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Dexi
Posted: 05 January 2025 15:52:34(UTC)
#66

Joined: 03/04/2018(UTC)
Posts: 1,749
15 + years is quite a long time , especially for those older investors ( depending on if they want to leave a legacy ) . Most markets slump / recovery cycles don`t seem to last as long as that - more like 3 - 7 yrs . No guarantees , I know .
If cash rates stay ~ 4-5 % , then there doesn`t seem much point in holding bonds , or , for that matter , the absolute return funds like CGT , RICA etc .
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SF100
Posted: 05 January 2025 16:25:59(UTC)
#67

Joined: 08/02/2020(UTC)
Posts: 2,254
Dexi;330156 wrote:
If cash rates stay ~ 4-5 % , then there doesn`t seem much point in holding bonds , or , for that matter , the absolute return funds like CGT , RICA etc .


When will we know?
And with what certainty?
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Thrugelmir
Posted: 05 January 2025 17:37:17(UTC)
#61

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ben ski;330128 wrote:
So today, you would probably hold quite a significant amount in discounted private equity.


Prior to 2007. Financial stocks were the place to be. After all what could wrong. As the layers of wall paper were progressively peeled away in the months that followed. A murky world of illusion, outright deception, poor corporate practice and self interest were revealed. Nothing magical in companies being privately owned rather than being exposed to the Corporate Governance that a public listing brings.
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SF100 on 05/01/2025(UTC)
ben ski
Posted: 05 January 2025 17:47:30(UTC)
#62

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Thrugelmir;330162 wrote:
ben ski;330128 wrote:
So today, you would probably hold quite a significant amount in discounted private equity.


Prior to 2007. Financial stocks were the place to be. After all what could wrong. As the layers of wall paper were progressively peeled away in the months that followed. A murky world of illusion, outright deception, poor corporate practice and self interest were revealed. Nothing magical in companies being privately owned rather than being exposed to the Corporate Governance that a public listing brings.


Risk is the other side of return. And if you're looking to maximise future returns, you want that combination of high return potential and being out of favour. It's that simple. You focus primarily on risk in the risk-off part of your portfolio. You try and do both in each and it's having your football team all midfielders.
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Sara G on 05/01/2025(UTC)
ben ski
Posted: 05 January 2025 18:08:17(UTC)
#60

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Johan De Silva;330134 wrote:
ben ski;330128 wrote:
But it's not optimal. If you really want the highest, most reliable return, you barbell: how can I generate the highest, reasonable return possible in my risk exposure, and how can I create the most robust downside protection in my risk-off exposure? So today, you would probably hold quite a significant amount in discounted private equity. For risk-off, there's no perfect asset class – but short duration index-linked bonds are probably the closest. In some ways they have the qualities of cash, bonds and real assets. But you really want a mix of durations, mostly very high quality, at least half pegged to inflation. And of course you rebalance ... And this kind of portfolio could look terrible over 5 years – but if you're hung up on 5 years, you don't really want to stray from an index tracker and probably 1-5 year treasuries.


A hybrid approach has worked fairly well in the SIPP, where I am asset-class agnostic but keep the sector weights of the index in mind. For example, I think we need to allocate about >40% into technology to match index's while introducing around 25% in private assets. This means significantly underweighting other sectors and listed-technology, lowering only some of the gains of the likes of NVIDIA, and we need to be aware of that and not stray too far away from the index.

I bet most of the forum (like most global funds) are underweight Financials, which has been my strongest driver of upside. I expect Financials to continue performing well if we have a strong economy and a decent neutral rate. We all need to be aware of various macro outcomes, including inflation, rates, and recession, not for portfolio construction if your passive but understand the reasons behind portfolio crashes to prevent capitulation. Not understanding "why" is the human phycology that in my opinion leads to capitulation.

I would hope everyone here would recommend to others outside this forum a passive index with age dependent amount of bonds. Most people I speak to about this stuff are way too bias and unwilling to be flexible quickly enough to think fast and as outlined in this non-investment book slow as well...

Book: Thinking, Fast and Slow: Daniel Kahneman
http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/2224/1/Daniel-Kahneman-Thinking-Fast-and-Slow-.pdf (Can be purchased on Amazon)


I think that's a fairly safe way to go. Probably the most exploitable market inefficiency for retail investors is short-termism – because the industry's pressured to deliver over 1-3 years, while stocks are not 1-3 year investments ... Which is why the obsession with 1-3 year performance here seems so unhelpful.

