Damien’s portfolio – raising cash

The background to my portfolio

Back in March 2015 I decided to invest £50,000 of my own money using 80-20 Investor. The purpose was twofold, firstly to show how you can use 80-20 Investor to invest and outperform the market with only a few minutes effort every now and then. Secondly, no other investment commentator, journalist or research provider invests their own money for fear of failing. This is a sorry state of affairs and is precisely why I committed to openly running my own portfolio for 80-20 Investor members to see.

Since then I have periodically changed my portfolio using the fund suggestions provided by the 80-20 Investor algorithm and associated research. I always disclose the changes at the time they are made.

Raising cash

Following my Damien's March 2020 Portfolio review something interesting (and worrying) happened in investment markets. In my review, I wrote how, the extreme equity market volatility means that it would probably be ill-advised to tamper with the equity content of the portfolio. I still think this is the case despite equity markets now not being in the BFBS tables at all anymore. It's a classic case of catching a falling knife when equity markets are tumbling as they are now.

However, in the days that have passed since that review, some of the biggest detractors from my portfolio's performance have actually been the low risk funds within my portfolio. The chart below shows the performance of all the low risk funds in my portfolio since equity markets started to drop on 19/20th February. As you can see, up until 6th March my low risk holdings had at least minimised losses. However, given that stocks have been in freefall throughout that time the funds' performance has been disappointing, not even beating cash. From the 8th March onwards the scale of the current investment market collapse has meant that bonds and equities have been highly correlated. Indeed you can see how my low risk funds have lost between 5% and 12% in a matter of days. Indeed, today the stop loss alerts were triggered on a range of bond funds within March's BOTB.

While this is something of a systemic issue, as the financial system continues to implode it does beg the question what is the point of holding them, if cash fares better. Part of the reason for the bond sell-off has been the increased potential for companies to default on their loans (raising concerns over creditworthiness). Furthermore in what environment would corporate bonds now rally? When stocks rally? Seems unlikely. It would likely take a complete refutal of the potential impacts that the coronavirus may have on corporate cashflows.

Hopefully, we are nearing the bottom for asset prices soon but there is no way of knowing. So I've taken the decision to remove the following funds and sit the proceeds in cash for the time being. Cash is a destination in itself and when my low-risk funds are clearly not cutting it then there is no point in holding them.

Finally, I took the opportunity to sell my tiny holding in the ASI Global Real Estate Share as it has been my worst performing holding now since the sell-off began. While it will crystallise the loss it is a small holding and limits further possible downside as it slightly reduces my portfolio's equity content. Aside from that I am not changing my portfolio as there is little anyone can do in this environment with regard to calling the bottom or timing the market.

Fund switches

• 100% out of Janus Henderson Fixed Interest Monthly Income and 100% into Cash
• 100% out of the ASI Emerging Markets Bond and 100% into Cash
• 100% out of ASI Global Real Estate Share and 100% into Cash
• 100% out of BNY Mellon Real Return and 100% into Cash
• 100% out of Liontrust Sustainable Future Corporate Bond and 100% into Cash

 

My portfolio now looks like this:

Name	Allocation % (rounded)	Risk	Sector	ISIN Code
Fidelity European	4.5	Medium	Europe Excluding UK	GB00BFRT3504
Jupiter Japan Income	5.5	High	Japan	GB00B0HZTZ55
M&G Global Listed Infrastructure	7	Medium	Global	GB00BF00R928
Slater Growth	9	Medium	UK All Companies	GB00B0706C66
VT Gravis Clean Energy Income	14.5	Medium	Global	GB00BFN4H792
ASI UK Real Estate Share	5.5	High	Property Other	GB00B0XWNN66
Premier Diversified Growth	9	Medium	Mixed Investment 40-85% Shares	GB00B8BJV423
Royal London UK Government Bond	6	Medium	UK Gilts	GB00B881TW52
Cash	39	Low

My Portfolio asset mix

My portfolio asset mix is as shown below (the previous asset mix is in brackets) with approximately 53% invested in equities:

• • UK Equities 17% (17%)
  • North American Equities 11% (11%)
  • Global Fixed Interest 0% (15%)
  • Japanese Equities 5% (5%)
  • European Equities 9% (9%)
  • UK Fixed Interest 0% (6%)
  • UK Gilt 5% (5%)
  • Cash 39% (0%)
  • Alternative Investment Strategies 3% (13%) (including absolute return)
  • Emerging Market Fixed Interest 0% (4%)
  • Commodities and energy 6% (6%)
  • Property 5% (9%)

Damien's higher risk and lower risk portfolios

Using the logic described in my post: Update to Damien’s alternative risk portfolios I created hypothetical higher and lower risk versions of my portfolio below:

Higher risk

Fund	Allocation
Fidelity European	7
Jupiter Japan Income	9
M&G Global Listed Infrastructure	11
Slater Growth	15
VT Gravis Clean Energy Income	24
ASI UK Real Estate Share	9
Premier Diversified Growth	15
Royal London UK Government Bond	10

Lower risk

Fund	Allocation
Fidelity European	5
M&G Global Listed Infrastructure	8
Slater Growth	10
VT Gravis Clean Energy Income	16
Premier Diversified Growth	10
Royal London UK Government Bond	7
Cash	44