The latest updates from the FinanceFanatics Investment Portfolio
Another month and another slew of changes have appeared in the FinanceFantics portfolio. I’m well aware I’m not exactly practising what I preach here by making so many changes, but in my mind, I’m merely honing the portfolio to perfection rather than trying to time the markets. I think it’s becoming more and more efficient both with regards to reducing management fees and finding the best funds available for the investment objectives.
As it stands at the moment unless I come into a sizeable chunk of money I won’t be making any more changes for quite some time. However, I’d like to see some investment in UK Gilts through an ETF (I’ve got my eye on iShares UK Gilts ETF), and I’d like another commodity in the portfolio. I’ve got a feeling that silver will appreciate rapidly in the future due its use in industry, especially in the manufacturing of solar energy panels, and I reckon the iShares physical silver ETF PHSP is as good as any.
Anyway, take a look at the list of investments we hold below and leave a comment at the end if you have any opinions.
- Scottish Mortgage Trust (SMT) – SMT remains a high-conviction choice for long-term global equity exposure. The investment approach followed here focuses on identifying high-growth companies and holding them for the very long-term to gain the benefit of compounded growth. These companies will often have been new entrants or disruptors into a region or industry which challenge the business model for the traditional companies. The portfolio turnover tends to be very low and the approach pays no heed to the benchmarks when making investments.
- Henderson Smaller Companies (HSL) – HSL offers investors a growth-biased approach to investment in UK small and mid-sized companies. Despite the UK smaller companies bias, the portfolio derives around 52% of sales from overseas, due to the mid-cap bias. One of the portfolio’s largest holdings in NMC Health illustrates this point well. It provides medical services throughout the UAE, which has organic growth opportunities driven by supportive demographics. Another global story is Accesso, a provider of online/mobile ticketing and queue management services for leisure activities. The management team are active in the IPO market, recently participating in Motorpoint and Joules both of which are more domestically focused businesses.
- Woodford Patient Capital (WPCT) – WPCT is managed by the UK fund superstar Neil Woodford. The trust aims to achieve long-term capital growth through investing in a diversified portfolio consisting predominantly of UK companies, both quoted and unquoted. There is a bias towards healthcare and biotechnology which provides good exposure to those sectors whilst the fee is currently a remarkably low 0.15%. The trust aims to deliver a return in excess of 10% p.a. over the longer term.
- Murray International Trust (MYI) – OUT, iShares Emerging Markets ETF (EMIM) – IN. MYI was originally purchased to add some emerging markets diversification to the portfolio, along with some added security from the fact that it holds 15% of its assets in corporate bonds. However, since I added the corporate bond ETF SLXX to the portfolio, I’ve been wondering if I should lose the 0.78% management fee that MYI has, and just replace it with an emerging markets tracker ETF instead. So that’s exactly what’s happened! EMIM has been specifically chosen for two reasons. Firstly it can be topped up for a low-cost monthly fee at Hargreaves Lansdown, saving regular purchase costs and capital gains tax. Secondly, it has a low 0.25% management fee. In my opinion, emerging markets are too volatile for this to be a core holding, so once it’s value is 7.5% of the entire portfolio, I’m going to stop monthly top-ups and just add to it as and when I feel it’s prudent to.
- Bankers Investment Trust (BNKR) – OUT, British Land REIT – IN. Bankers Investment Trust can be seen as a core holding for many portfolios due to its low management charges (0.5%), and its favourable returns and rising dividends. However, as part of the FinanceFanatics portfolio, it simply had too much overlap with the other funds that are being held. Although Bankers IT provides excellent global geographic diversification, the FF portfolio already has worldwide exposure via Witan and FCS investment trusts. I took the time to look at some of the top 10 holdings in these portfolios and realised that BNKR has many holding that are also held by these funds. In the end, I decided it would be better to replace it with something different entirely, hence the purchase of British Land. BLND has a very healthy yield of 4.34% and adds diversity through UK property. The Company owns, manages, develops and finances a portfolio of commercial properties focused on retail locations around the United Kingdom and London offices, and it creates and operates places for people to work, shop and live in.
