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Options for investing in GBP?


investmd
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Looking for advice on investing in GBP.

 

I'm based in Canada and tend to invest in a) equities like BRK, FFH, BAM & b) managers with zero fee partnership structures - Pabrai Funds, Aquamarine, ROMC & Austin Value Capital.

 

My wife has some money in the UK and she wants me to invest it, but she wants investment to stay in British Pounds. Looking for insights from this group of value investors as to what I can purchase in GBP that could compound at 8-15% over several years - equities that I could buy on the FTSE or bright managers in the UK with value add. Could stay consistent with my current theme or diversify.

 

Thanks!

 

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I have positions in Cambria Automobiles, Vertu, Motorpoint, St. James Place and Clipper Logistics. All 20-35 pct above my basis. St. James Place and Clipper Logistics are the highest quality, and unfortunately Clipper might be taken private. If not it might crash and thus be a good opportunity. Cambria and Motorpoint are both quiet good companies, overall I prefer Cambria here due to valuation. Vertu is the lowest quality of my bunch but also cheap, again I would probably go with Cambria here. St. James Place is a quiet terrific business I think but takes a bit more to understand. Headline valuation looks expensive, digging a bit further I think it is cheap for a high ROIC, asset light and steady grower.

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You could buy AVI global, the old British Empire Trust*, which is a diversified closed end fund of funds that over time will generate the return of the ACWI ex US +or-, would be diversifying to your other holdings with its emphasizing s on Japanese special situations and discounted funds. It charges 85 bps + the underlyings have fees, so that is a warning and contradictory to your ask, I am more recommending it because it is truly set it and forget it and you’d be investing in the U.K. without really investing in the U.K. the U.K. has an abundance of diversified closed end funds that are of decent scale and charge not entirely egregious fees.

 

https://www.aviglobal.co.uk/content/uploads/2019/11/AVI-Global-Trust-Annual-Report-2019.pdf

 

*why did they ever change that cool name? Foreign & Colonial had to change their name. British Empire Trust did not!

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You might want to temporarily just sell the GBP, for US/CAD - and have the currency sent out of the UK.

Park the proceeds in US/CAD treasuries, Canada's, GIC's, etc for a year.  On maturity, convert back into GBP - and send the currency back into the UK.

 

The expectation being that Brexit devalues GBP, and that the disruption lowers the market values of most UK companies. You get more GBP upon repatriation, and the opportunity to buy the targets for less. And while you are waiting, the funds are not at risk in the UK - and not temporarily subject to any kind of capital control.

 

SD

 

 

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Thanks for insights kab60,thepupil & SharperDingaan.

 

thepupil: agree 85basis points seems like for an ETF like fund - happy to pay good fees for good returns - 1-2% annual fees regardless of returns doesn't sit well given how challenging it is to beat the market by >2%

 

SharperDingaan - interesting play you suggest. However, my understanding has been that the worst thing for the UK about Brexit has been the uncertainty. Now that there is a clearer picture that it is going to happen, could the Pound not strengthen?

 

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you could also buy Scottish Mortgage, 37 bps fee, liquid 7 billion pound market cap global growth fund. it's obviously done very well lately given its growthy/techy. I'm more biased to the AVI type of stuff.

https://www.bailliegifford.com/en/uk/individual-investors/funds/scottish-mortgage-investment-trust/performance/portfolio/

 

There's templeton EM fund, for just plain old EM at a slight discount (and higher than ETF fee). F&C for global growth (similar to Scottish Mortgage)

 

Again this falls in the "low cost, liquid, diversified investment in UK without investing in the UK". Here's a list of the UK closed end funds >200mm pound market cap in order of market cap

 

