Yahoo Finance Listed funds have a big flaw. This one offers a way around it
Last week we reviewed four “wealth preservation” investment trusts that we had tipped in the past and said all still offered savers a solid option in the battle to cope with inflation and geopolitical shocks. Today we devote the column to another such trust, not so far covered here: Personal Assets.
What is immediately striking about this trust is its long-standing mission statement, portrayed prominently on its literature: “Our policy is to protect and increase (in that order) the value of shareholders’ funds per share over the long term.”
A glance at a long-term share price chart suggests that it has made a decent stab at that aim. While no investment portfolio that seeks to make meaningful gains can avoid short-term dips entirely, those experienced by Personal Assets are shallow and short-lived by comparison with a stock market index such as the FTSE 100. The overall direction is decisively upwards.
The mix of assets that the trust’s managers, Sebastian Lyon and his team at Troy Asset Management, use to achieve this outcome resembles to some extent those of two of the funds we covered last week, Ruffer Investment Company and Capital Gearing.
All three have substantial holdings in index-linked government bonds (36pc for Personal Assets); all have gold (although Capital Gearing’s holding is only about 1pc). All have shares: Personal Assets has 35pc of its assets in the stock market and tends to invest in a small number of “quality” companies – those that make high returns on capital thanks to sustainable barriers against competitors.
Also notable is the mix of currencies in which the assets held by these portfolios are denominated. As we have written in this column of late, we think exposure to other currencies, principally the American dollar, is a vital plank of any strategy to maintain the real value of your savings because of the prolonged weakness we expect in the pound.
Personal Assets has 56pc of its assets in pounds and 40pc in dollars if we include gold (while it’s often seen as a currency in its own right, it is still normally denominated in dollars), 3pc in the Swiss franc and 1pc in the euro.
The fund says its has “no predetermined maximum or minimum levels of exposure to asset classes, currencies or geographic areas” and it is prepared to shift the balance of assets markedly in response to changing conditions – in “exceptional circumstances” it says it could even hold all its money in cash.
Currently it is defensively positioned; its exposure to shares is at the lower end of a 15-year range of 32pc to 72pc. In the words of analysts at Investec, the bank, “the [trust’s] priority is now preserving capital, with significant dry powder to invest on weakness”.
One notable feature of the fund is its discount control policy, which has ensured that the shares never trade at a meaningful discount or premium to net asset value. While this does mean that investors do not get the opportunity to buy at a bargain price, they do have the comfort of knowing that they will almost certainly be able to sell without having to accept a discounted price.
When you run a wealth preservation trust it does make sense to do this: it would be a shame to achieve capital preservation from the assets in the portfolio only for volatility to be introduced into shareholders’ actual returns by variations in the discount or premium.
Also striking is the degree of investment in the fund by its board and managers. Lyon has a £9.8m stake; his assistant, Charlotte Yonge, has £171,000. The chairman of the board and another director have stakes worth about £1.6m; a third director has about £1m and a fourth about £500,000. No director lacks a meaningful stake.
This is another trust well placed to protect your savings through treacherous times.
Questor says: buy
Ticker: PNL
Share price at close: £488
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