- Physical gold ETF (PHGP) – PHGP is designed to offer investors a simple, cost-efficient and secure way to access gold by providing a return equivalent to the movements in the gold spot price, less the management fee. PHGP is backed by physical allocated gold and only metal that conforms with the London Bullion Market Association’s rules can be accepted by the custodian. Each physical bar is segregated, individually identified and allocated. The ETF has low fees of 0.39% and provides excellent portfolio hedging for stock market movements.
- Hansteen Holdings REIT (HSTN) – HSTN is a Real Estate Investment Trust. The Company is engaged in the investment, development, and management of industrial properties across the Netherlands, Germany, Belgium, France and the UK. The trust offers investors exposure to property in areas that would otherwise be difficult to gain access to. In addition to capital growth from the increasing value of these properties, there’s a very healthy rental return which contributes to a very reasonable 4.34% yield.
- iShares Corporate Bonds ETF (SLXX) – This exchange-traded fund is a compelling option to invest in the market of GBP-denominated corporate bonds. The ETF tracks an index that focuses on the larger and more liquid bond issuers. These enjoy a comparatively higher pricing power in the market, which caps yield potential relative to indexes tapping into less-liquid areas of the market. However, by the same token, it is likely to offer a lower-risk profile. GBP-denominated corporate bonds tend to have much longer maturities than their euro-denominated counterparts.
- Finsbury Growth & Income (FGT) – FGT benefits from the stewardship of a seasoned and talented UK equity manager who has demonstrated a consistent approach. The fund managers’ process is differentiated and has proved successful over a number of market cycles. He looks for unique and high-quality companies that offer a high and sustainable return on equity and are also cash-generative. The result is a concentrated portfolio with clear biases relative to peers and the FTSE All-Share Index. Turnover is low, reflecting the managers’ long-term approach and his buy-and-hold style. He only sells out if he no longer considers a company to be good quality.
- City Of London Investment Trust (CTY) – CTY is a long running UK focused Investment Trust which is notable for its low fee of only 0.42%. The prudent and measured approach to portfolio management has resulted in outperformance over most time frames. Since 1991, the fund has returned an annualised 9.3%, some 80 basis points more than the FTSE All-Share and around 190 basis points ahead of the peer group over this period. The fund has quite a low active share score and historical tracking error, suggesting outperformance has been generated through incremental value increases, rather than by sudden price jumps. The focus on well-managed companies with a commitment to their dividends has also enabled the fund to increase its dividend over the last 50 years.
- Witan Investment Trust (WTAN) – WTAN is a very solid choice for investors seeking core global equity exposure. Unusually, the trust uses a multi-manager approach and the key criteria are that each manager must be able to add value to the portfolio through stock-picking and sticking to their investment style. Style drift is closely monitored and deviations challenged. Underperformance is not on its own a reason for changing managers, but an inconsistent investment approach will flag up.
- Fidelity Global Smaller Companies Investment Trust (FCS) – FCS is a very solid choice for investors seeking broad exposure to global smaller companies. The investment approach is sensible, established and well executed. The manager is well versed with the UK smaller companies space over many years, but makes use of pooled investment vehicles for the more specialist and volatile areas (Asia, Emerging Markets and Japan) whilst US and European stocks are selected in-house. The fund has a distinct bias to the UK when compared with its peers; however, that hasn’t detracted from investor returns over the short, medium and longer term. The manager believes that UK smaller companies offer investors access to a variety of sectors, global earnings and good quality companies within a framework of solid corporate governance.
- RIT Capital Partners (RCP) – RCP aims to deliver long-term capital growth while preserving shareholders capital. The trust invests without the constraints of formal benchmarks so that it can deliver increases in capital value in excess of the relevant indices over time. The Trust invests in a widely diversified, international portfolio across a range of asset classes, both quoted and unquoted. RCP invests in unquoted holdings where they offer the prospects for particularly good returns and in specialist funds where they offer specific technical skills or specialist investment expertise.
- Personal Assets Investment Trust (PNL) – OUT. PNL is a strong offering for investors seeking capital preservation and long-term growth. However, I’ve taken another look at the long-term goals for the portfolio and have decided that as it has 20 years to run, it can afford to take on some extra volatility. The portfolio will, therefore, concentrate on shares for the next 10 to 15 years until I look to reduce risk with bonds and large-cap stocks. With that in, mind I’ve now sold PNL and spread its capital across other shares. PNL will probably make another appearance in the portfolio, but not for many years yet.
Investment information was sourced from Morningstar UK.