SMT LN Equity SCOTTISH MORTGAGE INV TR PLC

FCIT LN Equity F&C INVESTMENT TRUST PLC

RCP LN Equity RIT CAPITAL PARTNERS PLC

HICL LN Equity HICL INFRASTRUCTURE PLC

ATST LN Equity ALLIANCE TRUST PLC

3IN LN Equity 3I INFRASTRUCTURE PLC

INPP LN Equity INTERNATIONAL PUBLIC PARTNER

UKW LN Equity GREENCOAT UK WIND PLC

TRIG LN Equity RENEWABLES INFRASTRUCTURE GR

MRC LN Equity MERCANTILE INVESTMENT TRUST

MNKS LN Equity MONKS INVESTMENT TRUST PLC

PCT LN Equity POLAR CAPITAL TECHNOLOGY TR

TEM LN Equity TEMPLETON EMERGING MARKETS-O

WTAN LN Equity WITAN INVESTMENT TRUST PLC

FGT LN Equity FINSBURY GR&INC TRUST-ORD

CLDN LN Equity CALEDONIA INVESTMENTS PLC

CTY LN Equity CITY OF LONDON INVESTMENT TR

WWH LN Equity WORLDWIDE HEALTHCARE TRUST P

SEQI LN Equity SEQUOIA ECONOMIC INFRASTRUCT

MYI LN Equity MURRAY INTERNATIONAL TR-O

TRY LN Equity TR PROPERTY INVESTMENT TRUST

SSON LN Equity SMITHSON INVESTMENT TRUST

SYNC LN Equity SYNCONA LTD

HVPE LN Equity HARBOURVEST GLOBAL PRIVA

BPCR LN Equity BIOPHARMA CREDIT PLC

PIN LN Equity PANTHEON INTERNATIONAL PLC

ASL LN Equity ABERFORTH SMALLER COS-ORD

JMG LN Equity JPMORGAN EMERGING MKTS-ORD

FCSS LN Equity FIDELITY CHINA SPECIAL SITUA

BNKR LN Equity BANKERS INVESTMENT TRUST

GCP LN Equity GCP INFRASTRUCTURE INVESTMEN

PNL LN Equity PERSONAL ASSETS TRUST PLC

EDIN LN Equity EDINBURGH INVESTMENT TRUST

BBGI LN Equity BBGI SICAV SA

VEIL LN Equity VIETNAM ENTERPRISE INV LTD-C

FEV LN Equity FIDELITY EUROPEAN VALUES PLC

HGT LN Equity HGCAPITAL TRUST PLC

HRI LN Equity HERALD INVESTMENT TRUST PLC

JAM LN Equity JPMORGAN AMERICAN INVEST-ORD

TMPL LN Equity TEMPLE BAR INVESTMENT TRUST

JEO LN Equity EUROPEAN OPPORTUNITIES TRUST

GSS LN Equity GENESIS EMERGING MARKETS

BGSC LN Equity BMO GLOBAL SMALLER COMPANIES

APAX LN Equity APAX GLOBAL ALPHA LTD

AGT LN Equity AVI GLOBAL TRUST PLC

OTV2 LN Equity OCTOPUS TITAN VCT PLC

BRSC LN Equity BLACKROCK SMALLER COMPANIES

HSL LN Equity HENDERSON SMALLER COMPANIES

JII LN Equity JPMORGAN INDIAN INV TRUST

FSV LN Equity FIDELITY SPECIAL VALUES PLC

SDP LN Equity SCHRODER ASIA PACIFIC-ORD

JFJ LN Equity JPMORGAN JAPANESE INV. TRUST

BGFD LN Equity BAILLIE GIFFORD JAPAN TRUST

LWDB LN Equity LAW DEBENTURE CORP PLC-ORD

NESF LN Equity NEXTENERGY SOLAR FUND LTD

PEY LN Equity PRINCESS PRIV EQTY HOLD LTD

PLI LN Equity PERPETUAL INCOME & GROWTH-O

FSFL LN Equity FORESIGHT SOLAR FUND PLC

ICGT LN Equity ICG ENTERPRISE TRUST PLC

SOI LN Equity SCHRODER ORIENTAL INCOME

IEM LN Equity IMPAX ENVIRONMENTAL MARKETS

BRWM LN Equity BLACKROCK WORLD MINING TRUST

TPOU LN Equity THIRD POINT OFFSHORE INVESTM

PSSL LN Equity POLLEN STREET SECURED LENDIN

SCIN LN Equity SCOTTISH INVESTMENT TRUST

BBH LN Equity BB HEALTHCARE TRUST PLC

VOF LN Equity VINACAPITAL VIETNAM OPPORTUN

SAIN LN Equity SCOTTISH AMERICAN INV COMP

JLEN LN Equity JLEN ENVIRONMENTAL ASSETS GR

JESC LN Equity JPMORGAN EUR SMALLER COMPANI

TFIF LN Equity TWENTYFOUR INCOME FUND LTD

MRCH LN Equity MERCHANTS TRUST PLC

SLS LN Equity STANDARD LIFE UK SMALLER CO

MUT LN Equity MURRAY INCOME TRUST PLC

EWI LN Equity EDINBURGH WORLDWIDE INV TR

ATT LN Equity ALLIANZ TECHNOLOGY TRUST PLC

SLPE LN Equity STANDARD LIFE PRIVATE EQUITY

UEM LN Equity UTILICO EMERGING MARKETS TRU

OCI LN Equity OAKLEY CAPITAL INVESTMENTS

BSIF LN Equity BLUEFIELD SOLAR INCOME FUND

DGN LN Equity ASIA DRAGON TRUST PLC

