Here’s my latest portfolio review showing my returns for the first quarter of 2022.
My performance
It’s been a tough period for markets for obvious reasons. Thankfully, we’ve seen some positive developments regarding the war in Ukraine in the last couple of weeks, which seems to have helped share prices rebound from their recent lows. Indeed, the rebound has been very strong so it wouldn’t be a surprise if it tailed off or even reversed.
And of course, interest rates have been increased in both the US and the UK as central banks try to combat the rising rate of inflation, with energy and food prices making things particularly tough for those on lower incomes. Overall, there are headwinds aplenty for pretty much everybody.
I’ve lagged global markets for most of the last quarter, most probably due to my tilt toward quality and growth styles that have suffered more than most in recent months and to a lesser extent because the discounts on many of my trusts have widened out a bit.
| Portfolio / comparators | Q1 2022 | FY 2021 | Annualised return since Jan 2018 |
|---|---|---|---|
| My portfolio | -6.0% | +16.2% | +9.3% |
| Vanguard FTSE Global All Cap (fund) | -2.7% | +18.9% | +10.2% |
| Vanguard LifeStrategy 60 (fund) | -3.6% | +9.9% | +5.9% |
| Vanguard UK All-Share Index (fund) | +1.0% | +18.2% | +3.5% |
| FTSE All-Share Equity Investment Trust Index | -8.7% | +12.8% | +8.7% |
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 using a unitised method for my portfolio that adjusts for any money put in or taken out.
It’s always disappointing to trail the market but I tend not to read much into a single quarter’s numbers. Of a little concern is that, for the first time since posting these figures in 2018, I am lagging global markets by a noticeable margin.
While my portfolio has fallen a little less than global markets during other recent declines, that’s not been the case this time around. Although many of my holdings have held up ok, my positions in Fundsmith, Smithson, Keystone, UK small-cap, and biotech & healthcare trusts are well in the red this year — more on this later.
It’s been a struggle for the LifeStrategy 60 fund with rising interest rates hurting fixed income, but it’s not been a disaster and I’m happy to keep this vehicle in my comparators to highlight what a lower-risk portfolio can generate.
The wider trust sector has fared worse than my portfolio as it’s even more biased towards growth trusts than I am. UK shares, flush with both value and commodity stocks, have held up better than most other developed markets so far this year.
Despite slipping a little relative to my main comparator, I’m not planning any major changes to my portfolio as I remain broadly happy with the mix of trusts I own. I have made a few changes over the last few years as I developed a wider understanding of the sector through writing this blog but I regard that process as largely complete.
I have 18 separate holdings, comfortably within the maximum of 20 that I aim for so that I don’t build up a long tail of relatively meaningless positions that I don’t have enough time to monitor properly. I expect my portfolio turnover for the year will probably be a little below that of the last three years (7% in 2021, 9% in 2020, and 5% in 2019).
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My stretch target of 2-3% annualised outperformance is looking quite ambitious at this point but I’m keeping it for now. For context, my portfolio would need to be between 12-16% higher than it is right now to achieve that. So while that’s not an impossible gap to bridge, it’s definitely challenging!
I continue to use dividend reinvestment and any new money added to my portfolio as an opportunity to tweak my position sizes and take advantage of anything that looks like it’s been treated too harshly.
In short, it’s the same old story. I’m keeping things simple and avoiding making major adjustments based on any macroeconomic or market calls given that I plan to be invested for a long time to come and I am happy to ride things up and down along the way. Your mileage may vary, as they say.
