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Model Portfolio: 28 October 2011
Model Portfolio : 28 October 2011
October has been a rather mixed month for the Model Portfolio. The gilt market has drifted away from its highs, and so we have lost the "rising tide" effect that has propelled corporate bonds higher over the first half of the year.
The equity market has rallied strongly, and this represents an increase in investors’ willingness to take on risk. Lower grade credits have rallied, accordingly. However, this has not been an across-the-board effect. Our long-dated Lloyds TSB bond is up around seven points from last month , but other bonds such as GKN and Enterprise Inns have drifted. Our purchase of Italy is down some 10% from our entry level, although with a "half sized" position of £5,000, the damage is not too great.
At the time of last month’s valuation we were heavily overweight cash, and this money is gradually being put to work with the purchase of £10,000 long-dated BT bonds and £10,000 of the new ten-year index linked deal from National Grid. I am expecting more retail-targeted new issues between now and Christmas, so will keep £10,000 aside for these.
On balance, the portfolio is down 0.6% on a total return basis, but our asset allocation is roughly where we want it to be. We stay put and enjoy the income as it continues to roll in.
Price shown is "dirty" price, i.e. including accrued interest