PNL is run expressly for private investors. Its investment policy is to protect and increase (in that order) the value of shareholders' funds over the long term.
The trust became an independent in 1990 and was managed for many years by Ian Rushbrook until his untimely death in 2009. During his stewardship the PNL share price rose over 500%. As an independently managed investment trust, Personal Assets had total freedom to use gearing (i.e. borrowing to leverage its position), or liquidity (i.e. holding funds in cash rather than investing in the stock market) as appropriate.
In some circumstances the trust would continue to hold individual company shares, while hedging its position on the overall market using derivatives.
"We view our level of liquidity or gearing as probably the most fundamental decision we have to make on behalf of the shareholders of Personal Assets -- much more so than which individual stocks we should buy or sell."
During the run up to the so called ‘dot com’ technology bubble, Rushbrook was moving into cash as early as 1996. At its height the trust was 50% cash and was able to outperform the market during the downturn of the early 2000s.
In 2009 PNL engaged Sebastian Lyon as its new adviser. He runs Troy Asset Management which he established in 2000 primarily to manage the affairs of the late Lord Weinstock, and from whom he inherited his conservative style of investing and focus on wealth preservation.
Personal Assets Trust is unique with its commitment to the protection of shareholder wealth combined with its definition of ‘risk’ - PNLs definition is focussed on the ‘risk of losing money’ as opposed to most other trusts where risk is defined as volatility of returns relative to a benchmark index.
|5 yr comparison v FTSE All Share Index|
(click to enlarge)
The Investment Adviser, Sebastian Lyon, said:
"… Personal Assets' investment style tends to lead us to outperform in falling markets and lag in sharply rising ones, and the last year has been no exception. Over the year to 30 April 2013 our net asset value per share ("NAV") rose by 4.8%, while our comparator, the FTSE All-Share Index, rose by 13.6%.
Since April 2000, the trusts NAV has risen in 9 years out of 13 compared to the All-Share's 7. When it did fall, it did so in each case by significantly less than the All-Share. Between April 2000 and April 2013, NAV rose by 76.1%compared to the All-Share's 12.9%, so PNLs investment style succeeded not only in reducing risk but also in increasing long-term reward.
Returning to income - which is not what this investment trust is about as the current yield is £5.60 per share or around 1.6% - the trust has the option to withdraw cash on a fixed quarterly basis via its ‘Cash Income Option’. So for those who are able to invest a sizeable sum, rather than specifying a rate of return, investors are able to withdraw a specified sum (minimum £500). So, with say a holding to the value of £50,000, an annual income of £2,000 could be taken - 1.6% dividends and 2.4% from capital. In most years, this rate of withdrawal would be more than covered by capital appreciation and dividends so should be a sustainable longer term option.
Unfortunately I am not (yet) in a position to take advantage of this facility so will need to be content with the quarterly dividend distribution!
According to the latest quarterly report, equities make up around 44% of the portfolio - largely USA and UK. They include Microsoft, BATS, Nestle, Coca-Cola, GlaxoSmithKline and Johnson & Johnson. The rest is mainly gold at just under 12% and assorted government bonds 44% - so fairly defensive!
I like the look of this trust for its conservative/defensive qualities - and the fact it is different to most other investment trusts in my portfolio. I also like the concept of not losing money. I am reminded of legendary investor Warren Buffett’s investing rules - Rule 1, never lose money. Rule 2, Never forget Rule 1.
For those wanting to explore PNL further, here’s a link to their website. The quarterly reports make a good read.