My performance by holding
Here’s how my individual holdings have performed. For additional context, I’ve added in the net asset value return and the premium or discount to NAV.
| Holding | Share price Q1 | Net asset value Q1 | Premium/ (discount) |
|---|---|---|---|
| Gresham House Energy Storage | +8.3% | +1.6% | +24.6% |
| Bluefield Solar Income | +7.8% | +1.7% | +7.2% |
| HgCapital | +4.8% | +0.4% | -0.4% |
| JPMorgan Global G&I | +2.5% | +1.3% | +4.8% |
| KR1 | +1.5% | +13.0% | -26.0% |
| HICL Infrastructure | +0.8% | +1.3% | +14.6% |
| Vanguard All-World ETF | -2.5% | – | – |
| Lindsell Train Global | -3.6% | – | – |
| RIT Capital Partners | -6.6% | -3.3% | -5.0% |
| Bellevue Healthcare | -7.5% | -2.8% | -2.5% |
| Fundsmith Equity | -9.1% | – | – |
| Worldwide Healthcare | -9.2% | -4.2% | -6.0% |
| Baronsmead Venture | -11.0% | -10.6% | -6.9% |
| International Biotechnology | -14.5% | -5.6% | -9.0% |
| Henderson Smaller Companies | -18.6% | -16.9% | -11.9% |
| Smithson | -18.8% | -16.8% | +0.5% |
| Keystone Positive Change | -20.0% | -11.8% | -10.7% |
| BlackRock Smaller Companies | -22.1% | -13.5% | -12.4% |
My three renewable & infrastructure trusts have all done their job over the past three months and JPMorgan Global Growth & Income has held up well, too. Its proposed merger with Scottish Investment Trust has been delayed by a few months but it has continued to enjoy a small premium to NAV.
The premium on Gresham looks very rich at first sight but I am expecting the 2021 year-end NAV (due later this week) to show a decent jump and other recent developments like the latest Capacity Market Auction should push its NAV higher, too.
HgCapital has done surprisingly well given its technology focus. Its latest published NAV is as of 31 December 2021, so the end of March update might cause some indigestion for the share price if there is a reduction in the profit multiples used. The NAV at RIT Capital Partners is also a little behind events so I will be watching its next release for 31 March with interest.
KR1, my crypto plaything, has bounced back very strongly in recent weeks and the discount to NAV, based on my own rough estimate rather than any official figure, has widened significantly. In fact, at the time of writing, it may have even reached 40%. I wasn’t planning to add any more to this position for the time being having got my position size to what feels appropriate given its very high-risk nature. I’d also like to see it adopt some more frequent reporting and/or transfer to a more recognised exchange. But that discount might tempt me into a small nibble.
Lindsell Train Global, Fundsmith Equity, and Smithson are all trailing world markets this year although Lindsell Train Global has held up the best. I might add a little to Smithson, as it’s the smallest of these three positions for me, but I am happy to sit tight on these and ride out any periods when this style of investing drifts out of favour.
I’ve owned the three biotech/healthcare trusts for a couple of years now, adding to them fairly regularly along the way. Both Worldwide and IBT have seen a sizeable discount open up so I will probably take advantage of that. The managers of all these trusts are still very enthusiastic about prospects for the sector — which you would expect them to be of course — but the sell-off we’ve seen does seem like a decent buying opportunity. As a side note, BB Healthcare recently renamed itself Bellevue Healthcare.
It’s a similar story at Keystone, BlackRock Smaller, and Henderson Smaller, where the current level of discounts all look quite tempting given my long time horizon. My timing on Keystone was clearly very poor in hindsight but it’s encouraging to see that its NAV has held up better this year than most other Baillie Gifford trusts.
My trading
There’s not much to report on the trading front, as you may have already guessed. I bought a little Keystone and Vanguard All-World ETF using dividends I’ve received. However, I also trimmed my holding in HICL Infrastructure a little earlier in the year, adding to my position in KR1 when its discount widened dramatically. A handful of its newer investments soared in value and the share price seemed to lag behind events a little.
I’m planning to continue my recent practice of tidying up some of my taxable positions to use my annual CGT allowance. My ISA subscription for 2022/23 will probably be spread over a number of the trusts I mentioned earlier than are on high single or double-digit discounts.
