3 Defensive Funds for My Sipp

Investor Views: The coronavirus crisis has prompted Seamus Milner to rethink his investment portfolio

Emma Simon 6 May, 2020 | 11:27AM
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Seamus Milner retired two years ago and uses the pension freedoms, introduced in 2015, to continue investing while taking an income from his pension pot.

But while many investors stick to their strategy even through times of turmoil, Seamus started to shift his portfolio when it became clear that Europe was likely to be severely impacted by the Covid-19 pandemic at the start of the year. “I made some changes just as the virus was beginning to hit the news,” he says. “I was concerned about the potential impact on markets.”

Seamus, who lives in Staffordshire, usually takes an income from his self-investment personal pension (Sipp), although he is careful not to breach the limit that keeps him within the basic-rate taxpayer band. Knowing how much money he will drawdown from his pension pot allowed him to plan more easily and the first move he made was to put a year’s worth of income into cash. He then put another year’s worth into lower-risk investments, such as the Personal Assets Trust (PNL).

“I hope this provides a degree of protection and means I’m not forced to withdrew money from investments that are falling in value,” he explains.

The Personal Assets Trust has a remit to grow assets over the long-term but, crucially, to preserve investors’ capital. With a Gold Morningstar Analyst rating and five-star rating, it has achieved these aims over the years, delivering annualised returns of 5.82% over 10 years.

While the trust is managed on a day-to-day basis by Sebastian Lyon of Troy Asset Management, its board determines the broad asset allocation. Currently it invests around 47% of the portfolio in equities across the UK, US and other countries, and 40% in bonds. 

Equity Income Options

Elsewhere in his portfolio, Seamus has been shifting money into equity income options including Silver-Rated Troy Income and Growth (TIGT), Gold-Rated City of London (CTY) and Henderson International Income (HINC). He prefers investment trusts to open-ended funds and has the majority of his Isa and Sipp portfolios in such products.

Morningstar analyst Robert Starkey rates City of London’s “combination of exceptionally experience and stable management, consistent process, low fees, and focus on dividend generation”, calling it a compelling option for investors seeking a core UK equity income option. The trust has delivered annualised returns of 7.6% over 10 years. 

But Seamus has kept some of his portfolio is growth-focused options, which he hopes will deliver over the long-term; these include Polar Capital Technology (PCT) and Silver-Rated Fidelity Special Values (FSV).

Meanwhile, in his Isa, he holds Smithson Investment Trust (SSON). Seamus, who worked in sales for an investment firm before he retired, says: “This trust has weathered the storm very well indeed. I am currently looking at a 27% return since I first invested when the trust
launched so I have no intention of selling this investment at present.”

The trust, which focuses on small and mid-cap companies, was launched in 2018 by Fundsmith, the investment house owned by renowned manager Terry Smith. While Smith himself doesn’t run the trust – it is managed by Simon Barnard and Will Morgan - it follows his buy and hold investment approach.

As well as his investment portfolios, Seamus keeps some cash in banks and building societies, where he always tries to find the best interest rate. This has become harder in recent years, he says, with many top-paying accounts disappearing as base rate has stayed at rock-bottom.

He has a Santander 123 Account, although the rate on this has just been cut, and a monthly savings account with Lloyds that pays interest of 2.5%. Seamus adds: “Many of these accounts aren’t even really worth having, but they are a way to keep my money safe while I withdraw it throughout the year rather than something I’m relying on to pay me an income.”

 

 

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.

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About Author

Emma Simon

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