Here’s my latest portfolio review showing my returns for 2021 and over the last four years.
It was a topsy-turvy fourth quarter, to say the least. Markets surged in October and for most of November. Then they slid back as fears about the Omicron variant spooked investors. They recovered, fell again, and then recovered once more in the last couple of weeks of December.
The end result was a gain of just under 6% for world markets in the final quarter and an increase of 19% for the year as a whole. If you just look at developed markets then 2021 returns were an even more impressive 23%.
But there was plenty of turbulence beneath the surface. Many high-flying US stocks that set the pace in 2020 peaked as long ago as February 2021 and are down 70-80% since then. Formerly high-flying UK stocks have been hit as well. Boohoo.com was down 65% in 2021 and Ocado dropped 35%.
In short, the events of the last 12 months have reminded us how hard investing can be and the importance of being well-diversified.
I had a decent year, gaining 16.2%, but my portfolio lagged behind global markets in the last three months of the year.
|Vanguard FTSE Global All Cap (fund)||+18.9%||+5.6%||+11.6%|
|Vanguard LifeStrategy 60 (fund)||+9.9%||+3.5%||+7.3%|
|Vanguard UK All-Share Index (fund)||+18.2%||+3.7%||+3.5%|
|FTSE All-Share Equity|
Investment Trust Index
The usual explanatory note: I use the Vanguard global tracker fund as my main benchmark, with a stretch target of beating it by 2-3% per annum over the long term. The more conservative LifeStrategy 60 fund (a global 60% equity/40% bond portfolio), a UK index tracking fund, and an index of UK investment trusts provide additional reference points. All returns are measured in sterling.
Going back to the start of 2018, my annualised return is 11.6% which is exactly the same as a global tracker. I think my performance has been a little less volatile, although I don’t track that aspect particularly closely so I don’t have any fancy numbers to back that statement up.
Of course, I’d like to have been ahead of global markets after four years but I certainly would have accepted a 16% gain at the start of 2021. What’s more, a long-term annual return of 11.6% should be more than adequate for my retirement requirements.
It was a negative year for bonds, which fell around 5%, and this has held back the LifeStrategy 60 fund I use as a proxy for a 60/40 benchmark. But up 10% is not to be sniffed at either and I still think there’s merit in using this as another reference point for my performance.
Looking at the major world markets, there was quite a wide range of returns. It was another strong year for the US which rose some 28%. India and Russia made similar gains with both Europe and the UK up around 17-18%. Japan came in with a 4% gain while both Brazil and China fell by around 20%. All these returns are in sterling rather than local currencies.
Talking of sterling, it started and ended the year at $1.35 although it was a little higher for most of the year. The pound strengthened against the euro during 2021, going from €1.11 to €1.19.
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Earlier this year, I sold out of Caledonia Investments, which I had held for about a decade. Most of the proceeds went into Keystone Positive Change and the three biotech/healthcare trusts I own. I never like to look back at such things but Caledonia has actually performed very well since we parted company. I still reckon this will be a sensible move over the long term but there’s no denying that my timing on this switch was rather unfortunate!
I trimmed my position in RIT Capital Partners in March to realise some capital gains. I’ve held this trust since 1996 and although I built up my holding over many years this was the first time I had sold any. The proceeds were used to top up my position in Vanguard All-World ETF. I’ve reinvested some dividends in this ETF over the past year as well. I also topped up Bluefield Solar Income a couple of times this year as its premium narrowed quite a bit.
In the last quarter of the year, Acorn Income finally completed its wind-up process and I elected to take the cash on offer rather than roll over the proceeds into another fund run by the same management team. I reinvested that money into Smithson, BlackRock Smaller Companies, Henderson Smaller Companies, Keystone Positive Change, and the three biotech/healthcare trusts.
In the third quarter, I took a small position in KR1, a crypto investment firm listed on the Aquis Stock Exchange. I’ve topped up a few times since but it’s still a small position of less than 1%. I’m sitting on a loss of around 30% on that at the moment but I’m not too concerned about that as I accept it’s going to be extremely volatile and it’s very early days.
KR1 only publishes an updated net asset value every six months but I reckon it’s probably gone from a 10% premium to a near-20% discount over the time I have been holding, so I may add to it further in the coming months.
My portfolio turnover for the year, based on the sale proceeds of Caledonia, RIT, and Acorn is probably in the region of 7%. That compares with around 5% in 2019 and 9% in 2020. My preference is for course corrections rather than wholesale changes, so I would expect this number to be below 10% most years.
My performance by holding
Here’s how my individual holdings have performed. For some additional context, I’ve added in the net asset value return and the year-end premium/discount figure as well.
|RIT Capital Partners||+35.1%||+19.4%||1.3%|
|JPMorgan Global Growth & Income||+24.8%||+24.9%||3.6%|
|BlackRock Smaller Companies||+24.0%||+28.5%||-1.9%|
|Gresham House Energy Storage||+23.0%||+16.1%||15.3%|
|Vanguard All-World ETF||+19.4%||–||–|
|Henderson Smaller Companies||+19.1%||+25.8%||-10.8%|
|Baronsmead Venture Trust||+16.6%||+11.4%||-3.9%|
|Bluefield Solar Income||+1.9%||+7.2%||5.7%|
|Lindsell Train Global||+0.7%||–||–|
|Keystone Positive Change||-4.8%||-5.5%||-0.9%|
HgCapital did the business for me once again and it jumped a further 5% on the first day of trading in 2022. My position size here is getting a little large once again so it may be a candidate for a trim at some point. I’ve done that once before and ended up regretting it, so it’s not something I plan to rush into.
It was pleasing to see RIT Capital Partners do well after a few years of lacklustre performance. The narrowing of its discount helped a lot, of course. I might trim it again at some point to realise some more taxable gains.
Many UK small-cap trusts had a good year with BlackRock Smaller and Henderson Smaller boosting my returns even though their discounts widened. Acorn Income increased some 30% for the year before it wound itself up and even Baronsmead Venture Trust put in a good showing.
Fundsmith, Smithson, and JPMorgan Global Growth & Income were solid although they were clustered around my Vanguard global tracker. The JPMorgan fund is in the process of merging with Scottish Investment Trust which should double its size and reduce its charges as the performance fee element is to be scrapped. I’m also more comfortable with Fundsmith’s succession plans after the annual meeting presentation they did back in the Spring.
Keystone had a difficult year although its net asset value performance since Baillie Gifford took over in February has actually been quite similar to Scottish Mortgage and Monks and better than Baillie Gifford US Growth and Edinburgh Worldwide. So my theory is that it was Baillie Gifford type companies drifting out of favour rather than anything unique to Keystone. I might add a little bit more to this position over the coming year.
Lindsell Train Global has also struggled with its style of investing having similar issues to that of Baillie Gifford, although Lindsell Train tends to invest in much more mature companies. This is one of my biggest positions so it has been a pretty big drag on my overall performance this past year. It’s the fifth year it’s underperformed its benchmark out of eleven, but the previous largest underperformance was 4.4% whereas 2021 will be in the region 20% so it was comfortably the worst relative year it has had to date.
I still like the Lindsell Train approach (concentrated portfolio, low turnover, high-quality companies) but it’s a situation I am starting to watch a little more closely. I know a lot of investors have lost patience with Lindsell Train, though, believing that their reluctance to sell in seemingly any circumstance is a step too far.
My three renewable/infrastructure trusts had a mixed performance in share price terms although their net asset value performance was much more closely bunched. Gresham House Energy Storage saw its premium widen as investors seemingly got more comfortable with this new sub-sector of the renewables industry while Bluefield saw its premium, previously one of the highest in the sector, narrow considerably. I’m happy to let these three plod along for now. They only account for about 5% of my portfolio but they seem to add a little stability. They can be complex beasts to analyse though.
It wasn’t a great year for the three trusts I own in the biotechnology and healthcare sector. The two most slanted towards biotech, Worldwide Healthcare and International Biotechnology, struggled more than BB Healthcare. I’ve spent the last year and a half building these positions up and I’m happy to keep holding for the long term and I wouldn’t be surprised if they did quite well over the next few years.
KR1, my foray into crypto, had an outstanding start to 2021 so even though it’s fallen back while I’ve been holding it, its share price still nearly quadrupled last year.
In terms of premiums and discounts, I had a roughly equal mix of positive and negative movements. Across all the trusts I hold, the average premium is around 1% so that’s a little higher than the industry as a whole. Gresham and HICL are the two largest premiums in my portfolio right now so they might be a little vulnerable but I think both trusts are fairly conservative with their valuations so I am not overly concerned.
Overall, I’m pretty comfortable with the shape of my portfolio at the moment. There’s a little tidying up of taxable positions I’m hoping to do over the next few years, but even after that, I would expect my portfolio turnover to be a little lower than it’s been recently. Higher inflation seems to be top of many people’s worry lists at the moment but I’m pretty relaxed about that as well given the nature of the underlying companies I’m invested in.
Read more at Money Makers
I’ve been busy writing fund profiles over at Money Makers these past few months with recent pieces covering the likes of Scottish Mortgage, Mid Wynd, Tritax Big Box, HICL Infrastructure, Worldwide Healthcare, and Impact Healthcare REIT. Next up will be Finsbury Growth & Income giving me another chance to look at Lindsell Train’s investing approach.
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Please note that I may own some of the investments mentioned above -- you can see my current holdings on my portfolio page.
Nothing on this website should be regarded as a buy or sell recommendation as I'm just a random person writing a blog in his spare time and I am not authorised to give financial advice. Always do your own research and seek financial advice if necessary!
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