Saturday, 29 June 2013

Half Year Portfolio Review

I have just had a look at my portfolios - sipp drawdown and ISA - for the 6 months to the end of June.

keep calm and carry on
We have had a bit of a wobble recently around fears over QE and the slowing growth in China.  I imagine a lot of people were thinking the surge since the start of the year was starting to look a little overdone and the correction was therefore on the cards but when it happens it can be quite unsettling.

I suspect the recovery, such as it is, will continue in fits and starts but because there will be such low growth, it probably won’t feel like one.

The FTSE 100 is down -5.6% in June at 6,215 and down just over 3% for the quarter. However, since the start of 2013, the FTSE 100 is up 5.4%  - if we add on another 1.6% for dividends paid, this will give a ballpark figure of 7.0% total return for the half year.

My portfolio is allocated between fixed interest (40%) and equities, which in turn are divided between individual shares and investment trusts.


Over the past 3 months, I have taken the opportunity to take profits on one or two holdings - Aberdeen Asset, IG Group, RPC and this week, DS Smith. As the markets pulled back, I have recycled the proceeds into new holdings in Vanguard All World High Dividend ETF, Finsbury Growth & Income IT and Nat West Bank Preference shares (see recent posts).

Individual shares have been a little mixed, defensives seem to be holding on to gains but cyclicals including commodity related shares are continuing to lose ground - maybe things will turn around during the second half of the year. The better performers were again Reckitt & Benckiser (22.0%), and Unilever (18.6%) and also GlaxoSmithKline (25.9%). On the naughty step were Carillion (-9.0%), BHP Billiton (-19.4%) and BSkyB (-9.0%).

As a result of locking in some gains at the top of the market in May, the shares portfolio is up 8.5% over the past 6 months (slightly better than the investment trusts - which makes a change).

Total income on shares so far is 2.5%.

Investment Trusts

Most of the trusts have lost a little ground in recent weeks but remain in positive territory for the half year under review. The total return to 30th June was 7.2% - the better returns came from smaller companies specialist Aberforth (19.0%), followed by Law Debenture (15.7%), Temple Bar (15.5%), Bankers (15.5%), Edinburgh (13.1%) and Murray Income (13.4%). Losing ground this quarter have been recent addition Aberdeen Asian Income (-11.1%) and fixed income specialist New City High Yield (-4.8%).

Income from the trusts portfolio has been steady at 2.0%.

Fixed Interest

The PIBS and preference shares have all been affected by the problems at the Co-op Bank over the past month. This so called caring, ethical bank which avoided ‘casino banking’ was supposed to be an example of how all banks should be run. It was even promoted by the Government as the preferred bidder for the Lloyds Bank branches so there was due diligence undertaken at the highest level and never any suggestion from the regulator that they had any concerns - makes you wonder sometimes about these so called ‘financial experts’.

Another area of concern was an announcement by the Prudential Regulation Authority last week requiring several banks and building societies, including Nationwide and RBS, to strengthen their balance sheets with further capital. The Nationwide is now considering the issue of new bonds to raise an additional £1bn.

Because of the above concerns, all mutuals - Nationwide, Skipton, Coventry etc. - will need to work harder to reassure investors and institutions that there is no danger of them defaulting on their existing bonds and PIBS. In the meantime prices have fallen and margins have widened however, for the adventurous (or foolish!),  the additional risk premium has offered opportunities to secure yields approaching 10% on some PIBS.

Capital values on my holdings have fallen in recent weeks - around 5% or 6% bringing them down to just below their value at the start of the year. This has been offset by income of 3.5% so, all in all just around breakeven for the six months.

As a whole, the portfolio has advanced 4.9% over the first 6 months of this year including the payment of 2.6% income. Steady if unspectacular (but at least I don’t hold gold which has fallen around 30% in recent months!).

As always, I would be interested to hear how others have done - leave a comment if you keep track of your portfolio.


  1. I have a file of newspaper cuttings about PIBS. Every time I have read through it I've decided that they are too risky for my taste. The file contains a particularly frightening article recounting the story of an elderly couple who thought that PIBS would be a fine, secure substitute for an annuity and plunged about £100k into one of them - not even diversified across different issues or Building Societies. Sometimes you could weep.

    1. Thanks for sharing that story - a cautionary tale indeed and a reminder of the need to maintain a diversified portfolio.

  2. My HYP, consisting of individual shares, is the only investment I own. I don't count my home nor the emergency fund in NS&I indexed linked savings.

    Since 31/12/2012 my HYP capital value has increased by 7.7%. I have not bothered to calculate the % dividend paid, but over the whole year I expect to receive a yield around 1.1% higher than the FTSE.

    On a related topic, I too noticed that investment trusts outperformed individual shares during the recent run up. I don't own any trusts, so I have not spent any time looking in detail. However, I wonder if the outperformance of trusts is due to their gearing and/or discount narrowing. Next time there is a dip in the market I would be interested to see if your share portfolio outperforms your trusts portfolio.

    Anyhow - great blog. I am always pleased to see a DIY investor who walks the walk.


  3. I worked out the divi income. During the first half I received 2.4% income. So total return in the first half was 7.7% + 2.4% = 10.1%.


    1. Brodes,

      Thanks for stopping by and posting your figures - 10% on your shares hyp has done better than my shares.

      As you say ITs have outperformed shares - it is something I have been trying to figure out recently - gearing, discount to NAV and the writing of options will have some bearing for sure.

      The equivalent to UK hyp shares from my IT portfolio would be City of London (11.1% gain), Murray Inc (13.4%), Temple bar (15.5%) and Edinburgh (13.2%) - average total return over the past 6m is 13.3% and thats after allowing for the management costs of running the ITs.

      Certainly food for thought!

  4. Perhaps the answer to the Trust outperformance does not rest exclusively in the gearing.

    On 31/12/2012 my HYP was 32% geared using an interest only mortgage on my primary residence at 2.8% interest. Based on the original capital, my HYP 6m capital performance was 11.1%. Income was 2.4% in dividends minus 1.4% bank interest. So total performance based on original capital was 12.1%.

    I don't know where to easily find figures on trust gearing. Based on a brief Google search I came across the figures for CTY.

    City of London (CTY) gearing as of 31/12/2012:
    Philip Remnant, Chairman of the company, stated: "We benefited from gearing during the six months of between 8% and 10% as well as below average exposure to the oil sector, which was a poor performer."

    So my HYP made a mere 1% more than the CTY managers, but I used substantially more gearing. Their stock picking must be better.

    Does anyone have to hand the gearing figures for Murray Inc, Temple Bar, and Edinburgh?

  5. Gearing percentages can be found on the aic website - here's a link