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Thread: BeeBop does UK

  1. #101
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    Ha! Funny!

    Earlier this year I had some money (pounds) in a GBP-denominated, Irish-domiciled biotech ETF – BTEK iShares IV PLC NASDAQ US Biotech UCITS USD(GBP) Acc.

    It did OK, but I pulled it out to dabble in the GBP-denominated US bond funds. However I’ve been thinking about going back in – it’s started to show encouraging price movement over the past fortnight or so.

    Looking at BTEK and BIOG, 25% of each fund is made up of these four -

    Amgen Inc
    Gilead Sciences Inc
    Vertex Pharmaceuticals Inc
    Alexion Pharmaceuticals Inc

    Which, I guess, just goes to show how small the investable universe actually is, once you start focussing on specific sectors.

    And out of idle curiosity, I wonder how you go about working out the discount/premium to NAV for an ETF – or if that’s even possible

  2. #102
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    GTM...It probably is not possible to work out an ETF discount as it is a tracker of the collection of asset’s NAV, whereas a trust is a unit in a collection of assets. The reasons I like the ITs is because of this window of discount/premium opportunity plus the “theory” that someone/some group is piecing together an intelligent collection of assets. Whereas the ETF scene is more subject to the vagaries of market mood.....that said, both lots are relatively volatile at times especially when the media wants to swing the reading public into a new mood.

    And yes, many of the funds are made up of the same components. For the medical arena, I selected BBH.L as it had a different mix and a consistent dividend, although, I did buy Gilead twice on its cycles (nice small gain both times).

    I have just taken a look at my UK portofolio and the universe has started changing. My fantastic Monks, remains fantastic, however, the languid BlackRock Throgmorton (small caps) has been on a rocket base in recent weeks.....it now threatens Monks for dominant position in the folio. I never would have thought that.

    I think I should try and understand these bond funds more. Please keep posting about your moves on them as it is good to learn something new.

  3. #103
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    Default Those Bond Funds

    Like you, BeeBop, I have a use (a need even) for pounds for use in the UK .

    So, having decided that I’m going to have pounds, the question becomes where do I hold those pounds as they accumulate.

    Cash? It pays nothing. But at least there’s no exchange rate risk.
    Shares? That’s another post.
    Bonds? Useful for diversification. I’ll put my hand up and plead guilty to a fondness for diversification across asset classes.

    But there’s “quality” to consider. Having seen my mother become increasingly exposed to Hanover Finance in the early 2000s, I rate “quality” as important, and am prepared to balance interest rate against credit rating. I think of it as insurance, and am prepared to pay the premium.

    Plus, at times of share market volatility, there’s a flight from shares to bonds at the asset class level, and a flight from junk to government within the asset class.

    I remember in the GFC when bonds from Infratil, Hellaby, Silver Fern Farms, and others could be picked up at yields well into double figures, while NZ Government Stock went in the other direction. Government-guaranteed South Canterbury Finance bonds at a 25% yield? Oooooooh! Yes please!

    But back to the point - whose bonds?

    Well, if you’re looking for quality, you can’t go past government, can you? Given the world’s desperate search for yield, coupled with existing government bond interest rates globally (minimal to negative – I mean Argentina being able to sell a 100-year bond - come on!), and the likely trend, this points toward the US government, where the Fed has been raising interest rates, while at the same time the President is looking to lower interest rates. Who will win? And what will it mean for the yield curve? So I buy much but not all of the yield curve, settling on three timeframes

    So for bonds, I settled on 3 timeframes:

    30-90 days
    3-7 years
    20+ years

    The various forms of tax floating around mean steering clear of the US and the UK, and the fact that I’m buying in pounds means that a US or UK domiciled fund is off the table, except for the 30-90 day US Treasury Bills, which aren’t available outside the US and the USD. Why not break the rules at the beginning, eh?

    So knowing whose bonds, and knowing the duration, the currency, and the domicile, it’s simply a matter of trawling Morningstar to find the right vehicle .

    iShares run appropriate ETFs out of Ireland, denominated in pounds, which suit me fine, but here are other domiciles.

    The exchange rate is important

    I know the average value of my pounds in USD, and it’s relatively easy to construct a matrix of fund price and exchange rate which you can plug into a spreadsheet to tell you the effect of the combination of exchange rate movements and fund prices, which gives you entry, accumulate, decumulate, and exit points. After all, if the GBP/USD goes from (say) 1.21 to 1.29, your fund is worth a whole lot fewer pounds!


