Analysis & Comment  > Model Portfolio

Share |
Back to 2013

Model Portfolio: 12 June 2013

Bonds markets weaken as we hold a quarter cash

    

Whilst 2012 ended with a plethora of new issues, 2013 has been a bit of a damp squib.  So far there has been a distinct lack of exciting new issues and now the market is beggining to weaken.

The model portfolio frees up some cash to participate in offerings, but so far we have been struggling to find enough.  There seems to be no middle ground. Popular bonds are over-subscribed and private investors have scaled back. If there is little appetite unpopular issues are simply cancelled (eg, Morgan Stanley's bond).

We hope to see more issues on the horizon and hold cash accordingly.  But in the meantime all readers are welcome to participate in the active forum discussion on the state of the bond market.

Since the last portfolio review the portfolio has given up some gains and is valued at £152,834, with £41,284 of that cash in reserve, a decline of just over 2% (including £1,517 accrued interest).  This would have course been a lot worse, if we hadn't been actively taking profits recently.  We flagged on the 10th of May that chasing after the extended uptrend in the ORB bond market is not advised as the market may consolidate sharply.

The largest faller by far is the People for Places 1%, which has fallen from highs at 112, down to around 105, perhaps time to take profits there shortly?

The Italy 6% 2028 bond is also trading lower, down just over 4, around 103.  In fact, the only riser in the portfolio is the Nationwide 6.875% pibs, (still six years until it is callable at 100).

There is one new addition to the portfolio, the Co-Op 13% Perp. which we covered in Bond of the Week, just after the Co-Op was downgraded.  We picked 5k up at 90.  Although we are underwater as it currently trades around 87 we remain modestly optimistic.

Note: The portfolio is operated with real money initial deposit of £100,000 and traded through our live bond account. This is to accurately reflect the performance and holds a mixture of credits and bond types, from the AA-rated Places for People bond, down to more speculative holdings such as the BB- rated Enterprise Inns bond. The Portfolio also has a small proportion of its holdings in fixed income preference shares and "bond-like" instruments. Fixed Income ETFs may be added from time to time.

Buy Date Issue Life (yrs)  Nominal Purchase Price Current Price Current Value Accrued
24.3.11 Provident Financial 7.5% 2016 3 6,000 100 105 6,290 96
31.7.12 ICAP 5.5% July 2018 5 5,000 100 103 5,144 104
3.9.12 CLS HLDGS 5.5% BDS 2019 6 12,000 101 99 11,919 306
10.10.12 Workspace 6% Sept 2019 6 5,000 100 103 5,134 57
5.3.13 Paragon 6% 2020 6 10,000 100 101 10,063 170
16.5.12 Tesco Bank 5% 2020 7 5,000 100 103 5,139 18
20.9.12 ICG 6.25 Sept 2020 7 12,000 100 102 12,204 183
8.5.13 IPF 6.125 % 7 7,000 100 100 7,012 47
26.3.13 Unite Group 6.125%  7 10,000 104 102 10,173 8
13.10.11 National Grid PLC 1.25 2021 8 10,000 100 108 10,793 26
27.3.13 Provident Financial 6% 2021 8 5,000 100 102 5,081 67
31.1.10 Places for People 1% RPI 2022 9 6,000 100 105 6,287 24
8.3.11 Italy 6% 2028 15 5,000 100 103 5,147 261
8.3.12 Nationwide 6.875% U/D 5,000 88 106 5,300 150
16.5.13 Co-Op 13% Perp. U/D 5,000 90 87 4,350  

 

 

Category Sum            Notes
Securities 110,033 Valuation of current holdings
Accrued 1,517 Interest accrual on above 
Cash 41,284 Inc. interest & coupons received. 
Total 152,834  

Richard Berry