IN FO­CUS: LLOYDS BANK­ING GRP ‘ THE BEST- IN- CLASS BANK’

The Daily Telegraph - Your Money - - FRONT PAGE -

Lloyds has been an im­por­tant hold­ing of ours for years. Since the fi­nan­cial cri­sis in 2008 we have held a num­ber of its bonds and now in­vest in its shares too.

Banks have un­der­gone a real turn­around in re­cent years. They have de­risked, built up their cash re­serves, got rid of some of their non­core busi­nesses and, in the case of many, have made a profit.

In the im­me­di­ate af­ter­math of the cri­sis we thought there was a lot of value on the bond side of things, as banks un­der­went that change.

We bought some of the older bonds we hold in the port­fo­lio at a mas­sive dis­count to their in­trin­sic value fol­low­ing the crash. Since then their prices have im­proved dra­mat­i­cally.

As long as the bank main­tains healthy lev­els of cash, the like­li­hood of in­cur­ring a loss is very low.

Lloyds has been a solid in­vest­ment for us. A nice fea­ture of this fund is that it can hold the bonds, the shares or a com­bi­na­tion of the two. We have a small al­lo­ca­tion to Lloyds shares. The bank has now re­turned to prof­itabil­ity and is pay­ing a nice div­i­dend.

This is the best-in­class bank, and we will con­tinue to hold it. leav­ing us with a tidy cap­i­tal gain and a good in­come.

On the worst, we were too early in ex­pect­ing in­ter­est rates to go up. We in­vested in short-term bonds [which fall less when in­ter­est rates rise than longer-term bonds] in 2014 and 2016, which led to pe­ri­ods of un­der­per­for­mance.

In hind­sight that was a mis­take and we un­der­per­formed our ri­vals. Yes, of course, and my fam­ily has money in it too.

It’s a sim­ple flat-rate man­ager fee. There is no spe­cific bonus based on as­sets un­der man­age­ment, but of course it’s im­por­tant and it be­comes a fac­tor in­di­rectly. I al­ways wanted to be a pro­fes­sional foot­baller – the only prob­lem was that my feet were too small. I also tried my hand at jour­nal­ism for a while, be­fore I fell into bank­ing.

www.tele­graph.co.uk/funds

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