And that's why trades like Tech can become overcrowded – it's not just exuberance, it can be that leading funds need to be in those trades in order not to fall behind. Retail is still buying those funds on 3 year performance, so they have to keep buying those stocks.

We've got this ridiculous situation with ITs, where retail owns half the shares, and they trade on such thin volumes. It's terrible for prices, because retail are not smart at sticking with heavily discounted, high quality investments. They give up and throw in the towel. But in terms of opportunity (for long-term compounding), that's certainly where it's been since 2022.
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Big boy on 05/01/2025(UTC), Blunt Instrument on 05/01/2025(UTC)
SF100
Posted: 05 January 2025 18:36:29(UTC)
#63

Joined: 08/02/2020(UTC)
Posts: 2,254
ben ski;330163 wrote:
Thrugelmir;330162 wrote:
ben ski;330128 wrote:
So today, you would probably hold quite a significant amount in discounted private equity.


Prior to 2007. Financial stocks were the place to be. After all what could wrong. As the layers of wall paper were progressively peeled away in the months that followed. A murky world of illusion, outright deception, poor corporate practice and self interest were revealed. Nothing magical in companies being privately owned rather than being exposed to the Corporate Governance that a public listing brings.


Risk is the other side of return. And if you're looking to maximise future returns, you want that combination of high return potential and being out of favour. It's that simple. You focus primarily on risk in the risk-off part of your portfolio. You try and do both in each and it's having your football team all midfielders.


Personal circumstances need to be considered to form some conclusion of 'optimal' asset allocation.
And not everyone is out to, nor needs to maximise returns.
Least not when industry figures recognise the problems.
At this juncture, would doubt very much that 'significant' PE exposure is appropriate for forum chimps.

Quote:
The scale of the challenge for private markets has been highlighted from within the industry itself; Scott Kleinman, Co-President of private credit specialist Apollo, in a recent speech at an industry conference said: ‘I’m here to tell you everything is not going to be OK… The types of PE returns it (the industry) enjoyed for many years, you know, up to 2022, you’re not going to see that until the pig moves through the python. And that is just the reality of where we are.
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Dexi on 06/01/2025(UTC)
ben ski
Posted: 05 January 2025 21:59:27(UTC)
#64

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SF100;330170 wrote:
Personal circumstances need to be considered to form some conclusion of 'optimal' asset allocation.
And not everyone is out to, nor needs to maximise returns.
Least not when industry figures recognise the problems.
At this juncture, would doubt very much that 'significant' PE exposure is appropriate for forum chimps.

Quote:
The scale of the challenge for private markets has been highlighted from within the industry itself; Scott Kleinman, Co-President of private credit specialist Apollo, in a recent speech at an industry conference said: ‘I’m here to tell you everything is not going to be OK… The types of PE returns it (the industry) enjoyed for many years, you know, up to 2022, you’re not going to see that until the pig moves through the python. And that is just the reality of where we are.



Of course. But as with your thread, the reality of stocks at these valuations is, at some point, in some form, you are looking at much more muted returns too. Perhaps 5-6%, where we've been used to 10-15%.

So I think for someone focused on growth, while stocks could go to the moon on a new industrial revolution, you'd want to allocate meaningfully to other high growth sectors on better valuations – because there's fairly reasonable expectation you're only going to be looking at returns a bit above inflation from broad markets.

Something I always like to remind myself with private equity is that, like treasuries, these are fixed term investments, and the bulk of the portfolio you buy today won't even be realized in this market cycle. Everything with growth, rates and inflation will be different, but today's pessimism is a reality you can buy into. (Also worth noting BlackRock, who also estimate 6% from stocks, find better value in private equity infrastructure than growth.)
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SF100 on 06/01/2025(UTC)
Rory Barr
Posted: 22 January 2025 15:12:46(UTC)
#68

Joined: 18/11/2018(UTC)
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Rob B;329966 wrote:
Reading through a few of the ‘Xmas break’ threads, one theme that appeared more times than I expected was a desire for portfolio simplification. Numerous posters saying they hold too many OEICs / ETFs / ITs.

I guess the $64m question is……what’s brought this on?

