The two funds Saltydog has just sold
Both funds have seen their performances come off the boil of late.
As well as providing our members with performance data on the Investment Association (IA) sectors and individual funds, we also run a couple of demonstration portfolios showing how the information that we generate can be used.
Around this time last year we were busy reinvesting, having moved into cash earlier in the year. In the last 12 months, the Tugboat portfolio has gone up by 17% and Ocean Liner has gained 23%.
Tugboat was launched in November 2010. We thought it prudent to focus on the more cautious end of the spectrum, and so set out to create a ‘low-risk’ balanced portfolio.
We wanted to show that it was possible to reduce the overall volatility by holding a selection of funds from the different IA sectors, monitoring them on a weekly basis, and making changes when necessary.
We started by investing £40,000 of our own money using a fund supermarket. In February 2020, it was up at an all-time high of just over £68,400. It then fell as markets around the world struggled, but it avoided the worst of the drop.
By July, it was back setting new records, which were then beaten in August, September and October. It had a minor pullback in November, but went up again in December and January before peaking in February at £75,250.
The last couple of months have not been so easy. By the middle of March, it was back below £73,000, but has rallied in the last few weeks. On Friday, it closed at £75,190, just £60 short of its all-time high.
The Ocean Liner was created three years later, in November 2013. It is designed to be slightly more adventurous than the Tugboat. This means it can do better when market conditions are favourable, but may fall further if they suddenly take a turn for the worse.
This was certainly the case in 2020. In the first quarter, it dropped by more than the Tugboat, but after that it recovered faster. Having peaked in February of this year, it also fell during March, but went on to record a new high earlier this month before falling back a little.
Although we review the portfolios each week, we do not always make changes. Last week, we took the opportunity to take out a couple of funds that are not performing as well as we had hoped.
One of the key themes from this year has been a move away from the US and technology funds that did so well for us last year. The three UK equity sectors (UK All Companies, UK Smaller Companies, and UK Equity Income) have shone through in our tables and this is reflected in our portfolios. We started investing in funds from these sectors in November and have added to them this year.
At the beginning of this month, we bought the Schroder Income fund in the Ocean Liner portfolio. Although by the middle of last week it had gone up by 1.5%, there were other funds from the UK sectors that were consistently outperforming it, and so we decided that it was time to move on.
We also sold the TB Guinness Global Energy fund. Ocean Liner bought this fund in the middle of December. At the time, it was one of the leading funds in the Specialist sector and there were reasonable grounds to believe it could continue to do well.
It invests in companies from the oil and gas sector. These sectors struggled during lockdown and it seemed rational that as restrictions eased, world economies would pick up and demand for energy would outstrip supply. Logically, it follows that, for a time, prices would rise, and the fund would benefit.
We know that the funds from the Specialist sector can be volatile and that has certainly been the case. Within the first couple of weeks it had fallen by over 4%. However, by mid-March it was showing a gain of over 20%, which is when we added it to the Tugboat portfolio.
This turned out to be the kiss of death – it almost immediately started going down again. When we decided to sell it last week, it was showing a gain of 3.3% in the Ocean Liner, but a loss of 6.3% in the Tugboat. Fortunately, we never invest a lot in the most volatile funds and so not too much damage was done.
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