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  • FIRST POST
    • talexuser
    • By talexuser 9th Jul 18, 2:40 PM
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    talexuser
    Defensive suggestions.
    • #1
    • 9th Jul 18, 2:40 PM
    Defensive suggestions. 9th Jul 18 at 2:40 PM
    I've had to rejig the ISA and share account due to an inheritance, have no tax free wrappers left, and have run out of ideas for relatively defensive picks.

    The high income funds are now in the ISA, mostly Global and UK Income with a chunk of Troy and want one other defensive. At the moment looking at Caledonia for the discount with a 2% yield but the OCF of 1.22 looks very high compared to others.

    Outside the ISA I have a bunch of Vanguard ETFs across the world, with global ITs, and for defensive Personal Assets, RIT Capital and Troy. Since Troy is now in the ISA I want to sell the share account Troy and change to something like Capital Gearing.

    Ruffer has a high OCF of 1.16 and has gone nowhere recently, and Lowland looks half decent but all UK.

    I'm not so bearish as to want bonds, since have enough time to weather whatever comes next, but after a lot of googling and reading articles am getting brain sprain looking at fact sheets.

    Any ideas welcome, thanks.
Page 1
    • Alexland
    • By Alexland 9th Jul 18, 8:05 PM
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    Alexland
    • #2
    • 9th Jul 18, 8:05 PM
    • #2
    • 9th Jul 18, 8:05 PM
    Maybe a bit in cash to take advantage of future opportunities?
    • Thrugelmir
    • By Thrugelmir 9th Jul 18, 8:31 PM
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    Thrugelmir
    • #3
    • 9th Jul 18, 8:31 PM
    • #3
    • 9th Jul 18, 8:31 PM
    With little to no yield. Holding stocks outside an ISA isn't all bad. Just make use of your CGT allowances appropriately.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • grey gym sock
    • By grey gym sock 9th Jul 18, 9:48 PM
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    grey gym sock
    • #4
    • 9th Jul 18, 9:48 PM
    • #4
    • 9th Jul 18, 9:48 PM
    if you're too bearish to put it in shares, but too bullish to put it in cash/bonds, then the obvious answer is a mixture of shares and cash/bonds.

    that is basically what must of those "wealth preservation" funds do.

    investing doesn't have to be complicated

    (well, i realise when people know nothing about it, it looks complex to them. but when you do know a bit about it, there is no requirement to keep making it more complex.)
    • talexuser
    • By talexuser 9th Jul 18, 11:10 PM
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    talexuser
    • #5
    • 9th Jul 18, 11:10 PM
    • #5
    • 9th Jul 18, 11:10 PM
    Yes. thanks there should be some cash for a buying opportunity, and learnt here about section 104 and purchase cost averaging so sold ~11ks worth of gains the past couple of years to rebase, thinking the sacrifice of a little bit of stamp duty cost is well worth it in the long term.

    Thinking more about other relatively defensive fund selections I should investigate?
    • bostonerimus
    • By bostonerimus 10th Jul 18, 12:08 AM
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    bostonerimus
    • #6
    • 10th Jul 18, 12:08 AM
    • #6
    • 10th Jul 18, 12:08 AM
    The best form of defense is attack......if you "park the bus", as Mourinho says, you need to have a plan that works with the modest returns you might expect.

    I would concentrate on asset allocation rather than specific funds...if you are looking at a defensive portfolio with low risk and return then controlling costs becomes even more important.
    Misanthrope in search of similar for mutual loathing
    • eskbanker
    • By eskbanker 10th Jul 18, 12:43 AM
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    eskbanker
    • #7
    • 10th Jul 18, 12:43 AM
    • #7
    • 10th Jul 18, 12:43 AM
    Defensive suggestions.
    Originally posted by talexuser
    Well, three mobile centre-halves with wing-backs pushing on seems to be working out OK at the moment, but if you really don't fancy the traditional flat back four you could always try deploying a sweeper....
    • bowlhead99
    • By bowlhead99 10th Jul 18, 6:52 AM
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    bowlhead99
    • #8
    • 10th Jul 18, 6:52 AM
    • #8
    • 10th Jul 18, 6:52 AM
    Whatever you put into non-equities will probably underperform what you put into rquities, given long enough, so it's understandable that you are relucant to go and buy some outright non-equities funds. But if you refuse to buy non-equities funds while wanting to be cushioned against a downside, I suppose that generally means getting funds which hold a mix of asset classes, whether you prefer the investing style of RIT or Ruffer or PA or Troy or some of those risk-targted index-based funds-of-funds from the likes of HSBC or L&G..
    Ruffer has a high OCF of 1.16 and has gone nowhere recently
    Originally posted by talexuser
    Are you looking for something that goes somewhere when equity markets are going up but then doesn't drop when they drop? Sounds like a case of wanting to have your cake and eat it too.

