Investment Trusts

ColdIron

Rollinghome said:

Henderson Far East Income (HFEL) is another example that pays a tempting dividend of 10.66% pa. But it's total returns, income + capital, are by far the worst in the sector.  Despite that, the share price sits at a 4.33% premium to net asset value (NAV), the only one in the sector not at a discount, and has the highest ongoing charge.

HFEL has a place in a dedicated unwrapped income portfolio. It's my worst performer by far using just a share price metric. -32% since 2016. That capital loss can prove handy to offset gains now that the Annual Exempt Amount is so low. My capital loss has been exceeded by the dividends by some 50%

It's not one for the OP or a core part of any portfolio but is a useful adjunct to achieve particular objectives so for me HFEL is a keeper

Horses for courses, tools for the job and all that good stuff

leosayer

dunstonh said:

I am looking for a fund that will pay out income. Most Equity income funds only payout twice a year, but it seems investment trusts pay out 6 times per year, which would be better for me.

Why would it be better?

The modern way of doing things is to hold a cash float.  Distributions go into the cash float and a fixed monthly draw is taken (that equates to the anticipated yield).    Many don't even care much about yield nowadays as its been an underperforming strategy post credit crunch and total return has been king.

This mirrors my thoughts.

I can't think of reason why dividend payout frequency should to be the overriding selection criteria for an equity fund.

Far more important questions concern the required investment strategy, hedging requirements and fees.

Rollinghome

ColdIron said:

Rollinghome said:

Henderson Far East Income (HFEL) is another example that pays a tempting dividend of 10.66% pa. But it's total returns, income + capital, are by far the worst in the sector.  Despite that, the share price sits at a 4.33% premium to net asset value (NAV), the only one in the sector not at a discount, and has the highest ongoing charge.

HFEL has a place in a dedicated unwrapped income portfolio. It's my worst performer by far using just a share price metric. -32% since 2016. That capital loss can prove handy to offset gains now that the Annual Exempt Amount is so low. My capital loss has been exceeded by the dividends by some 50%

It's not one for the OP or a core part of any portfolio but is a useful adjunct to achieve particular objectives so for me HEFL is a keeper

Horses for courses, tools for the job and all that good stuff

Interesting.  I've spoken to others who hold it for similar reasons, but have never looked hard at the numbers Would be very interested in how that all pans out for you personally taking everything in account, including tax paid on the dividends and the effect of the poor returns, the premium, the cost of reinvestment, unless it's all required for income, etc. And sitting on a 4.43% premium.

On the face of it, the total return figure looks dismal: TR  17.83% over 5 yrs (against sector average of 38.29 and the better performers doing over 50%) TR 87.02% over 10 yrs (sector average 188.32% and Invesco doing 238.45%, i.e. similar to a global tracker).

I was recently told by the former chairman of another IT in the sector that their research showed 63% of dividends are reinvested with all the costs involved. (I'd add, that I don't invest for income, and though retired, still increasing investments - which could affect the numbers for me.)

ColdIron

As I say it's a dedicated income portfolio using ITs. Nothing is reinvested. I aim for 4%-5% but have two or three above this, e.g. BIPS/HHI for much the same reason. Total return is below par but that's not their job, it's not the job of the rest of the GIA either. I have portfolios for growth/WP in separate wrapped accounts using the bucketing/waterfall strategy

I don't Bed & ISA/SIPP it either, those contributions comes from cash, 8.75%/10.75% is better than 20%/22%. Tax on ITs is much easier than open ended funds or ETFs

I'll probably always have a need for income so have no plans to sell it (beyond annual CGT management) therefore I don't worry too much about share price/gains, that's a problem for further down the road. It could even become an SEP (someone else's problem)

poseidon1

Richmmm said:

I am looking for a fund that will pay out income. Most Equity income funds only payout twice a year, but it seems investment trusts pay out 6 times per year, which would be better for me.

However, I have always thought that ITs are more expensive due to the extra layer of management. Am I thinking wrong?

Can anyone point me towards a site that compares ITs? vs UTs for income?

Rich

Returning to your comparison request, the article below from Fidelity may provide useful  headline points -

https://www.fidelity.co.uk/markets-insights/investing-ideas/investment-trusts/funds-vs-investment-trusts-4-key-differences-explained/

Rollinghome

ColdIron said:

As I say it's a dedicated income portfolio using ITs. Nothing is reinvested. I aim for 4%-5% but have two or three above this, e.g. BIPS/HHI for much the same reason. Total return is below par but that's not their job, it's not the job of the rest of the GIA either. I have portfolios for growth/WP in separate wrapped accounts using the bucketing/waterfall strategy

I don't Bed & ISA/SIPP it either, those contributions comes from cash, 8.75%/10.75% is better than 20%/22%. Tax on ITs is much easier than open ended funds or ETFs

I'll probably always have a need for income so have no plans to sell it (beyond annual CGT management) therefore I don't worry too much about share price/gains, that's a problem for further down the road. It could even become an SEP (someone else's problem)

Ok, thanks.  Certainly an interesting approach.  As you say, horses for courses.

Albermarle

leosayer said:

dunstonh said:

I am looking for a fund that will pay out income. Most Equity income funds only payout twice a year, but it seems investment trusts pay out 6 times per year, which would be better for me.

Why would it be better?

The modern way of doing things is to hold a cash float.  Distributions go into the cash float and a fixed monthly draw is taken (that equates to the anticipated yield).    Many don't even care much about yield nowadays as its been an underperforming strategy post credit crunch and total return has been king.

This mirrors my thoughts.

I can't think of reason why dividend payout frequency should to be the overriding selection criteria for an equity fund.

Far more important questions concern the required investment strategy, hedging requirements and fees.

Although when buying Investment trusts, you have to give some thought to the discount or premium to NAV.
AIUI , the usual advice is not to buy trusts with a significant premium.
On the other side opportunists may look for ones with big discounts.
So compared to buying ETFs or OEICs, there is more of a trading risk/gamble.