40-60% Funds Worried

Albermarle

masonic said:

ChainsawCharlie said:

Royal London Sustainable Div C Acc

That fund looks pretty opaque to me. It lists the top 10 holdings, which as far as I can see are all shares. It does not state what type of fixed interest investments it is holding. Could be mostly corporate bonds, which are not like the government bonds we've been discussing. It seems to be quite a bit higher in risk than the average fund in its 40-60% equities Morningstar category and 20-60% equities IA sector.

ChainsawCharlie said:

Cheers @cheerfulcat, thats a really good explanation, made really clear, and yes @bostonerimus.

Just one final question, to assist my understanding then I'm done.

Let's take one of my Multi Asset Funds
The worst performing one so far

Royal London Sustainable Div C Acc

Its.currently 9.2% down in value, I guess this loss will be all equity at this stage, but if its due to bonds, is that because the value for now on some of the bonds have devalued because there are now bonds with better coupon rates?
Thanks for your patience 

This is not really a multi asset fund, not in the way you would describe VLS 60 in any case.
The 60% equity is concentrated in only 46 holdings, which means this is very much a managed fund looking to pick winners.
Like similar funds it was doing pretty well until the last 6 months, since when it has dropped over 12 % .
Also as you have noted for its bond % it is holding mainly corporate bonds, which is not normal for for a VLS60 type product.

Iain_For

ChainsawCharlie said:

Any pitfalls in the iShares 0-5 year US TIPS not hedged to sterling?

Potentially…

https://www.cityam.com/pound-faces-existential-crisis-bank-of-america-warns/

Hedged would generally be preferable for such an asset to reduce currency risk.

masonic

If you think the pound will continue to devalue then hedging to sterling will result in a worse outcome. You can see from the hedged vs unhedged performance in each of the last 3 years that's exactly what has played out.

If the pound weakens, then imported goods and services are going to get more expensive (things like fuel, energy, food, etc), so in a way hedging trades currency risk for local inflation risk. The opposite will be true if the pound strengthens and reverts to previous levels. Your investment fluctuates less when measured in sterling, but it fluctuates instead in spending power. Short dated US TIPS will give you some protection from a future unexpected rise or prolongation of US inflation. Short dated US TIPS hedged back to sterling will not give you protection against UK inflation, to some extent it will give you more exposure to inflation, as if you were holding cash, since the returns on short dated TIPS will be negligible. In an environment where everyone is very aware of inflation risks, the probability of future unexpected rises in inflation seems low, but if inflation does not subside next year and remains a global phenomenon they could still be worth holding.

aroominyork

Albermarle said:

masonic said:

ChainsawCharlie said:

Royal London Sustainable Div C Acc

That fund looks pretty opaque to me. It lists the top 10 holdings, which as far as I can see are all shares. It does not state what type of fixed interest investments it is holding. Could be mostly corporate bonds, which are not like the government bonds we've been discussing. It seems to be quite a bit higher in risk than the average fund in its 40-60% equities Morningstar category and 20-60% equities IA sector.

ChainsawCharlie said:

Cheers @cheerfulcat, thats a really good explanation, made really clear, and yes @bostonerimus.

Just one final question, to assist my understanding then I'm done.

Let's take one of my Multi Asset Funds
The worst performing one so far

Royal London Sustainable Div C Acc

Its.currently 9.2% down in value, I guess this loss will be all equity at this stage, but if its due to bonds, is that because the value for now on some of the bonds have devalued because there are now bonds with better coupon rates?
Thanks for your patience 

This is not really a multi asset fund, not in the way you would describe VLS 60 in any case.
The 60% equity is concentrated in only 46 holdings, which means this is very much a managed fund looking to pick winners.
Like similar funds it was doing pretty well until the last 6 months, since when it has dropped over 12 % .
Also as you have noted for its bond % it is holding mainly corporate bonds, which is not normal for for a VLS60 type product.

It is 100% a multi-asset fund because it uses a mix of different asset types. But, as you pointed out, it uses actively selected individual holdings rather than index funds. Also, VLS has plenty of corporate bonds; without checking the detail, it probably holds about 60% government/40% corporate as that is typical for an aggregate bond index fund.

masonic

ChainsawCharlie said:

aroominyork said:

Albermarle said:

masonic said:

ChainsawCharlie said:

Royal London Sustainable Div C Acc

That fund looks pretty opaque to me. It lists the top 10 holdings, which as far as I can see are all shares. It does not state what type of fixed interest investments it is holding. Could be mostly corporate bonds, which are not like the government bonds we've been discussing. It seems to be quite a bit higher in risk than the average fund in its 40-60% equities Morningstar category and 20-60% equities IA sector.

ChainsawCharlie said:

Cheers @cheerfulcat, thats a really good explanation, made really clear, and yes @bostonerimus.

Just one final question, to assist my understanding then I'm done.

Let's take one of my Multi Asset Funds
The worst performing one so far

Royal London Sustainable Div C Acc

Its.currently 9.2% down in value, I guess this loss will be all equity at this stage, but if its due to bonds, is that because the value for now on some of the bonds have devalued because there are now bonds with better coupon rates?
Thanks for your patience 

This is not really a multi asset fund, not in the way you would describe VLS 60 in any case.
The 60% equity is concentrated in only 46 holdings, which means this is very much a managed fund looking to pick winners.
Like similar funds it was doing pretty well until the last 6 months, since when it has dropped over 12 % .
Also as you have noted for its bond % it is holding mainly corporate bonds, which is not normal for for a VLS60 type product.

