Reply To: Carillion's effect on sector average calculation

[Stephen Bland]

As you indicate Jeff, my advice is to have just one HYP and not several. Topping up then follows the procedure I have described.

Where a portfolio was originally constructed from one of my earlier HYPs, then if the investor wishes to add new sectors from my later selections, that’s easily done whilst still maintaining just a single portfolio. The amount to be added into a new sector is the then sector average value as I mentioned in the latest TDL.

If for some reason you have operated multiple HYPs and wish to keep them that way, then logically you should treat each portfolio separately when using my topping up procedure. Thus the average sector values will vary between portfolios. But that’s really a clumsy and unnecessarily complicated way to run things and I don’t advocate this.

I suggest you should reconsider all your HYPs as one single portfolio, thereby making it simple to add new sectors or top up existing ones. In answer to your final point, when topping up you should never overweight a sector, you add only to the underweight sectors and even then just enough to bring it up to the new average. (ie. including the new money). Again this will be solved in your case buy merging all your HYPs into one. You’ll then know exactly how many sectors you have, the total portfolio current value and consequently the average sector current value and the margin available for topping up below average sectors or alternatively, adding new ones.