Portfolio Volatility Spreadsheet

munk

jon3001 wrote: »

Yes - it's a unit trust:
http://www.h-l.co.uk/fund_research/security_details/sedol/B11V7T6.hl

I does seem an interesting fund. Do the managers market it for cautious investors as HL seem to do?

They're rather careful not to market it explicitly for cautious investors, more a fund that gives absolute returns in all market conditions - though it's not really been fully tested in an up market since it only started a couple of years ago as an institutional only fund (retail shareclass came in 6-12 months back?).

I see they have a large cash position (79%) which presumably is collateral against their short positions and other derivates (otherwise they probably wouldn't be able to make such a high return: 16% this past year). Is there any risk of this going spectacularly wrong and the fund melting down into nothing!? :eek:

I can't comment on the specifics, can only point you to the info on the ML/Blackrock site:

• UK Absolute Alpha

They do provide an example of a trading pair, although the information is not surprisingly rather 'high level'. When reading that trading analysis article I linked to above though I did think this must be the kind of analysis Blackrock perform on their various 'best idea' pairs of long/short positions to ascertain the suitability of the pair for the trade and the likelihood of success.

Initially I was extremely sceptical about this fund because of it's primary use of derivatives to produce a return - as such I really only dipped my toe in initially by including this fund as part of a highly volatile portfolio. However over time (well, 6 months now anyway) the volatility of the fund has proven to be exceptionally low. It's quite curious how on a large number of days the price will move by exactly either 0.09% or 0.26%, almost too often to be a coincidence... whether this is a result of the trading strategy they employ ... who knows ... or maybe I'm just watching the price far too closely

Ack I really keep meaning to look at the price data for the fund over the last year or so, I managed to obtain it from them a while back but haven't gotten around to looking at it other than to check some creation prices for purchases.

As I said above I'm keeping a very keen eye on this fund's performance and will be looking to move to cash perhaps if it does start to falter. Touch wood though over the last 3-6 months the daily movement has never been more than perhaps 0.5% or so(?) and the general trend is upward, so all good!

I keep referring people to the Bloomberg chart for this fund to look at the daily price movements - if you toggle the 'rate of change' button on for the chart at bloomberg you can see how low the volatility is. The fund had a rocky few months early in it's inception (although the pricing points aren't daily through that period so perhaps it wasn't fully trading to the public at that point?), but since Apr 2007 the performance has been fairly steady.

Will be interesting to see how it performs in a bull market.

FATHEROFTWO_2

MUNK

Just out of curiosity do you have any of my ALL STAR PORTFOLIO funds in your portfolio ?

cepheus

It's a long time since I have invested in a Unit trust. Is there a way around the 5% bid offer on this fund? Is this only applicable if investing through an IFA?

barak

munk wrote: »

Will be interesting to see how it performs in a bull market.

It won't!

However, it may do well in the current volatile markets where indexes go up and down 1% or 2% or more from day to day. It appears to have increased in value almost every day for the last six weeks. I don't know how many other funds have managed that.

It may not be suitable for everyone, but I have a modest holding

Graeme7777

Hi,

I think that if you invest through a fund supermarket the initial fees can be a lot less than if you buy directly from the management company. The power of bulk-buying....

meester

cepheus wrote: »

It's a long time since I have invested in a Unit trust. Is there a way around the 5% bid offer on this fund? Is this only applicable if investing through an IFA?

HL (www.h-l.co.uk) have a 5% discount, so the bid/offer spread is zero.

meester

Graeme7777 wrote: »

Hi,

I think that if you invest through a fund supermarket the initial fees can be a lot less than if you buy directly from the management company. The power of bulk-buying....

That's not really the reason. Companies that rely on third parties selling their products and paying them commission are always reluctant to discount themselves, because it will annoy their salesmen, who cannot possibly compete. They are dependent on the other distribution channels for their money.

cepheus

meester wrote: »

HL (www.h-l.co.uk) have a 5% discount, so the bid/offer spread is zero.

So this couldn't be purchased through a self select share dealing broker such as selftrade without incurring the spread?

cepheus

I have just phoned Selftrade they claim there is a 1% charge or spread for the Blackrock fund. (edit They are not too sure now!) I am surprised that buying UTs through HL one can effectively avoid any spread at all, unless there is a charge imposed in some other way.

cepheus

Still very confused about this

This morning the Blackrock Alpha fund has a bid offer of 1.22/1.16 my broker is telling me this will be incurred plus any charge (0-5%) the broker will charge (in their case it is 1%). This suggests to me that if you bought and sold this immediately at best you would loose about 5% and 10% at worst. So considering it is a low volatility fund it doesn't seem suitable for anyone except those with a long term view!