Defensive Global IT's/funds

A_T

Sally57 wrote: »

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?

It's almost received wisdom now that LTGE and Fundsmith are defensive and will hold up well in a crash. In my opinion that's wishful thinking - they've both greatly outperformed since their inceptions and in a crash with large growth usually comes large falls. I actually hold both but not for defensive reasons rather because of their outstanding growth.

Alexland

A_T wrote: »

In my opinion that's wishful thinking - they've both greatly outperformed since their inceptions and in a crash with large growth usually comes large falls.

If it was just a bubble and valuations were exceeding reasonable earnings potential then yes.

However not all companies are the same. There are some who have demonstrated a consistent ability to operate with low debt, sustained competitive advantage, cash generation and most importantly the ability to reinvest earnings with a high return on capital which underpins the share price growth. Those companies which are only trading at a modest share price premium are therefore very attractive for their ability to compound returns.

There will be times when quality shares do get significantly overvalued which will act as a drag on future returns but even then in the long term they still make good investments.

Alex

StellaN

Sally57 wrote: »

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?

To be perfectly honest, IMO I don't think any of these options are unsuitable for your core holding especually as you seem to have other asset allocations covered. I personally would most probably favour an IT as they are more diversified with a larger number of holdings than the concentrated high conviction funds you have mentioned but it's all personal preference.

talexuser

I have had a large chunk of Fundsmith long term, and Foreign & Colonial, Witan and Alliance have all done very well since before the referendum devaluation when I jumped in.

Defensive is all relative, but my 'defensive' funds are Ruffer, Capital Gearing, Caledonia, Troy Inc & Growth, Personal Assets, RIT and British Empire, on the basis that I can ride out a storm and do not wish the safety (and relative underperformance) of t o o many bonds yet. Your risk tolerance may well be different (RIT is on the biggest premium, Caledonia on the biggest discount, but debatable if that discount will narrow much because of the structure delaying buybacks).

MPN

When the OP refers to a defensive global fund, I think she means a less risky middle of the road global fund or IT compared toth say SMT or Baillie Gifford Global Discovery etc. As StellaN as already stated none of the fund/IT options mentioned are unsuitable and possibly would be more defensive with less risk than perhaps an all world global tracker fund.

A_T

talexuser wrote: »

I have had a large chunk of Fundsmith long term, and Foreign & Colonial, Witan and Alliance have all done very well since before the referendum devaluation when I jumped in.

Defensive is all relative, but my 'defensive' funds are Ruffer, Capital Gearing, Caledonia, Troy Inc & Growth, Personal Assets, RIT and British Empire, on the basis that I can ride out a storm and do not wish the safety (and relative underperformance) of t o o many bonds yet. Your risk tolerance may well be different (RIT is on the biggest premium, Caledonia on the biggest discount, but debatable if that discount will narrow much because of the structure delaying buybacks).

but you're already holding a considerable amount of bonds via these trusts.

rathernot

Surely the real question is what you do with the other 70%?

StellaN

rathernot wrote: »

Surely the real question is what you do with the other 70%?

The OP has already said in post 8 that she will hold some bonds, property, wealth preservation fund/IT together with some more aggressive funds in Biotech and Technology.

rathernot

Hmm yes but I'm not sure I'd take "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." as going into detail of what that 70% is.

Fundsmith or Lindsell Train are fine choices. The other 70% may not be so may be worth discussing was what I was getting at.

talexuser

A_T wrote: »

but you're already holding a considerable amount of bonds via these trusts.

Obviously, but as explained in italics, not as many as going for 100% bond funds since I have a larger number of equity growth and income funds. Pretty difficult to be 'defensive' without some bond content.