    Maybe you would be better looking for an 'absolute return' fund which aims to get a positive return whatever markets are doing via strategies which are market neutral or at least not too correlated with either equities or bonds.. But cynics would say they subsist on luck as much as manager skill and if you are benchmarking them against an unfettered long-only fund you would probably think they don't go up as fast as your equities when your equities are going up, and then be disappointed, even though they are designed for s different role in your portfolio..
    I'm not so bearish as to want bonds
    Yet if you look at something like Capital Gearing which you are considering buying, or Personal Assets which you already bought, they both have 40%+ in bonds. I guess you are saying you actually don't mind bonds and just want a lower risk, less adventurous fund where the manager picks the split between equities and debt so that you don't have to see yorseld buying bonds, even though you are of course taking exposure to bonds rather than letting it be another 100% equities fund which wouldn't be very defensive.

    As grey gymsock mentions, if you don't want equities because of risk of dropping in an equities crash and you don't want bonds because of risk of dropping in a bond crash and because of long term underperformance vs equities, then one solution is just to have a bit of both, which you could buy yourself independently (by getting a long equities fund and a long bond fund and smushing the two together into the gap in your portfolio and periodically rebalancing).

    That's assuming you have exhausted other options which might be considered to sit in between, or be less correlated to one or the other- e.g. property, infrastructure, hedge/absolute return. What do you currently have in that space?

    You mention holding RIT Capital Partners. They have a mixture of public equities, private equities, holdings of debt/credit and absolute return funds, real assets such as property and gold, etc. Conceptually it's a reasonably diversified portfolio - due to coverage of a bunch of asset classes - but not without its risks and concentrations in certain areas. Really, for your portfolio as a whole - assuming you don't know what's coming next - you should aim to have exposure to a bunch of asset classes and sectors and regions and then just do as you suggest: sit back and 'weather the storms'.

    You can do that through specialist funds for single asset classes or by using funds which have a generally defensive positioning when markets are relatively high. The latter is no doubt easier and the profile of returns is maybe more acceptable as if there's more than one asset class in the fund you will get a blended result closer to the averages of different parts of the market rather than the somewhat stark result of only one part of the market. But of course if you ar going to trust someone to construct you a defensive corner of your portfolio using a mix of asset classes, you have to decide who to trust on how to do ir -e.g. the Troy team, the Ruffer team, etc etc.

    If you keep on asking for recommendations and end up buying into everyone in the space, you will get a blend of the best ideas and the worst ideas and it might have been better to just go with some cheaper solution rather than paying the 1% or whatever to get everyone's ideas and end up with a big blend of everything. That leads people to suggest indexes as an option though capital preservation is IMHO not something you do by sitting on an index and riding it up and down. There are of course multi-asset funds built as a blend of indexes as a cheap n cheerful way to lower your exposure to global equities..
    Last edited by bowlhead99; 10-07-2018 at 7:05 AM.
    • mollycat
    • By mollycat 10th Jul 18, 8:08 AM
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    mollycat
    • #9
    • 10th Jul 18, 8:08 AM
    • #9
    • 10th Jul 18, 8:08 AM
    Sorry to but in/be impertinent

    @Bowlhead....do you mind if I ask; do you still hold M&G Optimal Income.

    Would a strategic bond fund be an appropriate way to build a longer term defensive side to a portion of one's portfolio?
    • DiggerUK
    • By DiggerUK 10th Jul 18, 9:54 AM
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    DiggerUK
    Defence with real security
    .......I'm not so bearish as to want bonds, since have enough time to weather whatever comes next........
    Originally posted by talexuser
    This whole thread has avoided gold, not surprising given the long history of prejudice, so if you are prepared for an extended timeframe and have the patience to "weather whatever" then why not go for the traditional safe haven.