BGS LN Equity BAILLIE GIFFORD SHIN NIPPON

THRG LN Equity BLACKROCK THROGMORTON TRUST

HFEL LN Equity HENDERSON FAR EAST INCOME LT

GABI LN Equity GCP ASSET BACKED INCOME FUND

CGT LN Equity CAPITAL GEARING TRUST-ORD

TRG LN Equity TR EUROPEAN GROWTH TRUST PLC

JPGI LN Equity JPMORGAN GLOBAL GROWTH & INC

NAS LN Equity NORTH ATLANTIC SMALLER COMP

JCH LN Equity JPMORGAN CLAVERHOUSE IT

SONG LN Equity HIPGNOSIS SONGS FUND LTD

DIG LN Equity DUNEDIN INCOME GROWTH INV TR

SIGC LN Equity SHERBORNE INVESTORS GUERNSEY

SWEF LN Equity STARWOOD EUROPEAN REAL ESTAT

NAIT LN Equity NORTH AMERICAN INCOME TRUST

NBLS LN Equity NB GLOBAL FLOATING RATE INC

RICA LN Equity RUFFER INVESTMENT COMPANY LD

BIOG LN Equity BIOTECH GROWTH TRUST PLC/THE

HONY LN Equity HONEYCOMB INVESTMENT TRUST P

JEMI LN Equity JPMORGAN GLOBAL EMERGING MKT

BHMG LN Equity BH MACRO LTD

BUT LN Equity BRUNNER INVESTMENT TRUST PLC

EAT LN Equity EUROPEAN ASSETS TRUST PLC

LWI LN Equity LOWLAND INVESTMENT COMPANY

DIVI LN Equity DIVERSE INCOME TRUST PLC/THE

AAIF LN Equity ABERDEEN ASIAN INCOME FUND L

ATR LN Equity SCHRODER ASIAN TOTAL RETURN

JAI LN Equity JPMORGAN ASIAN INVEST-ORD

ADIG LN Equity ABERDEEN DIVERSIFIED INCOME

AAS LN Equity ABERDEEN STANDARD ASIA FOCUS

BGEU LN Equity BAILLIE GIFFORD EUROPEAN GRO

BCI LN Equity BMO CAPITAL & INCOME INVESTM

PAC LN Equity PACIFIC ASSETS TRUST PLC

BRGE LN Equity BLACKROCK GREATER EUROPE INV

BGLF LN Equity BLACKSTONE/GSO LOAN FINANCIN

USA LN Equity BAILLIE GIFFORD US GROWTH TR

RSE LN Equity RIVERSTONE ENERGY LTD

BRFI LN Equity BLACKROCK FRONTIERS INVEST

JRS LN Equity JPMORGAN RUSSIAN SECURITIES

CCPG LN Equity CVC CREDIT PARTNERS EUROPEAN

HINT LN Equity HENDERSON INTERNATIONAL INCO

JMF LN Equity JPMORGAN MID CAP INV TRUST

SUPP LN Equity SCHRODER UK PUBLIC PRIVATE

IIT LN Equity INDEPENDENT INVESTMENT TRUST

FAIR LN Equity FAIR OAKS INCOME LTD

BHGG LN Equity BH GLOBAL LTD-GBP SHRS

BGUK LN Equity BAILLIE GIFFORD UK GROWTH FU

SQN LN Equity SQN ASSET FINANCE INCOME FUN

FAS LN Equity FIDELITY ASIAN VALUES PLC

FEET LN Equity FUNDSMITH EMERGING EQ TRUST

PCFT LN Equity POLAR CAPITAL GLOBAL FINANCI

SST LN Equity SCOTTISH ORIENTAL SMALL COS

PCGH LN Equity POLAR CAPITAL GLOBAL HEALTHC

ANII LN Equity ABERDEEN NEW INDIA INVESTMEN

ABD LN Equity ABERDEEN NEW DAWN INV TRUST

HEFT LN Equity HENDERSON EUROPEAN FOCUS TRU

LTI LN Equity LINDSELL TRAIN INV TRUST

TIGT LN Equity TROY INCOME & GROWTH TR

BPET LN Equity BMO PRIVATE EQUITY TRUST-O

AEMC LN Equity ABERDEEN EMERGING MARKETS IN

JPE LN Equity JPMORGAN ELECT PLC-MGD GRWTH

SHIP LN Equity TUFTON OCEANIC ASSETS LTD

MWY LN Equity MID WYND INTERNATIONAL IT

TORO LN Equity CHENAVARI TORO INCOME FUND L

NCYF LN Equity CQS NEW CITY HIGH YIELD FUND

HNE LN Equity HENDERSON EUROTRUST PLC-ORD

JPEL LN Equity JPEL PRIVATE EQUITY LTD

SJG LN Equity SCHRODER JAPAN GROWTH FUND

MNP LN Equity MARTIN CURRIE GLOBAL PORT

HHI LN Equity HENDERSON HIGH INCOME TR-ORD

JZCP LN Equity JZ CAPITAL PARTNERS LTD

IBT LN Equity INTERNATIONAL BIOTECHNOLOGY

JMC LN Equity JPMORGAN CHINESE-ORD

VSL LN Equity VPC SPECIALTY LENDING INVEST

JPS LN Equity JPMORGAN JAPAN SMALLER CO TR

MTU LN Equity MONTANARO UK SMALLER COS INV

SCRF LN Equity SME CREDIT REALISATION FUND

KIT LN Equity KEYSTONE INVESTMENT TRUST

FJV LN Equity FIDELITY JAPAN TRUST PLC

JMI LN Equity JPMORGAN SMALLER COSIT PLC

