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Model Portfolio: 3 March 2011

Portfolio update, and a couple of suggestions from readers.................

    

The portfolio is once again long cash, having taken some profits on the Next 5.25% 2013, liquidated our non-performing holding in the Bradford & Bingley PIBS and sold £10,000 Lloyds 5.375% 2015 in order to lighten up on financials. There are a many options for reinvestment, and another PIBs may be on the shopping list for March.

I have added a couple of positions in index-linked instruments, but these have been weak performers, the RBS inflation-linked 2022 particularly so. Whilst index-linked instruments are a useful hedge, I am not entirely unconvinced that a better solution is to buy higher-yielding bonds. Of course, this comes with credit risk attached, but the return here is more real and immediate.

A couple of readers have commented that the model portfolio is (a) overweight financials and (b) too trading-orientated. I think these are both fair points. The former is a tricky one - there are an awful lot of financials in the GBP bond market and with the restricted choice that is open to private investors, the portfolio has a tendency to slide in that direction. On the second point, I agree, the portfolio is slightly overtraded and this may well be a function "feeling the need to do something" - and keeping interesting copy on the website! I shall bear this advice in mind going forward.  

Some readers would prefer a greater focus on income rather than the current "roll up" calculation. Again this is fair point although I have no plans to change the calculation basis at present. The addition of a "yield at purchase" column should help.  

This month I have arranged the table in terms of maturity order (another reader suggestion). This gives a better overview of the structure of the portfolio. The same reader has suggested adding YTM at purchase and averages thereof. This is a good idea and Iíll drop it in next month ( Iíll have to do some digging in my records).  

Overall performance (which is measured on a total return basis) is good.  We have clawed back some of our losses on B&B, and financials have improved. The portfolio is up 3.9% from last month and if we could do that every month, that would be something.

 

Date of Purchase

Issue

Life (yrs) 

Nominal

Purchase Price

Current Price

Value  

Accrued

9 Jan 2008

Marks & Spencer 5.625% March 2014

3

10,000

 95.82 105  10,500
16 Aug 2009 RBS "Royal Bond 5.3% 2015 4 100  £100 101.2  10,120 /

7 Mar 2007

Segro 5.5% 20 June 2018

7

5,000

  97.35

 99

 4,950

 

16 Aug 2010 Enterprise Inns 6.5% Dec 2018 7 6,000

  83.5

 90.5

 5,430

 

04 Jan 2011 National Grid 2.983% 2018 7 7,000  144.71  145  10,150

 

04 Feb 2010 GKN 6.75% 2019 8 10,000  97.56  104  10,400
28 July 2010 RBS Royal Bond  5.1% 2020 9 5,000  96.03  91  4,550
06 May/19 Nov 2010 Goldman Sachs 5.5% Oct 2021 10 10,000  87.9  92  9,200
04 Nov 2010 RBS Inflation-Linked (3.9% min) 2022  11 5,000 100  92.4  4,620
20 Sept 2010 Yorkshire Building Society 13.5% 2025 CoCo 14 5,000  116  115  5,750
16 Sept/01 Dec 2010 Lloyds 6.5% Sept 2040 29 10,000  96.35  93.5  9,350
20 May 2010 Nat West 9% prefs (undated) U/D 5,000  1.03  1.10  5,500  /
12 Dec 2010 Ecclesiastical 8.625% prefs U/D 5,000  1.02  1.11  5,550  /

 

Category Sum            Notes
Securities

£96,070

Valuation of current holdings
Accrued

£2,158

Interest accrual on above 
Cash

£24,738

Including interest & coupons received. 
     
Total

£122,966