    Dividends on cash are inflation negative, and equities are nothing to really shout about either..._
    I am not now, nor have I ever been, a Financial Adviser.
    'Forward to the British Spring' 'Viva Wikileaks'
    • talexuser
    • By talexuser 10th Jul 18, 12:27 PM
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    talexuser
    As usual Bowl has hit the nail. I do of course realise that bonds are included in some funds, and have no commercial property so F&C is on my list. I have to be honest and admit I do not pay enough attention to asset allocation as described many times here. For the first 15 or so years of Peps and Isas just chose the best performing, long term manager record, funds - only sold after giving them a good chance to recover (minimum 3 years plus) and measured them against the nearest comparable tracker I would have chosen in their stead. Totally unscientific but maybe a little like the new "bonkers" strategy of changing to the top every 6 months combined with a Buffet "buy and hold" strategy . But that was my choice if I'm happy to accept a punt, albeit a well researched one.
    Went into trackers in the last five or so years because running out of active funds that outperform long term to consider, and needed to start spreading classes around as per advice here.

    Gave up on bond funds after a decade or so because felt could wait out any equity crashes without having to sell - I had M&G Optimal Income for many years for example.

    So will sit out the next crash without selling, just want to have some 20% fallers rather than all 40% fallers, at the moment defensive about 10% of the total, another fund would make it about 12%, so not outrageously bearish.

    I suppose we would all like to have the cake left over as well too if possible. Maybe I should just get back into Artemis Strategic Assets (gave Littlewood 4 years before selling) because he has been positioned for the inevitable since starting at the expense of performance.
    • bowlhead99
    • By bowlhead99 10th Jul 18, 9:49 PM
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    bowlhead99
    @Bowlhead....do you mind if I ask; do you still hold M&G Optimal Income.
    Originally posted by mollycat
    Yes, still have it, as do other members of the family. It's not a bad fund IMO.


    Would a strategic bond fund be an appropriate way to build a longer term defensive side to a portion of one's portfolio?
    Anything that makes money while not being fully correlated with equities is of use when making your portfolio more defensive. If the bonds you use are not 'strategic' but instead of some particular type of your choosing, you have to decide in what proportions to hold them, which can be a headache.
    Maybe I should just get back into Artemis Strategic Assets (gave Littlewood 4 years before selling) because he has been positioned for the inevitable since starting at the expense of performance.
    Originally posted by talexuser
    My Mum has that one and I'm happy with his short stance on certain government bonds (she also has Optimal Income, which is long bonds, but I don't see that as contradictory.
    • A_T
    • By A_T 10th Jul 18, 10:34 PM
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    A_T
    As usual Bowl has hit the nail. I do of course realise that bonds are included in some funds, and have no commercial property so F&C is on my list. I have to be honest and admit I do not pay enough attention to asset allocation as described many times here. For the first 15 or so years of Peps and Isas just chose the best performing, long term manager record, funds - only sold after giving them a good chance to recover (minimum 3 years plus) and measured them against the nearest comparable tracker I would have chosen in their stead. Totally unscientific but maybe a little like the new "bonkers" strategy of changing to the top every 6 months combined with a Buffet "buy and hold" strategy . But that was my choice if I'm happy to accept a punt, albeit a well researched one.
    Went into trackers in the last five or so years because running out of active funds that outperform long term to consider, and needed to start spreading classes around as per advice here.

    Gave up on bond funds after a decade or so because felt could wait out any equity crashes without having to sell - I had M&G Optimal Income for many years for example.

    So will sit out the next crash without selling, just want to have some 20% fallers rather than all 40% fallers, at the moment defensive about 10% of the total, another fund would make it about 12%, so not outrageously bearish.

    I suppose we would all like to have the cake left over as well too if possible. Maybe I should just get back into Artemis Strategic Assets (gave Littlewood 4 years before selling) because he has been positioned for the inevitable since starting at the expense of performance.
    Originally posted by talexuser
    why not hold something that is likely to go up when equities crash i.e. UK or US government bonds? look up Lars Kroijer and see what he has to say.

    another option is a Harry Browne Permanent Portfolio: 25% Gold, 25% Equities, 25% Long Dated Gilts, 25% Cash. Over long periods of time this portfolio has matched 100% equities but it's hard to stick to as some people are unable to resist tinkering especially during an equity bull market.
    • bostonerimus
    • By bostonerimus 11th Jul 18, 2:24 AM
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    bostonerimus
    Defensive funds and income ITs etc are nothing magic. They just hold a range of investments that they think will fulfill their strategic objectives and then pay you dividends and there might be some price appreciation too. They might have access to derivatives and private equity etc, but basically you are just buying a managed asset allocation. You can do something similar with a few regular funds (maybe passive, maybe active) and you should be able to save some money.