    GBP/USD rises, Fund price rises
    GBP/USD rises, Fund price falls
    GBP/USD falls, Fund price rises
    GBP/USD falls, Fund price falls

    So to summarize – pick your asset class, pick your duration, pick your vehicle, and work out what the effect of currency movements will be, and do daily data entry.

    And never forget that timing and exchange rate are incredibly important
    Last edited by GTM 3442; 23-11-2019 at 05:20 PM.

  4. #104
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    Thanks give us a heads when the timing and exchange rate are right.

  5. #105
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    Valuing an ETF

    I suppose it's possible,but its likely to be extremely inaccurate. The fund manager of an IT knows the portfolio composition on a daily basis, and can mark to market on that basis.

    With an ETF, you as a retail punter generally only know what the actual portfolio composition was as at the end of the last reporting period. So whilst you can mark to market, you're probably doing so based on old, out-dated, information, and assuming that the ETF is a 100% fit to any underlying index.

    So I guess that yes you can, but why would you?

  6. #106
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    Quote Originally Posted by Joshuatree View Post
    Thanks give us a heads when the timing and exchange rate are right.
    Currently:

    CU71.L on Yahoo! at GBP103.49
    IBTL.L on Yahoo! at GBP4.1133
    GBP/USD on Yahoo! at USD1.2837

    You now have the data, human - time to take a deep breath and enter the matrix. . . .
    Last edited by GTM 3442; 23-11-2019 at 10:56 PM.

  7. #107
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    Quote Originally Posted by Joshuatree View Post
    Thanks give us a heads when the timing and exchange rate are right.
    Currently:

    CU71.L on Yahoo! at GBP103.49
    IBTL.L on Yahoo! at GBP4.1133
    GBP/USD on Yahoo! at USD1.2837

    You now have the data, human - time to take a deep breath and enter the matrix. . . .
    Last edited by GTM 3442; 23-11-2019 at 06:02 PM.

  8. #108
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    Default Is the matrix correct?

    Quote Originally Posted by GTM 3442 View Post
    Like you, BeeBop, I have a use (a need even) for pounds for use in the UK .

    So, having decided that I’m going to have pounds, the question becomes where do I hold those pounds as they accumulate...


    The exchange rate is important

    I know the average value of my pounds in USD, and it’s relatively easy to construct a matrix of fund price and exchange rate which you can plug into a spreadsheet to tell you the effect of the combination of exchange rate movements and fund prices, which gives you entry, accumulate, decumulate, and exit points. After all, if the GBP/USD goes from (say) 1.21 to 1.29, your fund is worth a whole lot fewer pounds!


    GBP/USD rises, Fund price rises
    GBP/USD rises, Fund price falls
    GBP/USD falls, Fund price rises
    GBP/USD falls, Fund price falls

    So to summarize – pick your asset class, pick your duration, pick your vehicle, and work out what the effect of currency movements will be, and do daily data entry.

    And never forget that timing and exchange rate are incredibly important
    Looking at the matrix, it does not look correct.

    What do you think.

  9. #109
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    Quote Originally Posted by Toulouse - Luzern View Post
    Looking at the matrix, it does not look correct.

    What do you think.
    Dunno.

    My immediate concern is with the result of the upcoming UK election, and whether to buy the FTSE in dollars, the S&P in pounds, or to sit on my hands until B-Day.

  10. #110
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    Well, I had a short detour to look at Brazil, but the rocketing IBOVESPA is balanced by the plunging real, so no, nothing to see here, move along please.

    In the UK, with the strengthening pound, it seems as if a short-term punt on the FTSE100 in an ETF denominated in USD is in order.

    I'm anticipating a Conservative victory in the election with a small but workable majority, and a subsequent euphoric rally in the FTSE and the GBP.

    Fingers crossed.

    On the other side of the world, the Australian bank term deposits are coming due, but the current Australian TD rates aren't worth having. So I think I'll ship the AUD to Luxembourg and put them into an Australian government bond ETF. No change to the asset allocation, no change to the currency diversification either. And with the RBA looking likely to cut rather than hold the equivalent of the OCR, there's the possibiity of a small uptick in price.

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