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bowlhead99

Alexland wrote: »

Bowlhead do you think there is risk the premium might turn to discount when Lord Rothschild steps down as chairman (but remains as president) and takes a less active role at the end of September? How much of this is already priced and how much might the price change when it actually happens?

The premium might turn to discount for a variety of reasons but succession planning has been in place for some time. In recent months/years his has been more of a figurehead role rather than a trading role and the investment team's bright ideas go through the JRMC management team rather than have him sign everything off. People aren't going to think on 1 October, "oh no, Rothschild is no longer vetting the strategy, I suddenly don't want to pay as much to buy a share".

His stepping down to be more officially a 'figurehead' role as President, presumably with no executive responsibilities - but still having a large personal investor stake along with other family money - means that he can still encourage wealthy people in his personal network to invest in it. And I don't expect him to be selling off his shares at great pace causing an overhang and depressed price. His official move away from the front line was announced at this April's AGM so it is not new news, and even then it was only sold as the continuance of the 'moving away from the day to day' which had started some years earlier.

It remains to be seen what the change in demand will be, of course, but I don't expect it to be an issue for a long term holder.

The premium exists not just because of his stewardship but because of the exposure to a complex 'not 100% equities' strategy which is attractive when markets look high and there is global uncertainty. In boom times it is less likely to be in such demand, so less premium needed, but that's OK because boom times are still good times to be invested.

Voyager2002

bowlhead99 wrote: »

OK, the mixed asset fund is RIT Capital Partners plc.

Its portfolio holdings as at the end of June are shown on page 7&8 of the half-yearly report pdf at https://www.ritcap.com/sites/default/files/RIT_2019_HalfYearly_Report.pdf

Closing price on the LSE today was 2055p.

An interesting choice.
While the decision to use a multi-asset fund makes perfect sense, why this one?

Alexland

bowlhead99 wrote: »

The ongoing charges figure for 2018 using AIC guidelines was 0.68%. There is also exposure to management fees in the underlying investee funds it holds, estimated at about 1.03% for 2018. So about 1.7% all in, handing a huge advantage to the management-fee-free 4-share portfolio for the meaningless 1-year comparison.

Looking at the Key Information Document they are quoting 0.06% portfolio transaction costs + 2.22% ongoing costs (0.68% management, 0.51% interest deducted, 1.03% underlying fund managers) + 1.18% estimated underlying manager performance fee + 0.45% carried interest within the underlying funds. All sounds extremely expensive. What kind of risks must they be blending to get sufficient performance to generate a decent return? If they get the blend wrong could this have potential to go badly wrong?

Alex

DairyQueen

Note that one of the primary objectives of RIT is "to deliver long-term capital growth, while preserving shareholders’ capital". The management charges have not impeded that objective. This trust doesn't aim to maximise growth. It aims to preserve the real value of capital over the long-term. Slow-and-steady is the maxim I would apply. The average annual share price return over the last three decades exceeds 12%.

Historically, this trust has performed well (against relevant indices) across all types of market conditions. Given that we are entering a turbulent market period I suspect that BH has chosen this as an each-way bet against market falls over the short term.

I invested for precisely that reason.

Alexland

It might sell itself as a conservative wealth preservation investment but they must be taking some substantial risks under the surface to be delivering that sort of return above fees.

beamyup

Alexland wrote: »

It might sell itself as a conservative wealth preservation investment but they must be taking some substantial risks under the surface to be delivering that sort of return above fees.

I am so surprised that more than 1 person on this board has this fund. To my eyes it is madness to believe in this kind of sorcery.

Alexland

beamyup wrote: »

I am so surprised that more than 1 person on this board has this fund. To my eyes it is madness to believe in this kind of sorcery.

I am not an outright sceptic as with skill it should be possible to blend risks to produce the lower volatility and good results seen with this trust. I am just unconvinced they can keep it going forever.

Prism

Alexland wrote: »

It might sell itself as a conservative wealth preservation investment but they must be taking some substantial risks under the surface to be delivering that sort of return above fees.

A S&P tracker in £ terms is running at about 10.5% over 30 years so I don't think its a huge leap to imagine some skilled managers beating that throughout the downturns. Its probably been more defensive than risky - avoiding the downside rather than capturing the upside.

Linton

I also hold some RIT in my Wealth Preservation portfolio. It is a bit risky for my purposes so its a minority holding. However it has clearly done its job over the years.



From a quick bit of research: RIT was founded as Rothschild Investment Trust 30 years ago and the family have continued to be closely associated with it since that time. Lord Rothschild has recently stood down as chairman. A couple of the family members together hold about 36% of the shares. So I think it is a fair assumption that the fund managers know what they are doing.


Since 1995 RIT has returned 1400% against the FTSE World Index at about 700%. Looking at the graph it clearly benefited from the .com boom but avoided the following bust, strongly out performing the FTSE World until 2008/2009. Though it did not do so well in the 2008 crash, falling much the same as the FTSE World.. Since 2009 it has steadily returned about 150% against the FTSE worlds noticably more volatile 250%. So pretty good marks in achieving its objectives. In the next crash my money would be on RIT rather than the FTSE World.


Madness and sorcery? Or a good example of what can be achieved by sensible long term financial management in a range of different economic conditions over several decades.

bowlhead99

beamyup wrote: »

If I had a IFA and if they recommended this investment to me, I would show them the door.

Regardless of what an IFA suggested to you, you would probably show them the door because a recurring theme of your posts is that you don't like the idea of using IFAs and have not used one in the last 25 years.

Notwithstanding this, it's unlikely that an IFA would recommend this investment to you because their recommendations need to consider various suitability criteria, which includes understanding the client's knowledge and experience and so on. As it's known that you distrust active management in general, and you don't comprehend the underlying holdings, the IFA wouldn't recommend you buy it.

beamyup wrote: »

I am so surprised that more than 1 person on this board has this fund. To my eyes it is madness to believe in this kind of sorcery.

It is about 35-40th position in the FTSE250 with over £2bn of free float market cap. So, people other than its founders do believe it to be credible.

The 'madness' that you describe is:
- invest in some opportunities;
- acknowledge there are some costs incurred along the way to access them;
- be satisfied with the end result.

If you're not familiar with all the types of investment opportunity that exist, you might think the whole thing is sorcery or witchcraft. But it is not 'sorcery', merely 'unfamiliar territory' for you.

I imagine someone in the 16th century would be surprised to be told that his friend just got back from circumnavigating the globe, when he knew that the earth was flat. In the late 19th century people would be surprised to see someone take a journey via horseless carriage. A person brought up in North Korea might be surprised on leaving the country to find that the other countries were not in fact worse, as they had been led to believe, but actually had some pretty cool stuff.