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IT alternatives to Strategic Bond Funds?
Little John
Posted: 11 October 2017 18:39:49(UTC)
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As I ponder a portfolio for my drawdown SIPP I quite fancy a sizeable chunk in a couple of good Strategic Bond Funds giving a reasonable yield of approx 4%, modest growth without the more volatile exposure to equities. I don’t fancy paying my high HL platform fees of 0.45% on them and wondered if anyone can suggest whether there are any ITs that invest in a similar style to the Funds and offer a decent yield and growth potential. I’m trying to save £1k pa in fees.

Thanks for any thoughts
Amateur hour
Posted: 11 October 2017 19:41:17(UTC)
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The IT bond funds tend to be high yield, yielding 5-7 percent, and with the attendant risks/equity like behaviour. So one possibility might be to blend the likes of IPE and NCYF with a defensive low yielder like CGT - which I think is currently about a third in linkers - to give downside protection and that 4 percent target yield overall. But it is an interesting question, and I will be interested in other answers...
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Little John on 11/10/2017(UTC), Jim S on 12/10/2017(UTC)
srg751
Posted: 11 October 2017 20:01:18(UTC)
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IT's tend to fly under the 'dynamic' banner. Look at the ones in the 'Twentyfour' stable. I don't go near the sector personally but if it's your bag then Twentyfour are highly rated.
It's a long time since strategic bond funds were put to task, but whenever they are, Bailie Gifford corp. bond comes out on top. ( yes it's an OEIC, and yes it is strategic)
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Little John on 11/10/2017(UTC), Jim S on 12/10/2017(UTC)
Tim D
Posted: 11 October 2017 20:02:48(UTC)
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Little John;51861 wrote:
As I ponder a portfolio for my drawdown SIPP I quite fancy a sizeable chunk in a couple of good Strategic Bond Funds giving a reasonable yield of approx 4%, modest growth without the more volatile exposure to equities. I don’t fancy paying my high HL platform fees of 0.45% on them and wondered if anyone can suggest whether there are any ITs that invest in a similar style to the Funds and offer a decent yield and growth potential. I’m trying to save £1k pa in fees.

Thanks for any thoughts


Is using an alternative platform an option? A drawdown SIPP on ATS (Alliance Trust Savings) costs a flat £342 p.a (including VAT), I think; includes a handful of free trades a year and having income paid to your bank account monthly. Makes no difference whether you hold funds or trusts or whatever. And there may be cheaper options.

Trust-wise, TwentyFourAM's TFIF and SMIF have been on my radar as possibles for the income portfolio. Not sure how "strategic" they are though; stuffed full of high yield junk more like. Although TFIF's factsheet does say "Efficient portfolio management techniques will be employed such as currency hedging, interest rate hedging and the use of derivatives such as credit default swaps to mitigate market volatility.". Charts to date make it pretty clear you'd need to reinvest some income to see any chance of growth.
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Little John on 11/10/2017(UTC), Jim S on 12/10/2017(UTC)
srg751
Posted: 11 October 2017 20:29:29(UTC)
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Little John;

Be aware that all strategic funds differ in that, say, one may cover all bases to diversify and spread the duration/geo risk, another may make a big bet in a certain direction such as a rise in bank rates, whilst another may hedge to make currency bets. Performance would suggest that the managers calls haven't been much better than 50/50.

The one thing that I did learn when I looked at them, albeit some 6 years ago, was that when bond markets panicked, the strategic funds didn't perform too differently to your out and out corporate bond funds. If it's 'protection' that your after, then I wouldn't look any further than Baillie Gifford Corp Bond. It's been there and done it, successfully. If it's yield, then Twentyfour.

GL.
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Little John on 11/10/2017(UTC), Tim D on 11/10/2017(UTC), Jim S on 12/10/2017(UTC)
Tug Boat
Posted: 12 October 2017 08:30:21(UTC)
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Went through a similar exercise, sold my strategic bond UTs and bought CMHY, NCYF and TFG. TFG has been tipped by Questor today, it's a bit different to a bond fund.

I went through the "why do I hold strategic bond funds" question and the answer prompted the purchase of the above.

Errr, that's it.

Tug, aged 58 and 3/4

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Tim D on 12/10/2017(UTC), Little John on 12/10/2017(UTC), Jim S on 12/10/2017(UTC), Mickey on 12/10/2017(UTC)
Mr Helpful
Posted: 12 October 2017 10:31:46(UTC)
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This is a difficult area with yields so low.

A few basic question(s)/thoughts, picking up from where Tug Boat left us afloat :-

+ What indeed is the aim of the Bond Funds?
+ Is it to provide defence when the 'trailblazers' Stocks are in trouble?
+ What does the historic record show for performance correlation or otherwise with Stocks? Esp when Stocks are in trouble.
+ A number of the suggestions mentioned above could be over-correlated with Stocks and not provide protection when needed.
+ How important is yield?
+ And what concessions might be made to reach for that yield?

Apologies for not having ready answers.
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Tim D on 12/10/2017(UTC), Little John on 12/10/2017(UTC)
Chris Howland
Posted: 12 October 2017 11:05:58(UTC)
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Might be worth evaluating HDIV as well as those suggested by others.

The recent announcement about a dividend cut (dropped the prospective yield to about 4.5%) saw a market reaction which has since been recovered.

This has been one of my portfolio's reliable cornerstones (and possibly the first IT I owned - a long while ago so memory is a little hazy) and while there are better yielding 'strategic bond' IT it is a holding I have been comfortable with.

The trust has dividend reserves of 0.38 of a year at current dividend rates - which should increase to about 0.5 once the dividend reduction commences.

As others have mentioned, there are quite a few options available - I also own IPE, CMHY and NYCF as well as HDIV. They've all contributed very nicely so far...


Chris
2 users thanked Chris Howland for this post.
Mickey on 12/10/2017(UTC), Little John on 12/10/2017(UTC)
Little John
Posted: 12 October 2017 13:38:59(UTC)
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Thank you to all who are chipping in with ideas and comments.

In answer to Mr Helpful's questions I'm happy to clarify:

The aim is to provide one of the foundations for the retirement income so the yield is important and I'm aiming for about 3.5% plus some capital growth. The Strategic Bond funds appealed because they manage to achieve this generally and offer some protection from direct correlation with equities (or rather not as much volatility) or have I got that wrong?

I will look at the suggested IT's to check on their equity correlation.

I already own CMHY, IPE, HDIV to about 11% of my portfolio. I wanted to know whether there were any other ITs similar to Strategic Bonds but less influenced by equity fluctuations. The intention is to increase these to about 50% of the portfolio with the rest offering yield plus diversification.

Thanks
1 user thanked Little John for this post.
Tim D on 12/10/2017(UTC)
Micawber
Posted: 12 October 2017 14:25:53(UTC)
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There's NBLS
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