Anyone else implementing a Permanent Portfolio in the UK?

[Jake]

Hello all! What a joy it is to find a forum of like minded people who use the PP. Like finding a little haven of rational people in an often crazy looking investment world  Greetings from the little island known as Britain where I am based. Is anyone else here using the PP approach in the UK? I'd love to trade thoughts on the way others have done it, especially the products that they are using. In case it is of interest, I've applied the PP in a UK context in the following way:

I use FTSE All Share index funds for the stocks component.
I use the longest term UK government Gilts and longest term corporate bonds that I can get for the long term bonds part. The Gilts are inside a pension plan as that helps lower the tax burden.
Gold is international anyway (so no change from the Harry plan there).
The cash component is currently in normal commercial banks- I know I know, Harry would not be pleased to hear this, especially in these times. I am a little unsure about what the best UK equivalent is for the Cash component... it is a work in progress.

Love to hear anyone else's thoughts on a UK based Permanent Portfolio- especially on the cash part.

[stone]

Jake, I'm also UK based. I think "gizmo-rat" and "clive" are too. I got the impression that National Savings and Investments index linked savings certificates are currently the best cash holding for UK citizens. If you withdraw you lose the current years interest but for each whole year held you get RPI+0.5% tax free. If things change radically and we get above inflation interest rates, then shop around. Clive has made some posts about a "rate tart ladder approach".

For the bonds I used the 2060 4% gilt. Do even the safest (lowest yield) corporate bonds show the desired strong inverse correlation in price with stocks that recently has been the case with long dated gilts? The 2060 4% gilt  swung in price from 92p to 104p as stocks floundered since earlier this year.

I'm very heterodox with the stocks because I'm an index fund skeptic. I hold  investment trusts with one third of the stock allocation as CTY, one third as BRSC and one third as TEM. I appreciate that that flies in the face of what is viewed as kosher.

[stone]

Clive, I initially thought of getting undated gilts rather than 50year but read something saying that they had become increasingly illiquid with large bid/ask spreads. On the online broker x-o, I can get 50year gilts online but none of the undated gilts seem to come up. Are the undated gilts also call-able by the government (ie could they in theory buy them back if they so wished)?

[gizmo_rat]

Hey Jake, welcome.

There's an older thread here;

http://gyroscopicinvesting.com/forum/ht ... ic.php?t=0

about implementing in the UK and theres also at least a couple of other people in the UK aside from those stone mentioned.

You might want to look at some of the discussion here around corporate bonds when considering what you are holding as your PP.

My (pre pp) corporate bonds didn't do what they were supposed to do in 2008, where as gilts did.

Cash wise I'm mostly on ILSCs now as a result of earlier discussions here.

[Jake]

Wow, thanks so much everyone for all the great info! I'll nom my way through the old threads and the links I really appreciate all the help.

[tbone]

Hey Guys, I'm just going through the process of setting up a UK based PP too, so I'd like to add my thanks for the above info too

Which index fund do you use Jake, are they all much of a muchness? I was looking at the HSBC one. 

Tim.

[gizmo_rat]

Which index fund do you use Jake, are they all much of a muchness? I was looking at the HSBC one. 
Tim.

I found this a useful overview.

http://monevator.com/2010/10/26/low-cos ... -trackers/

but take note of the gotchas if you get the Vanguard fund through Alliance trust.

[tbone]

Does anyone know if there are any funds available that track short or long dated UK treasuries?  I was going to buy them through Hargreaves Landsdown, but it turns out gilts have to be bought over the phone, so the dealing charges go from 11 quid to about 50   So I was wondering of there are funds that can be used instead?

Thanks,

Tim

[tbone]

Does anyone know if there are any funds available that track short or long dated UK treasuries? 

Actually, ignore that - I think the annual management fees for funds are going to exceed the dealing costs for Gilts, so no point.

[stone]

x-o charges £5.99 for dealing gilts.