Defensive Global IT's/funds

Sally57

I am about to transfer out of a personal pension (from SJP) in cash to open a SIPP. I would like to have a global IT or fund as the core holding say around 30%.

At the moment, I am considering either Lindsell Train Global Equity or Fundsmith for the fund options. For the IT options it is Foreign & Colonial (FRCL) or Mid Wynd International (MWY).

Are these fund/IT choices fairly defensive? I realise LTGE and Fundsmith are fairly concentrated high conviction funds whereas FRCL and MWY are more diversified across a larger range of holdings. So would the IT's in question be more defensive than the funds bearing in mind I am looking for a 100% equity core holding in my SIPP?

Computer_Beginner

So are you planning to hold a fund (OEIC?) plus an IT?
Or choosing between one or the other?

You seem to lean more towards active management. Is that a considered choice?

Jack Bogle would probably say that all fund managers revert to the mean. If you believe that, then maybe Woodford is due some improved performance?

What about Scottish Mortgage? Moneyweek seem keen on them.

ColdIron

Computer_Beginner wrote: »

What about Scottish Mortgage? Moneyweek seem keen on them.

Defensive? It has an FE Risk Score of 173

Linton

Lindsell Train looks pretty defensive to me investing in solid companies like Unilever, Diageo, Pepsico etc. It has lower than average Technology and Biotech. I would be more concerned about Fundsmith. IIRC it started off in a similar way to Lindsell Train but is now 35% tech and 25% Health, almost the opposite sector allocation to LT. Mix the two funds and you would have a balanced portfolio!


Both funds invest in small number of shares and so diversification may be a concern. Both funds have performed very well over the past 5 years but neither has been tested in falling markets. So neither would interest me as a major component of a portfolio.

Sally57

Computer_Beginner wrote: »

So are you planning to hold a fund (OEIC?) plus an IT?
Or choosing between one or the other?

You seem to lean more towards active management. Is that a considered choice?

Jack Bogle would probably say that all fund managers revert to the mean. If you believe that, then maybe Woodford is due some improved performance?

What about Scottish Mortgage? Moneyweek seem keen on them.

I hold some Scottish Mortgage (SMT) in my ISA but as ColdIron pointed out the FE Risk Score is very high. Therefore, I want a more defensive and less risk option for my core holding in my SIPP. I am looking at either a fund or an IT as the core holding not both.

I do lean towards active management from a personal choice but I have nothing against passive options in fact its the easier option but at the moment not for me.

bowlhead99

To be honest, I wouldn't see the 4 choices there as being 'defensive', especially given they're all equities.

Fundsmith and Lindsell Train may have reputations of buying big global brands with solid competitive positioning and in most cases the ability to pay dividends etc, and I don't disagree with Linton that LT has some more conservative holdings than some others. But you only have to look at the percentage returns gained in recent years to see how much the market has enjoyed investing in those company types and imagine what percentage you could lose in those concentrated portfolios if the prevailing market attitudes were to change.

You mention this is for a core holding but if only 30%, that means that more than two thirds of what you hold will be 'non core' activities and within that massive unused space there is plenty of opportunity for both defensive and aggressive activities.

So perhaps it doesn't matter if the core is defensive or not. If it was not, there would be ample opportunity to buy more things that were defensive in the huge space around the outside of the core. Whereas if the core was defensive, there would be lots of space to put more aggressive things, except a lot of what you want to put into the non core space won't be aggressive because you will presumably be wanting non equity stuff like bonds, property, infrastructure etc to avoid having a 100% equity pension.

Really a fund that is 100% equities is not defensive in my book. To me an example of a defensive IT that invests globally (though not in every corner of the globe) would be something like RIT Capital Partners (half yearly report came out within the last couple of weeks). A lot more diversification of asset types than the products you mention. Still, there are more conservative mixed asset ITs out there and i wouldn't put 30% in it.

