Benchmarking myself

My self invested personal plan (SIPP) advanced by just under 0.60% over the four weeks through to March 10, compared to a 2.86% fall in the FTSE All Share index. That half decent positive number hides some rather big variations - decent gains on some structured products and shares were offset by hefty losses on several resources shares.

The numbers were helped by my decision last week to take profits on my International Power shares. I sold them at 405p in the open market, rather than wait around for the next offer from the French parent that’s currently looking to mop up the minority shareholders. There were also decent gains on my InCapital structured product and my RBS inflation-linked bonds.

But there have been some big hits to my resource stocks. Shares in Mongolian miner Ivanhoe crashed by over 20 per cent in the last few weeks, whilst energy stocks also fell back sharply. In retrospect I probably mis-timed my purchase of oil exhcange-traded funds and energy investment funds, as prices have pulled back by around 5 per cent in the last few weeks. My two oil ETFs from iShares (one is US-based, the other from the UK) both fell by around 8 per cent whilst my position in New City Energy is now down 14 per cent in total.

The commodity complex overall has shown weakness in recent months, and it’s worth noting that this reversal in commodities has occurred at the same time as the benchmark S&P 500 index has advanced. That could portend trouble later in the year.

I’m not too worried about this general weakness in the energy equity sector, though; largely because I’m a long-term investor who’s happy to sit tight for the next five to 10 years. If prices continue to fall I may even top up my positions in the New City Energy fund and the two iShares ETFs!

I’d also note that Third Point - the US listed hedge fund run by Dan Loeb - has had a bad few months, falling by 3 per cent in value since early March and generally under-performing the US markets. Shares in BSkyB have also fallen by more than 5 per cent in the last few weeks, as the markets have begun to factor in the possibility that News International may permanently walk away from a full takeover (although personally I think they'll still pounce in a few years' time).

I haven't made any new purchases since last month, so I am still running cash levels of 22 per cent in my portfolio. I’d quite like to push that below 17.5 per cent by the end of this month, implying a further 5 per cent increase in my holdings in equities and high yield bonds. I’m waiting for my brokers to register on their system a US based oil and gas ETF from Market Vectors; once they do, I’ll probably buy some (the ticker is FRAC) and I’m also very likely to buy a big chunk of shares in the UK-traded Doric Nimrod airplane leasing fund (ticker DNA2). More on that next month.

Yet rather than spend all my time thinking of ways to spend that cash, I've been focusing instead on benchmarking my portfolio against 'proper' institutional managers, especially those in the passive multi-asset class portfolio space. The table below shows my current asset allocation (excluding cash), with an overall equity position of 62 per cent of invested funds, 12 per cent in equity neutral hedge funds, 11.8 per cent in resource based equities and 13 per cent in bonds. Looking in turn at that equity position, I’m very strongly focused on defensive utility and infrastructure funds (33 per cent of all invested funds) and high yielding developed world large cap stocks.

My asset allocation (ex cash)....

Looking at what one might call the 'competition', Vanguard currently runs a multi-asset class portfolio that looks a tiny bit like my portfolio (their 80 per cent Lifestrategy Fund in particular) although their portfolio has no direct exposure to resource stocks or hedge funds, and boasts a much higher level of investment in emerging markets stocks.

...versus Vanguard's Lifestrategy80 fund

On balance, I suspect that my portfolio is probably a tad closer in 'ethos' to the portfolios run by Frontier Asset Management, who rebalanced their core portfolios just last week. The table below shows the mix of assets in their balanced fund, as well as those recent portfolio switches. They’ve started notching down their bonds exposure, to 16 per cent - not far off my own exposure.

...and Frontier's core balanced fund

Compared to my own portfolio, Frontier has a much larger exposure to global real estate (I have only a 2.5 per cent exposure to small cap UK funds compared to their 10 per cent) and a massive 20 per cent exposure to managed futures or CTA funds. I used to have interests in this area via the Matrix Ascension funds run by Winton Capital. In an ideal world I’d like to find a way of investing in CTAs again, although I can’t say I’d go for a 20 per cent allocation - 5-10 per cent would probably work best for my portfolio.

I’m also very interested in Frontier's increased exposure to emerging market bonds which I think is a very wise move (up from 5 per cent last year to 7 per cent this year). In other personal portfolios that I run, I've been building a strong EM bond position, especially through local currency based funds – my sense is that compared to equities, local currency bonds are a much better way of playing the increasing wealth of the developing world.

■ To see the latest state of play in David's Sipp, go to www.investorschronicle.co.uk/tips-and-ideas/our-portfolios/sipp-portfolio.

visible-status-Standard story-url-DStevenson_Portfolio.xml