Tag Archives: Bonds

Portfolio review for 2010

As usual, my portfolio review for year 2010 is divided into three sections: Expenses, Emotion and Return.

Expenses

2010 2009
Number of Buy 4 9
Number of Sell 0 1
Turnover Ratio 0.0% 0.72%
Average Holding Period (year) Infinity 139
Total Expense Ratio 0.36% 0.58%

Quite a passive year, partly because of delay on planned portfolio activity in October 2010.

Emotion

Nothing much to say here, except the frustration of finding London Stock Exchange(LSE)-listed global bond ETFs that are available in Saxo (the stock broker I use), and the delay caused by the waiting. Anyway, the two LSE-listed global bond ETFs are available now (since May 2011) for trading in Saxo.

Return

2010 2009
Portfolio IRR Portfolio TWR Benchmark Portfolio IRR Portfolio TWR Benchmark
SGD
5.21% 5.20% 4.47% 25.60% 25.48% 20.39%
USD
14.50% 13.70% 28.92% 23.58%

Note:

  1. IRR = Internal Rate of Return, also known as Dollar-Weighted Returns.
  2. TWR = Time-Weighted Returns
  3. Both TWR and IRR returns include dividend and un-invested cash holding.

Comments on the return

  • The IRR and TWR are almost the same. This is because new cash contribution is evenly spread out over the year, as I save monthly to contribute to the portfolio.
  • Portfolio return is quite close to the benchmark, which tells me that my portfolio behaves as expected as a 75/25 portfolio.
  • The gap between SGD return and USD return is due to depreciating US dollars.

Portfolio Allocation

Current Target
Equity 71% 75%
US 25% 25%
EU 13% 20%
JP 5% 5%
APEJ 7% 10%
SG 3% 5%
REIT 17% 10%
Fixed Income 29% 25%
Global 5% 10%
Asia 4% 5%
SG 16% 10%
Cash 3% 0%

There is a slight over allocation in REIT due to a number of right issues by several REIT managers. The Cash holding is caused by the delay on planned portfolio activity mentioned above.

Looking into 2011

There are more and more ETFs listed in SGX and I have not looked into them; could be interesting. For global bond ETF, I will start to use the LSE-listed iShares Citigroup Global Government Bond (IGLO) and iShares Global Inflation-Linked Bond (IGIL) that are now available for trading in Saxo stock broker.

As always, stay the course and tune out financial news.

Portfolio activity for October 2010 is delayed

My regular half-yearly investment should have already happened in October but it was delayed, due to difficulty in finding a suitable platform to buy global bond ETF—Saxo refused to add the global bond ETFs I requested because it is multiple-currency while POEMS added the ETFs but their commission is high, read my post here. The portfolio asset allocation has been within the 5% threshold from the target 75/25 stock/bond ratio since October, but within the bond portion, global bond is under-allocated and requires top-up. That’s why I am looking for global bond ETF to add. I prefer not to add to the current global bond unit trust fund in my portfolio because of the fund’s active management.

Recently, a reader left a comment that a multiple-currency ETF was added to Saxo upon his request. I have sent a request to Saxo again to add the two global bond ETFs. Will update when I have their reply.

Global bond ETF in London Stock Exchange

Update 7-Aug-2011: IGLO and IGIL are now available for trading in Saxo since mid-May 2011. The commission is charged in USD, converted from GBP at Saxo prevailing rate.

I posted HERE that I may consider bond ETF in London Stock Exchange following the reduction of Saxo commission from GBP 15 to GBP 8.  But alas, when I asked Saxo to add the following two global bond ETFs, Saxo replied that they were not able to add because these ETFs are traded in multiple currencies (GBP and USD).

When I probed further and informed Saxo that the two ETFs have different stock symbols for different currencies, Saxo replied they still could not add them because they share the same ISIN number on the same exchange.

Ok, let’s try POEMS. I emailed their tech support to add these two ETFs. And on the following day, it was added! So now you can buy the two ETFs in POEMS, just note that the ETFs are traded in GBP and their symbols are:

However, there is a catch: POEMS charges a higher commission (GBP 25) compared to Saxo. Given this, I am undecided whether to use POEMS or not.

Building bond ladder with FSM

In the portfolio activity in April this year, I kept the fresh fund for Singapore fixed income in FSM cash fund, instead of building the SGS bond ladder that I have planned. It was because the yield of 5-year SGS bond was low and I was really busy to go to bank to bid for it. But I have overlooked a quick and convenient way to build SGS bond ladder — the SGS bonds offered by fundsupermart (FSM). FSM charges 0.1% of nominal value as initial processing fee and 0.1% of nominal value deducted from coupon payment as annual custody fee.

How much do the fees reduce the yield? To do this comparison, I use the data in SGS web site as the yield before fee; and FSM Bond Factsheet to calculate the yield after fees. For the latter, I point my browser to FSM Bond Factsheet, then select a SGS bond, enter 1000 as the amount to buy, enter indicative price + $0.10 (to simulate the 0.1% processing fee on $1000 nominal value) as maximum price to buy, and finally hit the Submit button the get the net yield to maturity. My assumption is that the net yield from the calculation above includes the fees charged by FSM and the bid-ask spread.

The bonds that I have compared are as follow, with the yield to maturity from SGS web site and FSM calculator respectively. Data are extracted on 1 August 2008.

  1. NX01100H; Coupon 3.625%; Maturity 01/07/2011; Years to Maturity: 2.92 (years), 1.36%, 1.10%
  2. NX02100S; Coupon 3.500%; Maturity 01/07/2012; Years to Maturity: 3.91 (years), 1.84%, 1.63%
  3. NX04100F; Coupon 3.625%; Maturity 01/07/2014; Years to Maturity: 5.91 (years), 2.47%, 2.29%

The fees and spread reduce the yield of the above bonds by 0.18% ~ 0.26%. Compare this with a bond ladder built by bidding SGS bonds at zero cost, this method has the advantage of building a bond ladder faster and saving the trip to banks.

Thanks to this post in sgfunds.com for the information on FSM SGS bonds.