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Model Portfolio: 15 December 2010

End-of-year valuations for the FII model portfolio........

    

The last valuation of 2010 has a slightly downbeat note. Gilts, and indeed other benchmark government bonds, have been selling off; this has impacted the prices of the corporate and bank bonds that we hold.

Generally, corporate spreads have been fairly resilient, but bank bonds less so. We have been buying into the sell-off of the last month or so, topping up our holding in the Goldman 5.5% 2021 subordinated bond and the super-long Lloyds 6.5% 2040 bond. I remain convinced by the value offered by the latter, although at the time of writing the price is still falling and the yield is over 7%. Sadly, the bond is still not available for Crest (CDI) delivery.

I am now somewhat overweight the financials and will look back to trim the Lloyds 5.375 2015 or the RBS "RB53" into a rally.

New additions include the Ecclesiastical 8.625% pref, and this security has jumped to a premium over the subscription price. Our other prefs, CoCo’s etc looked rather grim last months, but appear to have recovered somewhat - suggesting that these instruments are an equity-correlated asset class (for the moment!).

All in all, the December valuation bring  us to a figure of £117,405, down a little from last month’s bottom line, and a fair bit off the Autumn peaks. We run the portfolio on a total return basis and in January this year it stood at £108,440. We’re up 7.6% on the (slightly truncated) year - not a stellar performance, but not too bad either.

Looking forward, the last couple of months has also seen us tuck away a couple of attractive and high yielding positions, so roll on 2011 and all it may bring.  

Date of Purchase

Issue

Nominal

Purchase Price

Current Price

Value  

Accrued

30 Jan 2007

Kingfisher 5.625% 15 Dec 2014

10,000

  95.24

 105.5

 10,550

 7

7 Mar 2007

Segro 5.5% 20 June 2018

5,000

  97.35

 98.9

 4,945

 137

9 Jan 2008

Marks & Spencer 5.625% March 2014

10,000

  95.82

 105

 10,500

 417

10th April 2008

Bradford and Bingley 11.625 PIBS

10,000

 112.00

 35

 3,500

 /

20 Aug 2008

Next 5.25% Sept 2013

5,000

 86.5

 105.5

 5,275

 58

16 Aug 2009 RBS "Royal Bond 5.3% 2015 100  £100

 100.6

 10,060  /
04 Feb 2010 GKN 6.75% 2019 10,000  97.56  101.5  10,150  97
06 May 2010 Goldman Sachs 5.5% Oct 2021 6,000  87.5  88.5  5,310  62
20 May 2010 Nat West 9% prefs (undated) 5,000  1.03  102  5,100  /
21 June 2010 Lloyds 5.375 Sept 2015 10,000  100.9  101.5  10,150  154
28 July 2010 RBS Royal Bond  5.1% 2020 5,000  96.03  92.8  4,640  224
16 Aug 2010 Enterprise Inns 6.5% Dec 2018 6,000  83.5  86.5  5,190  15
16 Sept 2010 Lloyds 6.5% Sept 2040 5,000  98.41  90  4,920  83
20 Sept 2010 Yorkshire Building Society 13.5% 2025 CoCo 5,000  116  115  5,750  148
04 Nov 2010 RBS Inflation-Linked (3.9% min) 2022  5,000  100  97.4  4,870  /
19 Nov 2010 Goldman Sachs 5.5% 2021 4,000  92.366  88.5  3,540
01 Dec 2010 Lloyds 6.5% 2040 5,000  94.30  90  4,500  41
12 Dec 2010 Ecclesiastical 8.625% prefs 5,000  102  107  5,350  /

 

Category Sum            Notes
Securities

£114,300

Valuation of current holdings
Accrued

£1,443

Interest accrual on above 
Cash

£1,662

Including interest & coupons received. 
     
Total

£117,405