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