Finally my $400k mini portfolio has BROKEN EVEN! Yeah, it doesn't sound like a big deal, but considering it bore the full brunt of the COVID crash, to crawl back to the living from a low of $300k in my opinion is very amazing already. The worst move I could have made would be to be 'scared off' after the crash and say I don't want to take anymore risks.
A new purchase has been added and mode details will be provided below.
Portfolio performance was up month-on-month mainly due to upward price movement on my bonds. Shell equity (which I am counting on to be the volatile component of this portfolio) remains muted.
In April 2021, I added a new bond purchase. It is the Singtel 3.3% SGD Perpetual:
This, in my opinion, is THE SGD BOND I had been waiting for. Majority Government owned, too big to fail (like SIA), stable business, and WITH AN INVESTMENT GRADE CREDIT RATING. This is all so rare just like when all the stars are aligned. And did I mention you could have bought it near to 100 on Day 1 of trading, which is something very rare. Usually for rare bonds like these (e.g. Aviva SGD bond), Day 1 of trading will see the bond opening at 102 region already. I did not get allocation on this mini account during the IPO, and I actually bought this bond on Day 1 of trading.
Singtel needs no introduction, I will not waste words talking about the Issuer. What I would talk about is the coupon structure. It will currently pay 3.3% p.a. for the next 10 years until the First Call Date of 14th July 2031 whereby it will reset to Prevailing 10 year SGD Swap Rate + 1.9% from 14th October 2031. If still not called by 14th October 2051, it will reset to Prevailing 10 year SGD Swap Rate + 2.65%.
In all honesty, a coupon rate of 3.3% is not fantastic. The main reason why I added this bond to my Main and Mini Portfolios is because I use it as the 'First Layer" of utilising my SGD cash in a leveraged portfolio. The main bugbear that most if not all Singaporean Investors face would be lack of Investment Grade SGD bond investments. Sure there are plenty of better bonds out in the market, but they are usually denominated in USD. This means you cannot just use your SGD cash in the bank to buy these USD bonds. You usually have to take a USD Loan. So by using the SGD cash to first buy this Investment Grade (and hence high lending value) bond, you have already 'utilised' your SGD cash and when you take the USD Loan to buy the 'better' USD bond, you are not wasting anything. Versus, you put SGD cash in the leveraged portfolio and just buy the USD Bond with USD Loans.
Remember I started off this Mini Portfolio with SGD400k cash, and although it had been utilised before I bought this Singtel Bond, I am already planning ahead for the HSBC 5% SGD Bond to be called on the First Call Date of 24th Sep 2023 and SGD250k cash re-enters the Mini Portfolio. Hey it is 2 years later, but no harm planning for it now! Afterall, good SGD bonds are as rare as blue diamonds!
For the sharp eyes readers, you would have noticed some changes in the LTV% of my securities. The Bank which I held this Mini Portfolio with had upgraded a number of LTV% (maybe due to COVID crisis being deemed largely over).
I would deem this Mini Portfolio as currently Fully Invested and I will not be looking to add anything for now unless I sell something. The Lloyds Bond and Shell Equity are likely the 2 securities that might be offloaded if the price is right (the Lloyds Bond might be called in January 2022 anyway).
The current Margin Ratio is 89.3% which is higher than my upper target range of 85%, but the Singtel Bond was too attractive to miss. The consequence of this 89.3% Margin Ratio is that this Mini Portfolio will hit Margin Call if all securities in this portfolio drop by at least 11% simultaneously. That is a risk I will have to undertake when I play the leverage game.
Overall with this Mini Portfolio reaching $1m Asset Size with $400k Initial Capital and $600k Loans, it can be deemed to be 1.5 times leveraged. (The average Leverage Ratio of Hedge Funds is about 2.1, Source: HFleverage.pdf (columbia.edu))
Regards, Newbie
This blogpost is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information.
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