SCP LN Equity SCHRODER UK MID CAP FUND PLC

UTL LN Equity UIL LTD

CCJI LN Equity CC JAPAN INCOME & GROWTH TRU

STS LN Equity SECURITIES TRUST OF SCOTLAND

SCF LN Equity SCHRODER INCOME GROWTH FUND

WPC LN Equity WITAN PACIFIC INVESTMENT TR

USF LN Equity US SOLAR FUND PLC

 

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SharperDingaan - interesting play you suggest. However, my understanding has been that the worst thing for the UK about Brexit has been the uncertainty. Now that there is a clearer picture that it is going to happen, could the Pound not strengthen?

 

One month after Brexit, would you expect GBP to continue trading at a premium to the Euro?, as it does now,

Or is it more likely that GBP trades at a discount to the Euro? - to promote badly needed trade, and the jobs that go with them.

 

The current premium is approximately 9%. If it swings to an equal but opposite discount, it implies an 18% devaluation in GBP

Devaluations typically occur over time, the populace often doesn't realize the significance, and 18% is relatively mild.

If you have the ability, they should be taken advantage of.

 

About once/decade the CAD/US FX rate becomes < 1.0000, versus the more 'normal' 1.3200 -1.3500 range;

routine periodic trade based appreciation/devaluation of roughly 32-35%.

 

Just a different POV.

 

SD

 

 

 

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SharperDingaan - interesting play you suggest. However, my understanding has been that the worst thing for the UK about Brexit has been the uncertainty. Now that there is a clearer picture that it is going to happen, could the Pound not strengthen?

 

One month after Brexit, would you expect GBP to continue trading at a premium to the Euro?, as it does now,

Or is it more likely that GBP trades at a discount to the Euro? - to promote badly needed trade, and the jobs that go with them.

 

The current premium is approximately 9%. If it swings to an equal but opposite discount, it implies an 18% devaluation in GBP

Devaluations typically occur over time, the populace often doesn't realize the significance, and 18% is relatively mild.

If you have the ability, they should be taken advantage of.

 

About once/decade the CAD/US FX rate becomes < 1.0000, versus the more 'normal' 1.3200 -1.3500 range;

routine periodic trade based appreciation/devaluation of roughly 32-35%.

 

Just a different POV.

 

SD

 

I don’t think premium or discount is the right thing to look at.  What you really want is PPP adjusted premium or discount.  For example I can always add or subtract 3 zeros on or off the British Pound and  change UK prices by the same amount and nothing would change but the UK/Euro would swing to a premium or discount.  Not sure what your analysis would be if you adjusted for PPP though...

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PPP is a long term measure, and ASSUMES no further changes. Brexit is a continuous application with extreme change.

A more practical independent measure is the 'Big Mac' Index, which is often closer to current FX values.

https://www.bigmacindexconverter.com/

 

Plug in the numbers for GBP and Euro. GBP is at a premium to the Euro of ((100/91.26)-1)x100, or 9.6%

About the same as the current GBP/Euro FX rate.

 

SD

 

 

 

 

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