Tag Archives: LondonStockExchange

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.

Lower commission for stocks traded in London Stock Exchange

I received this email from Saxo last week:

… the minimum commissions charged on stocks traded on the following exchanges will be lower from 1 May 2010:

  • Euronext Amsterdam (AMS) from EUR 20 to EUR 12
  • Euronext Brussels (BRU) from EUR 20 to EUR 12
  • Euronext Lisbon (LISB) from EUR 20 to EUR 12
  • Euronext Paris (PAR) from EUR 20 to EUR 12
  • Frankfurt/Xetra Stock Exchange (FSE) from EUR 20 to EUR 12
  • London International Exchange (LSE_INT) from USD 40 to USD 20
  • London Stock Exchange (LSE_SETS) from GBP 15 to GBP 8
  • Milano Stock Exchange (MIL) from EUR 20 to EUR 12
  • OMX Helsinki (HSE) from EUR 20 to EUR 12
  • Sistema De Interconexion Bursatil Espanol (SIBE) from EUR 20 to EUR 12
  • Swiss Virt-X (VX) from CHF 30 to CHF 18
  • Swiss Exchange (SWX) from CHF 30 to CHF 18
  • Wiener Börse – Vienna Stock Exchange (VIE) from EUR 20 to EUR 12

Saxo Capital Markets will raise the minimum commissions charged on stocks traded on the OMX Copenhagen Stock Exchange (CSE) from DKK 19 to DKK 29.

The reduction of commission for London stock exchange is almost half. Great! Now I only need half of the previous investment amount to achieve the same ‘sales charge’.

With this low commission, I may also consider bond ETF in London stock exchange when I need to add to my global bond asset class. Currently I use unit trust fund for global bond asset class. Below are the global bond ETFs in London stock exchange that I may use:

iShares MSCI Europe ETF trading characteristics

Last month, I wrote about iShares MSCI Europe ETF in LSE (ticker: IMEU) as the replacement for iShares DJ STOXX 50 ETF (EUN) in my portfolio. However, the volume and spread information of IMEU was unknown to me at that time. Following that, I have recorded the price, volume and NAV of IMEU over 19 days from September to October. 

The results are in this online spreadsheet, which contains two sheets: (1) Volume and Spread; (2) Premium/Discount Chart. Click the tab at the top of the spreadsheet to view them. Below are the summary over the observed period.

Bid/ask spread

  • GBP 0.034 or 0.25% most of the time

Average volume

  • about 22,511 shares

Premium/discount

  • # of Days between -0.25% & +0.25% = 2
  • % of Days between -0.25% & +0.25% = 11%
  • # of Days between -0.5% & +0.5% = 4
  • % of Days between -0.5% & +0.5% = 21%

Buy/Sell Volume

  • Buy volume: 10,302 ~ 15,302 shares
  • Sell volume: 10,302 ~ 15,302 shares

From the above trading characteristics, this ETF has narrow bid/ask spread. Most of the time it is traded at premium, with only 11% of days traded between -0.25% & +0.25%. The period also coincided with the financial crisis and market turmoil, so large premium/discount and spread was observed on some days.

Throughout the period, consistent buy and sell volume was observed in the queue, as you can see in the Buy Vol and Sell Vol column in the spreadsheet. The volume times the price are more than enough to meet my investment need. For example, on the first day, there are 10,302 shares selling at GBX 1,448.91, which is equal to GBX 14,926,670.82 or GBP 149,266.70.

The fund Size has also increased from EUR 82,674,000 as of my last post to EUR 166,616,000 as of 30 Oct 2008. With the above information, I have decided to replace EUN with IMEU as the Europe equity in my portfolio.

iShares MSCI Europe ETF in LSE

iShares MSCI Europe ETF (ticker: IMEU) has been listed in the London Stock Exchange (LSE) for slightly more than one year already. It offers broader market coverage than the iShares DJ STOXX 50 ETF (ticker: EUN) I use to cover European stock market. I am considering IMEU as a replacement for EUN.

iShares DJ STOXX 50 (EUN) iShares MSCI Europe (IMEU)
Expense Ratio 0.35% 0.35%
Fund Size EUR 771,590,000 EUR 82,674,000
No. of Holdings 51 394
Tracking Error (1yr) 0.23% 0.11%
Premium/Discount ? ?
Bid-Ask Spread ? ?
Buy/Sell Volume ? ?

Data taken from http://uk.ishares.com on 09 September 2008.

IMEU fund size is reasonable and tracking error is better than EUN. To examine its trading feasibility, I will need to track its premium/discount, bid-ask spread and buy/sell volume over a couple of weeks.