Read more at Money Makers
I’m continuing to write fund profiles over at Money Makers with recent pieces covering the likes of Herald, Mobius, RIT Capital Partners, Henderson Smaller Companies, Renewables Infrastructure Group, Round Hill Music Royalty, Fidelity Special Values, LXi REIT, Finsbury Growth & Income, and Personal Assets.
Here is the sign-up page that provides full details of what you get as a paying member of Money Makers. Jonathan has set up some more demo portfolios in the last few months and it is very interesting to watch how they have all performed as markets wrestle with current events.
Disclaimer
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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Thanks for the update. Interesting as usual.
I really enjoy reading your updates and the whole world of investment trusts….. but I don’t currently take advantage of any of it as I’m 100% in Vanguard FTSE Global All Cap (fund) for ISA and SIPP.
How do your performance figures stand up after removing all platform, management and performance fees? That could easily give you an additional 1% headwind into your 2 – 3% target of beating the market?
Whilst all the IT’s you are in are very interesting in their own right, I love Fundsmith/Smithson, SMT, RIT etc, but why try to manage 18 – 20 IT’s when you could just own the one all weather fund which is currently your bellmark… Vanguard FTSE Global All Cap… and chill?
Sure, you won’t be shooting the lights out any year but despite many times i’ve been tempted to dip into a few IT’s and perhaps adopt a core and satellite strategy (80/20) I can never quite find a better long term, all weather, transparent and low cost solution than Vanguard FTSE Global All Cap.
Would really appreciate hearing your insights and motivations?
Hi Wildfire,
I use my actual portfolio values to calculate my returns so the figures are after taking off any platform fees, management and performance fees that I have to pay in real life. Similarily, these numbers include all the trading costs I have to pay if I sell something to buy something else, as I’m using the actual numbers.
For the Global All-Cap fund I use the accumulation unit prices so it’s calculated on a similar basis in that it includes the management fee that Vanguard charges. The one difference is I don’t take any estimated platform fees off the Global All-Cap calculation so that puts my portfolio numbers at a very slight disadvantage. I could take off a notional amount for platform fees but I decided against that to keep things simple.
Some of my portfolio is held outside ISAs and SIPPs, so in real life I sometimes have to pay some tax on dividends received. But I would also have to pay tax on any dividends received on the Global All-Cap fund if I held it in taxable accounts so I decided to ignore that as well, again for simplicity. The yield on my taxable holdings is about the same as the Global All-Cap fund so I suspect adjusting for this wouldn’t make much difference anyway.
As for why take this approach, I guess I would say it’s for a few reasons. I think it’s possible (although certainly not at all easy) to do better than a global tracker over the long term and the difference compounded over many years can make a meaningful difference. I’m happy to accept the risk that I could underperform. And I also enjoy the process and the challenge of investing this way. It’s certainly not for everyone though and it does take extra time and effort.
Lastly, on a practical note, I suspect the fact that I have pursued an active approach for the last 25 years or so has meant that I have been motivated to put more money into the markets than I would have done had I just gone down the passive route – difficult to know that for sure of course.
I agree that investing in ITs is a challenge which only gets more interesting with time, as knowledge of the field becomes more nuanced. I’ve also been tempted, like Wildfire, to just go for the Vanguard Footsie Global ETF, but would miss the ‘fun’ of trying to ‘beat the market’. I’m a buy and hold investor and appreciate the candour of your reviews. I’d be interested to hear your views on my current strategy of selling IT outliers like Seraphim Space, bought in a moment of exuberance, to use the funds to add to deeply diving ITs I hold on conviction, like Edinburgh Wordwide….
Hi Katfish,
Personally, I like all my trust positions to be meaningful so I try to avoid building up a long tail of smaller holdings as I find it hard to keep track of everything. I think my smallest holding at the moment is around 2%. So I like the general idea of concentrating on what you think are your best ideas.
Seraphim does look interesting on a very long-term view (I did a fund profile on it recently for Money Makers) but I think all its investments are still unprofitable and I reckon there’s a significant possibility it may need to put through some major NAV reductions over the next year.