Prism

Linton wrote: »

Lindsell Train looks pretty defensive to me investing in solid companies like Unilever, Diageo, Pepsico etc. It has lower than average Technology and Biotech. I would be more concerned about Fundsmith. IIRC it started off in a similar way to Lindsell Train but is now 35% tech and 25% Health, almost the opposite sector allocation to LT. Mix the two funds and you would have a balanced portfolio!

I do agree that both together work fine as well as either alone. Its worth digging into the Fundsmith tech and health sectors a little. The tech is Microsoft, Sage, Intuit and Amadeus all of which should hold up relatively well (in theory) during a downturn as they are focused on longer term subscription models. Facebook is untested. There is probably an argument to include Visa and Paypal in tech too. I assume anything that hit consumer spending would effect these two.

Healthcare is very little biotech and drugs (part of J&J) and mostly medical devices companies like Idexx, Stryker and Bection Dickinson, basically the defensive part of healthcare.

I have my main allocation to Fundsmith and my wife is in LTGE. I am hopeful these will both hold up during a downturn as well as anything else. Fundsmith have given a back tested performance of their companies of -12% during the worst of the financial crisis (7/12/2007 to 9/3/2009). Maybe next time will be different but for the time being I like the defensive qualities of Lindsell Train and Fundsmith.

Sally57

bowlhead99 wrote: »

To be honest, I wouldn't see the 4 choices there as being 'defensive', especially given they're all equities.

Fundsmith and Lindsell Train may have reputations of buying big global brands with solid competitive positioning and in most cases the ability to pay dividends etc, and I don't disagree with Linton that LT has some more conservative holdings than some others. But you only have to look at the percentage returns gained in recent years to see how much the market has enjoyed investing in those company types and imagine what percentage you could lose in those concentrated portfolios if the prevailing market attitudes were to change.

You mention this is for a core holding but if only 30%, that means that more than two thirds of what you hold will be 'non core' activities and within that massive unused space there is plenty of opportunity for both defensive and aggressive activities.

So perhaps it doesn't matter if the core is defensive or not. If it was not, there would be ample opportunity to buy more things that were defensive in the huge space around the outside of the core. Whereas if the core was defensive, there would be lots of space to put more aggressive things, except a lot of what you want to put into the non core space won't be aggressive because you will presumably be wanting non equity stuff like bonds, property, infrastructure etc to avoid having a 100% equity pension.

Really a fund that is 100% equities is not defensive in my book. To me an example of a defensive IT that invests globally (though not in every corner of the globe) would be something like RIT Capital Partners (half yearly report came out within the last couple of weeks). A lot more diversification of asset types than the products you mention. Still, there are more conservative mixed asset ITs out there and i wouldn't put 30% in it.

Thanks for the input. I will hold some bonds, property and a wealth preservation IT outside my core holding as well as a small percentage in a few more aggressive funds such as Healthcare/Biotech and Tech. Therefore, I do want my 30% core holding 100% equity but not at the top risk level such as SMT, so I was asking for views on these funds/IT's. I must admit I am swaying towards FRCL as a steady, well diversified global IT.

Computer_Beginner

ColdIron wrote: »

Defensive? It has an FE Risk Score of 173

You're right.
Sorry, I think I need a cup of coffee!

kidmugsy

I wouldn't buy RIT until their premium vanishes. Defensive possibilities include Personal Assets Trust, Ruffer Investment Company and Capital Gearing Trust. You could visit their websites and read their reports/reviews. I've always found the PAT and RIC ones both instructive and amusing. I've only just become a reader of CGT's which also seems worthwhile.

ArchBair

Sally57 wrote: »

I must admit I am swaying towards FRCL as a steady, well diversified global IT.

FRCL is a good choice in my opinion for a core holding in a SIPP, well diversified with a large number of holdings but not really defensive but as you said not as risky as SMT etc. Although it really doesn't matter if you also have bonds, property etc in your SIPP portfolio.