Too many holdings to manage?
Not beating the average market return (appropriate benchmark)?
Ideas that just haven’t worked out?
Recency bias (another year of stellar market returns)?
Poor performance over 1yr / 3yrs / 5yrs?
Impatience?
Fees?
Low interest rate era end - a return to ‘normality’?
Kid in a sweetshop at time of purchase(s)?

Could it really as simple as choosing a multi-asset fund(s) (i.e., AJB / HSBC / LifePlan / LifeStrategy / L&G / MyMap) aligned to your risk and volatility requirements and be done with it?

Clearly this would be as dull as dishwater for this forum.....


Just revisiting the question this thread originally posed, and the first few answers which provided straightforward views by response. After that it veered off topic a little and died.

The question it posed was "Could it really as simple as choosing a multi-asset fund(s) (i.e., AJB / HSBC / LifePlan / LifeStrategy / L&G / MyMap) aligned to your risk and volatility requirements and be done with it?" and I think the answer, for most people at least, is probably "yes".

We traditionally think about a higher equity allocation when young (the growth and accumulation phase) which reduces once the pot is big enough which tends to be around retirement time.

I'm a firm believer on never going below a 60% allocation to equities, because however short or lengthy your retirement before you shuffle off to the crematorium, you need to keep an allocation to growth to offset inflation and other headwinds.

But once you're in your 60s, have worked hard to build some wealth which you'll depend upon for the rest of your days (in SIPPs, ISAs and GIAs), why not just go with one or two 60:40 funds from, say HSBC and Fidelity, and get on with life?

What's the downside to this approach from an investment perspective (not the 'missing the fun of managing a portfolio' aspects) and does any of it outweigh just doing it...?
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6 users thanked Rory Barr for this post.
Dexi on 22/01/2025(UTC), Harry Trout on 22/01/2025(UTC), Jed Mires on 22/01/2025(UTC), Aminatidi on 22/01/2025(UTC), Cm258 on 22/01/2025(UTC), Martina on 22/01/2025(UTC)
Jed Mires
Posted: 22 January 2025 18:53:35(UTC)
#72

Joined: 04/04/2023(UTC)
Posts: 338
Rory Barr;331916 wrote:


The question it posed was "Could it really as simple as choosing a multi-asset fund(s) (i.e., AJB / HSBC / LifePlan / LifeStrategy / L&G / MyMap) aligned to your risk and volatility requirements and be done with it?" and I think the answer, for most people at least, is probably "yes".

We traditionally think about a higher equity allocation when young (the growth and accumulation phase) which reduces once the pot is big enough which tends to be around retirement time.

I'm a firm believer on never going below a 60% allocation to equities, because however short or lengthy your retirement before you shuffle off to the crematorium, you need to keep an allocation to growth to offset inflation and other headwinds.

But once you're in your 60s, have worked hard to build some wealth which you'll depend upon for the rest of your days (in SIPPs, ISAs and GIAs), why not just go with one or two 60:40 funds from, say HSBC and Fidelity, and get on with life?

What's the downside to this approach from an investment perspective (not the 'missing the fun of managing a portfolio' aspects) and does any of it outweigh just doing it...?



You are right and there is no downside. Its very very easy to get good returns relative to all other investors with similar asset profiles by simply buying a multi assset fund (such as Vanguard LS ). If however you want excellent returns its difficult because every step you take to achieve this could also produce poor returns. Its very easy to produce very poor returns trying to produce excellent returns.
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ANDREW FOSTER
Posted: 22 January 2025 18:58:41(UTC)
#69

Joined: 23/07/2019(UTC)
Posts: 8,103
Rory Barr;331916 wrote:


The question it posed was "Could it really as simple as choosing a multi-asset fund(s) (i.e., AJB / HSBC / LifePlan / LifeStrategy / L&G / MyMap) aligned to your risk and volatility requirements and be done with it?" and I think the answer, for most people at least, is probably "yes".



One of my 'rules' is 'never buy a fund of funds'...which usually rules out multi asset funds

The reason is simple, it's the opaque charging.

Are you paying a charge on the parent fund AS WELL as the constituent funds?

If you are thats very bad, but finding out if you are is usually extremely difficult. And usually seems to be 'yes, you are double paying'.

If you want just look at the top 10 holdings and replicate those ten. Rebalancing every so often if you want to.
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