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  1. #1

    Options to improve this portfolio?

    I've got a couple of months to mull over options before my SIPP is transferred from my DFM. There's no rush to make immediate wholesale changes/purchases as the portfolio as it stands is being transferred in-specie.

    At the moment it is just over 70% equities with half of that in 5 or 6 UK Equity Income funds so there is a little bit more concentration than i'd like. Overall the portfolio is a little too on the aggressive side for my liking so i've put together a mix that is lighter on equities but over the last 5 years has beaten the WM portfolio with a marked reduction in volatility.

  2. #2
    I think it looks good .. Not a million miles from Hawksmoor Vanbrugh – which has performed well, despite the fee and defensive positioning:

    I'd consider GAM Star Credit Opps *may* fall with the stocks – you can almost consider those perpetual bonds preference shares .. So maybe that gives you closer to 60% in terms of market risk exposure.

    Then the Polar Capital fund, and the long exposure in the long/short funds, probably takes you to about 66-68% exposure .. If you may be retiring in 7-10 years, that *might* be higher than I'd go .. I'm neurotic, so I probably really would try to get my long market exposure to no more than 50%.

    I'd also wonder about UK Gov Bonds .. Very tricky, as they should be good diversifiers .. But is there any chance of making a positive return from here? I'd perhaps be tempted by a Gold ETF and Short-Duration Inflation-Linked bonds (as a disaster hedge, and in case we do find ourselves in a repeat of the 70s stagflation)

  3. #3
    Thanks KL, it's interesting how the constituent parts of a fund can move it out of the asset 'box' it may appear ostensibly to be in.

    I don't want to be up at 70% equities so i'll have a look at re-jigging to move the allocations.

  4. #4
    I think asset allocation is such a tough thing to get right at the moment too – I'd say particularly over 10-15 years, as we're in uncharted territory with valuations, and who knows how long this rally can run? (I'm getting so used to it, I can imagine it running another 15 years.)

    Warren Buffett is currently 55% stocks, 35% cash and 10% bonds .. So as a value investor, he's quite high in cash.

    Yale and the college endowments tend to have up to 25-30% in go-anywhere Hedge Funds (the kind of thing RIT Capital Partners use to diversify their market exposure) – and not unlike the Henderson and OM Absolute Return funds – so they're letting more active managers react to market events as they happen.

    Ray Dalio thinks the gradual unwinding of liquidity from markets (which has lifted everything thus far) is likely to pull the rug out from under asset valuations at *some* point .. I think we all expect that .. But there's also skepticism that we'll be able to unwind it – Japan's been doing this for decades.

    My rationale for 50% market exposure is that it's a coin toss .. I'm probably a fair bit over that at the moment, but will draw it back if things sour .. And most of my capital preservation is in cash, just because it's difficult to find much else that's working at the moment .. And there is always a chance inflation comes along and takes us by surprise, in which case we might all be scrambling to buy up gold and inflation-linked bonds (more sensible investors – like Ruffer and Troy Trojan – tend to hold them anyway, but again, it's a hefty bet on a certain outcome .. that maybe is inevitable, but maybe isn't?)

  5. #5
    Just a question - How do you know Warren Buffett is currently - 55% stocks, 35% cash and 10% bonds ?

    I heard he wants his bequest to his wife to be invested -
    - 90% S&P Tracker and 10% short dated US Bonds

    This seems very adventurous to me given that I believe his wife is 71 but we don't know what proportion of her total assets this is ?

  6. #6
    KL- I just wondered how you know Warren Buffett is currently 55% stocks, 35% cash and 10% bonds. I am sure a couple of years ago Buffet advocated a portfolio that was 90% S&P Tracker and 10% Short Dated Bonds ?


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