). When you say gilts, are you referring to bond funds that include gilts or the purchase of gilts directly? Hadn't considered the latter tbh.

This portfolio already has a mixture of 4-6 HY and quality bond funds in it, this is partly why I'm thinking of alternative low(ish) risk options for the portfolio. The portfolio has (had) a volatility (SD) of around 6% which is perhaps about right, don't really want to be adding anything that's more than 6% SD/volatility.

To be honest I think I'm going to go ahead with the original plan to drip feed in money into the property funds over 6 months.

Just to be clear: you do know that a bank/building society " bond " is not the same as a corporate/government bond?

Hehe yes My thinking was that since general bond fund performance at present is so flat given the high interest rates, it would almost make more sense to put the money that was to be invested in bond funds into a decent fixed term high street bond instead - although to some extent the boat has gone on that idea really, high street bonds seem to be dropping in interest rate returns now.

I would have thought the fixed term bond rates might have risen more than they have in the last month or so given the difficulty some lenders are having raising funds with the lack of trust around between banks, but that doesn't seem to have panned out as yet. We shall see...

Cheers

munk

dipsomaniac wrote: »

if the underlying value of the property in the fund was 100 the price of buying/selling units in the fund (ignoring any initial charge) would look something like this;

Thanks for that explanation. I should have read up on this when you posted last but your explanation was spot on and coincides with this:

http://www.incademy.com/courses/Unit-trusts-and-OEICs/What-is-a-unit-trust/8/1007/10002

Mmm, so it would indicate a much larger number of sellers than buyers for the SWIP Property fund over recent times, I wonder why they don't keep the excess units in the 'manager's box' then instead of switching to a bid pricing basis? Will have to keep this in mind then when considering selling units in this fund and only sell after the pricing basis has flipped back to offer pricing.

Are there any other examples of funds that jump regularly between the pricing bases? I've not noticed it before.

Curiously looking closely at the SWIP property chart here for 'price':

http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?tab=7&Id=F0GBR06N5U&lang=en-GB&lastPageURL=

it seems to be only since July 2007 that they started this policy of jumping from one basis to another. Odd.

Cheers.

munk

Jonbvn wrote: »

NU have just released an "internal" global property fund "to diversify away from the unstable UK property market" (their words not mine).

http://www.h-l.co.uk/news_and_expert_views/fund_news/articles/27757.hl?pr=article&type=cw

Sounds useful that one, looks like late 2008 until OEIC version of the fund is rolled out Bet things will be peachy by then in UK market heh.

Ta.

munk

jon3001 wrote: »

Even if a particular asset is very volatile, if it has a low correlation with the rest of the portfolio then a small amount will actually lower the overall risk. You should rebalance annually to get the full benefit.

For instance consider two portfolios:
Portfolio A: 100% Bonds
Portfolio B: 93% Bonds 7% Stocks

Because B holds uncorrelated assets it will be less volatile while having slightly higher long-term returns.

So you could use say a 5% exposure to gold or diversified commodities as a counterweight to your equities to get the benefit of an uncorrelated asset.

You can find more info on these ideas in William Bernsteins's book "The Intelligent Asset Allocator".

I really should buy this book, I think someone on here mentioned it to me before

The portfolio is actually the one I mentioned in that linked thread ^ and it's quite nicely 'balanced' now. My concern with relation to this thread is that in drip feeding money into the property holding (planned to be 10% after 6 months), it really feels like throwing good money after bad right now! However of course by drip feeding at least it will mean we have more units for the money once the final weighting is reached.

Cheers for the reply

cheerfulcat

munk wrote: »

I'm looking for alternatives to bond and property funds for a cautious/balanced portfolio (downside risk tolerance of 10-15%). When you say gilts, are you referring to bond funds that include gilts or the purchase of gilts directly? Hadn't considered the latter tbh.

Yes, I mean gilts held directly. You can research them here. Returns are not spectacular but they are virtually guaranteed. BTW I second the rec for Bernstein's book and suggest a look at " Asset Allocation " by Roger C. Gibson as well.

dipsomaniac

munk wrote: »

it seems to be only since July 2007 that they started this policy of jumping from one basis to another. Odd.

it started with a couple of institutional investors pulling out of nu & new star uk property funds. i believe the reason given was that the funds didn't match the investors objectives anymore as they were holding up to 25% cash (they may have just been taking profits as the funds did return abnormally high double digits returns for the previous 3 years). the resulting drop in price when the pricing basis was switched caused a panic amongst investors and the continuing retreat from uk commercial property as investors rebalance (some from 100%) there portfolios.

a lot of money has poured into these funds over the last five years so commercial property will have been overvalued due to the competition (and need) between fund managers to spend this money. office/retail/industrial parks - erections have been springing up everywhere!

i am sure this is just a slight correction as commercial property is one of the more predictable investments that should be part of a balanced portfolio with its low volatility, income yield and previous history of consistant positive returns (176 consecutive months). please remember that past performance isn't...........................................

the greed/panic mentality certainly makes investing interesting.

[Deleted User]

greed and now the panic will make these funds a bargain in a few years time.

dunstonh

NU reckon that 2008 will see a return to 7-8% p.a. for property funds and this year has seen the end of the silly 15-20% returns that have been in place.

They had been predicting a bad year for a few years. It didnt come when they thought but it arrived finally.