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Model Portfolio: 16 December 2008
Model Portfolio : 16 December 2008
Model Portfolio : Year end review
This month’s report brings us to the last model portfolio valuation of the year, and presents an opportune time to review our strategy and performance to date.
We started into 2008 with a valuation of £103,495, up some 3.5% from our entry point of £100,000 a year earlier. In January 2008, the portfolio had 20% cash, and it was our plan to gradually invest this cash over the course of the year, hopefully picking up a few good bargains in the corporate and non-gilt sector.
However, the fall-out in corporate and non-gilt bonds proved worse than our expectations and we bought into the falling corporate bond market too quickly, leaving us with some mark-to-market losses on the book. Back-to-back with this was the extraordinary rally that was seen in government bonds and with the benefit of hindsight, our weighting in this high-quality sector of the market was far too low.
The valuation leaves us with a figure of £94,306 for the year end; down, but not out. Moving forward into the next year, we are positioned for 2009 with a reasonable level of diversification and some good yields locked in.
Structurally, we remain happy with our portfolio, which has a good spread of maturities. This keeps the liquidity coming back in to the portfolio, both through coupons and upcoming maturities (the A&L 4.25% Dec 2008 matures at the end of this month). We note that we are overweight in retailers and financials, but this is perhaps a reflection of the UK economy. The portfolio has continued to invest its cash and income into the falling markets in corporates and we have added positions in BT and GE (see table below) over the last month or so, locking in some good yields.