    PS I hate the Harry Browne PP.....too much cash, to much long bonds and too much gold for my liking
    Misanthrope in search of similar for mutual loathing
    • A_T
    • By A_T 11th Jul 18, 7:48 AM
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    A_T
    Defensive funds and income ITs etc are nothing magic. They just hold a range of investments that they think will fulfill their strategic objectives and then pay you dividends and there might be some price appreciation too. They might have access to derivatives and private equity etc, but basically you are just buying a managed asset allocation. You can do something similar with a few regular funds (maybe passive, maybe active) and you should be able to save some money.

    PS I hate the Harry Browne PP.....too much cash, to much long bonds and too much gold for my liking
    Originally posted by bostonerimus
    historically it holds up as well as a 60/40 - but with much less volatility.
    • DiggerUK
    • By DiggerUK 11th Jul 18, 10:28 AM
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    DiggerUK
    Why so rigid
    .......another option is a Harry Browne Permanent Portfolio: 25% Gold, 25% Equities, 25% Long Dated Gilts, 25% Cash.........
    Originally posted by A_T
    Gilts are being hit by debasement, and cash by deflation. If that is your portfolio, what is to stop you rebalancing in to gold and equities. If so, what ratio would you propose.
    The liquidity of cash and bonds is instant both in and out, so hardly a perilous "tinkering" to undertake..._
    I am not now, nor have I ever been, a Financial Adviser.
    'Forward to the British Spring' 'Viva Wikileaks'
    • digannio
    • By digannio 11th Jul 18, 11:27 AM
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    digannio
    If you are at all tempted by the defensive absolute/targeted return funds I would be very careful. The sector is packed with underperforming funds failing to get anywhere near their stated targets. If you look at one of the big players, Newton Real Return, you could have earned more in carefully chosen cash accounts over the past five years than its cumulative performance of 12.4%, similarly with another biggie, Invesco Perpetual Global Targeted Returns, if you consider its three-year performance (5.6%). Standard Life's giant Gars fund has a five-year cumulative performance of 5.9%.
    Quite a number of the funds seem to offer very little of the upside during a robust rising market but still capture the losses of a falling market. And many are not very easy to understand.
    • bostonerimus
    • By bostonerimus 11th Jul 18, 11:56 AM
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    bostonerimus
    historically it holds up as well as a 60/40 - but with much less volatility.
    Originally posted by A_T
    A quick look at the 10 year statistics of 60/40 vs PP shows PP hA lower StDev, but the CAGR for US 60/40 is 7.15% and PP is 6.03%...it might be different for the UK. I'd be interested to see the numbers.

    What I don't like about PP (or a domestic 60/40) is the lack of global diversity as well as too much cash etc
    Misanthrope in search of similar for mutual loathing
    • Prism
    • By Prism 11th Jul 18, 1:10 PM
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    Prism
    What the Harry Browne portfolio tells me is that it's not particularly great during the saving part of your working life but might be a worthwhile consideration later on when you are starting to rely on your savings during retirement. Assuming many of us are saving for long terms goals of course
    • AnotherJoe
    • By AnotherJoe 11th Jul 18, 1:36 PM
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    AnotherJoe
    If you are at all tempted by the defensive absolute/targeted return funds I would be very careful. The sector is packed with underperforming funds failing to get anywhere near their stated targets. If you look at one of the big players, Newton Real Return, you could have earned more in carefully chosen cash accounts over the past five years than its cumulative performance of 12.4%, similarly with another biggie, Invesco Perpetual Global Targeted Returns, if you consider its three-year performance (5.6%). Standard Life's giant Gars fund has a five-year cumulative performance of 5.9%.
    Quite a number of the funds seem to offer very little of the upside during a robust rising market but still capture the losses of a falling market. And many are not very easy to understand.
    Originally posted by digannio

    I found exactly that with my foray into this type of fund, PAT and Seneca, both down in a mild up market. Not impressed at all.
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