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Investor Views: "How I Built a £1m Pension Pot"

Retired investor Robert Maybury has made impressive gains from his fixed income portfolio, which has helped swell the value of his SIPP to almost £1 million

Emma Simon 26 April, 2017 | 11:05AM

Since retiring a decade ago Robert Maybury has made impressive returns from his investment portfolio. He invests in investment trusts and direct shareholdings, but the bulk of his money is in fixed income investments. He says: “I feel most confident investing in fixed-income investments, be it corporate bonds, retail bonds or even gilts.

“In many ways I’ve been lucky. When I retired in 2009 it was around the time of the financial crisis and this market was in disarray. At the time, there were a number of investments that seemed to offer fantastic value, and have delivered good returns for me.”

When he stopped working Maybury was unsure whether he would need to sell his house to finance his retirement. To date he has not had to do this; instead he has seen the value of his SIPP rise from £250,000 to almost £1 million.

Picking Up Bargains

Some of the best investments he has made were after the financial crash. He explains: “At the time I bought some Lloyds Bank (LLOY) preference shares. Most investors and even professional fund managers didn’t want to touch anything relating to banks, so the price of these preference shares had slumped.”

At this price, Maybury said investing in these preference shares seemed a risk worth taking. “I didn’t think that Lloyds was going to go bust so was happy to hold onto these shares and earn a decent return on my money.” As the outlook for Lloyds improved so the capital value of these shares also increased, he added.

Maybury also invested in a bond issued by NatWest Bank, which paid a 9% coupon. As he pointed out at the time this subsidiary of RBS (RBS) was profitable, although there were problems with the parent company.

When this bond was first issued before the financial crisis it was trading at above par - in other words it was trading for more than its initial issue price of 100. However, following the financial crash its price fell to 30% of its issue price, meaning that the fixed income it paid was far more valuable.

Long Standing Share Holdings

Maybury lives in Cambridgeshire with his partner, and has both a SIPP account and an ISA account with Selftrade. He also runs an ordinary investment account with the company.

Although the lion’s share of his money is in fixed income investments, Maybury also invests in the stock market. “I like investing in equities, but if there’s a share I like, I’ll invest a lot less initially when compared to corporate bonds.”

One of his longest-standing share-holdings has been CLS Holdings (CLI) an investment property company. Maybury has had a holding in this company for around 12 years, although during this period he has sold shares when prices have risen, then bought them back again in subsequent dips.

According to figures from Morningstar, shares in this company have risen by 25.39% over the past 10 years.

Another more recent holding which has performed well has been Burford Capital (BUR). This firm provides corporate finance and insurance options for lawyers and their clients who are engaged in litigation.

Maybury says: “This has delivered excellent returns. I bought into the company at about 125p per share and they are now worth around 785p. It seemed to me a good investment because the returns seem uncorrelated with other areas of the market.”

Morningstar data shows the spectacular growth of this company in recent years: over one year the share price has risen by a phenomenal 180%; while over three years shares have grown by 81%.

Buying Closed-end Funds at a Discount

Maybury also invests in a number of investment trusts; he likes the opportunity to buy at a discount to potentially boost overall returns.

One of his better holdings in recent years has been BlackRock Throgmorton trust (THRG), which invests in UK smaller companies. Maybury says he bought this trust when it was trading at a 20% discount. This Silver Rated trust has a four-star rating, reflecting its strong performance against peers in recent years.

The trust is managed by Mike Prentis. Morningstar fund analyst David Holder says: “Prentis’ investment approach is tried and tested over several market cycles. It revolves around quality management, strong market position, cash generation, strong balance sheet, and a prior record of earnings-per-share growth.”

Maybury says: “It seems to me that in the smaller companies sector there is more opportunity for fund managers to add value. There seem to be quite a few decent trusts trading at discounts at the moment, so there is quite a bit of opportunity for investors.”

Despite being retired Maybury does not invest primarily for income, instead valuing the total return of an investment.

“Often I will reinvest any income I receive and will look to sell holdings if I need release cash. Often this is more tax-efficient as capital gains tax allowances are fairly generous,” he says.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
BlackRockThrogmorton Trust plc458.00 GBX0.58
Burford Capital Ltd1,160.00 GBX-3.49-
CLS Holdings PLC230.00 GBX1.05-
Lloyds Banking Group PLC66.41 GBX0.15
Royal Bank of Scotland Group (The) PLC276.30 GBX-0.58
About Author Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk