The good, bad and indifferent

By the time my next
column is published, on the second Saturday
in January, I should have been able to quantify the performance of my portfolio in 2009, including my pension fund assets.

In the absence of any shocks, it looks as though there has been a decent uplift. This has happened despite static property values and the difficulty
of getting a precise value for my evolving collectables portfolio. At present,
I value my collectables at cost. By contrast, in the property sphere, a call to the letting agent of my investment property can provide an up-to-date value.

What concerns me now, however, is whether or
not the portfolio is correctly positioned for 2010. My main issue is what to do with the chunk of uninvested cash, which makes up just under 10
per cent of my regular portfolio and around 15
per cent of my total investments, including
my pension funds.

I am nervous that the recovery may falter, leaving equity markets overvalued. With retirement on the horizon,
I am particularly anxious not to take risks with pension fund money, where, to date, my three funds have survived the market turmoil more or less unscathed. But equally, I am unsure whether the overall 20 per cent these funds have in cash is really that wise. With this in mind, I am veering towards further bond investment as the best way forward – as property and collectables already give me enough “hard asset” protection against inflation.

My various bond investments have, almost exclusively, been via the fund route and many
are of long standing.
But have prices already appreciated enough?

For reasons I explained last month, I am attracted to sovereign emerging market bonds, although the funds that invest in them are dollar-denominated, which adds some currency risk. However, since I have a dollar hedge in the form of gold bullion coins – where there has been a further tidy gain in sterling terms in the past month – and a position in a euro- denominated exchange trade fund (ETF), this is not of too much concern.

Even so, I am holding back for the moment until I have seen the impact of
the debacle in Dubai on other emerging market debt. There may be an opportunity to buy on a higher-yield basis than the current 6.7 per cent.

I am also considering investing in Indian equities through the sterling- denominated Lyxor India ETF. This fund tracks the S&P CNX “Nifty 50” index. It has substantially lower charges than the active funds that invest in India, and, to my mind, the pool of stocks available for investment does not give sufficient advantage to going in via the actively managed route. Many active funds invest, admittedly in slightly different proportions, in the stocks that are part of the index that can be accessed through the ETF.

Having said that, one
big surprise about my investigations into the Indian market has been
the number of Indian companies listed in the UK, mainly on the Alternative Investment Market (Aim). Few are suitable for my purposes, but the diversity of companies on offer –
from resources through infrastructure to Bollywood film and video games makers – is broad.

I am also making a trip to Spain in January. The purpose is to try and work out whether the bombed-out Spanish property market is worth a more thorough look. I sense it is still a little early, but some early reconnaissance will not be wasted.

Peter Temple is an active private investor writing about his own investments. He may have a financial interest in any of the companies and trading strategies mentioned.