It is 100% a multi-asset fund because it uses a mix of different asset types. But, as you pointed out, it uses actively selected individual holdings rather than index funds. Also, VLS has plenty of corporate bonds; without checking the detail, it probably holds about 60% government/40% corporate as that is typical for an aggregate bond index fund.

Thankyou, for checking.
I think it gets 5 crowns in trustnet, and bronze on morningstar, performance seemed pretty good before this year, its down the most in my portfolio at the moment, in ISA and SIPP
Phscologigicaly it feels like a diseased fund :-)
I know I know....early days 😄

I believe aroominyork is referring to VLS, not your Royal London fund, when discussing the mix of bonds. Nothing to suggest your figure of 70% corporate bonds in the RL fund is inaccurate.

It is normal that a fund like your Royal London fund will outperform in rising markets, but underperform in falling markets. It is loaded up with growth stocks and higher risk bonds.

aroominyork

You are so emotional and panicky that you need to find an index fund that meets your risk tolerance and learn to leave it alone. If there was one house I would want for actively managing mid-risk multi-asset funds it would be Royal London, but you see them as diseased. The diversified fund is about 57% equities; over the last five years it has outperformed VLS60; you mustn't be thrown by a small recent dip.

ChainsawCharlie

masonic said:

ChainsawCharlie said:

aroominyork said:

Albermarle said:

masonic said:

ChainsawCharlie said:

Royal London Sustainable Div C Acc

That fund looks pretty opaque to me. It lists the top 10 holdings, which as far as I can see are all shares. It does not state what type of fixed interest investments it is holding. Could be mostly corporate bonds, which are not like the government bonds we've been discussing. It seems to be quite a bit higher in risk than the average fund in its 40-60% equities Morningstar category and 20-60% equities IA sector.

ChainsawCharlie said:

Cheers @cheerfulcat, thats a really good explanation, made really clear, and yes @bostonerimus.

Just one final question, to assist my understanding then I'm done.

Let's take one of my Multi Asset Funds
The worst performing one so far

Royal London Sustainable Div C Acc

Its.currently 9.2% down in value, I guess this loss will be all equity at this stage, but if its due to bonds, is that because the value for now on some of the bonds have devalued because there are now bonds with better coupon rates?
Thanks for your patience 

This is not really a multi asset fund, not in the way you would describe VLS 60 in any case.
The 60% equity is concentrated in only 46 holdings, which means this is very much a managed fund looking to pick winners.
Like similar funds it was doing pretty well until the last 6 months, since when it has dropped over 12 % .
Also as you have noted for its bond % it is holding mainly corporate bonds, which is not normal for for a VLS60 type product.

It is 100% a multi-asset fund because it uses a mix of different asset types. But, as you pointed out, it uses actively selected individual holdings rather than index funds. Also, VLS has plenty of corporate bonds; without checking the detail, it probably holds about 60% government/40% corporate as that is typical for an aggregate bond index fund.

Thankyou, for checking.
I think it gets 5 crowns in trustnet, and bronze on morningstar, performance seemed pretty good before this year, its down the most in my portfolio at the moment, in ISA and SIPP
Phscologigicaly it feels like a diseased fund :-)
I know I know....early days 😄

I believe aroominyork is referring to VLS, not your Royal London fund, when discussing the mix of bonds. Nothing to suggest your figure of 70% corporate bonds in the RL fund is inaccurate.

It is normal that a fund like your Royal London fund will outperform in rising markets, but underperform in falling markets. It is loaded up with growth stocks and higher risk bonds.

Thanks Masonic, for pointing out my mixup,  thats reassuring about RL
Looks like 27% Corporate  for VLS 60

masonic

Taking the chart above (over at Trustnet) and zooming in on the peak to trough returns from early December, you can see the losses have been almost double, but then looking at the discrete performance figures, even over 12 months rather than 6 months, there isn't much difference, and RL has had a very good prior year (24m-36m). It therefore comes down to risk appetite. Interestingly, both funds had the same peak to trough drop in the Covid crash, and both have near identical returns since then.

ChainsawCharlie

masonic said:

Taking the chart above (over at Trustnet) and zooming in on the peak to trough returns from early December, you can see the losses have been almost double, but then looking at the discrete performance figures, even over 12 months rather than 6 months, there isn't much difference, and RL has had a very good prior year (24m-36m). It therefore comes down to risk appetite. Interestingly, both funds had the same peak to trough drop in the Covid crash, and both have near identical returns since then.

Thanks Masonic, that really does show  a  different performance, I can see  now you point it out how that extra bit of risk adds up, looking forward to better times with that one

Iain_For

ChainsawCharlie said:

Thanks for the link Iain, that paints a pretty bad picture of the pound hey?

The take away from the BOA commentary isn’t so much that the pound may fall relative to the dollar in the short term, but that it may behave more like an emerging market currency, i.e. volatile. Personally, I’m not looking for excess volatility in the part of my portfolio that is supposed to be more defensive so hedge bonds as I do not have the luxury of time I once did!