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Model Portfolio: 1 April 2008
First quarter 2008 valuations................   The situation remains broadly unchanged from the last couple of portfolio reports with Gilts and high quality bonds such as the AAA rated EIB issue benefiting from a "flight to quality" effect. At the other end of the scale, lower grade credits such as Kingfisher languish at low prices. Retailers, property companies and financials are the worst hit as the malaise continues in the credit markets (more)   

This month sees the end of the first quarter of 2008. The situation remains broadly unchanged from the last couple of portfolio reports with Gilts and high quality bonds such as the AAA rated EIB issue benefiting from a "flight to quality" effect. At the other end of the scale, lower grade credits such as Kingfisher languish at low prices. Retailers, property companies and financials are the worst hit as the malaise continues in the credit markets, and it is in holdings in these sectors that we have experienced the biggest mark-to-market losses.  

However, the portfolio continues to benefit from the inflow of income, both from interest accruing on our holdings and coupons paid. Last month we received the annual coupon on the Marks & Spencer bond and the semi-annual coupon on the UK Gilt and this gradual roll-up (plus our strategy of phased entry) means that the portfolio remains in profit from its 2007 launch at 100,000, in spite of the turmoil experienced in the markets. Volatility of the portfolio also remains very low, being less than 1% on a month-to-month basis.  

We continue to have spare cash (15%) to invest, whilst the summer will see the maturity of the Vodafone 6.25% July 2008, bringing more liquidity back into the portfolio. Currently our view is that corporate and bank debt is oversold relative to the rather expensive Gilts, and it will be in the non-Gilt area that we will be looking for our next purchase, looking to lock in yields between 5.5 and 8%.   

Model Portfolio

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

P&L           

Accrued

16 Jan 2007

Vodafone 6.25% 10 July 2008

10,000

 100.42

 99.93

 9,993

 -49

459

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 79

 7,900

 -1,624

170

15 Feb 2007

Alliance & Leicester 4.25% December 2008

10,000

  97.46

 96.75

 9,675

 -71

111

7 Mar 2007

Segro 5.5% 20 June 2018

10,000

  97.35

 87.23

 8,723

 -1,012

434

28 Mar 2007

EIB 4.75% 06 June 2012

10,000

  96.82

 100.5

 10,050

 +368

393

18 April 2007

Merrill Lynch 5.125% 24 Sept 2010

10,000

  97.66

 94.48

 9,448

 -318

270

18 July 2007

Treasury (Gilt) 4.25% 7 March 2011

10,000

  95.20

 100.88

 10,088

 +568

30

19 Aug 2007

Portman (Nationwide) 6.25% PIBS

 5,000

  97.50

 90

 4,500

 -375

140
9th Jan 2008 Marks & Spencer 5.625% March 2014 10,000   95.82  93.15  9,315  -267 16
4th Feb Portman (Nationwide) 6.25% PIBS 5,000   85.00  90  4,500  +250 140
Bond sub total            

 

 

 

Category Sum            Notes
Securities

84,192

Valuation of current holdings
Accrued

2,163

Interest accrual on above 
Cash

16,701

Including interest & coupons received. 
     
Total

103,058

 

Mark Glowrey

Notes: Dealing costs are 15 per trade, and this is factored into the total valuation of the portfolio. There is no stamp duty payable on bonds, although this may be applied to preference shares and other classes of security. Valuations are based on bid-side levels.