Thursday, 5 June 2014

Personal Assets Trust - Portfolio Sale

I added this to my portfolio of investment trusts last August. My previous update was November following their half-year results - here’s a link to the post.

They have today issued results for the full year to 30th April 2014 (link via PNL website). Share price total return for the year was -(5.5%) compared to a gain of 10.5% for the FTSE All Share index. In fact the trust has now failed to beat the index over not just the past year but also the past 3, 5 and 10 years - quite an under achievement!

Given the trusts remit / investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term, I imagine the management will be facing many increasingly frustrated investors at the forthcoming AGM and will have many uncomfortable questions to answer.

Investment adviser, Sebastian Lyon concluded his report:

"We are in the midst of an extraordinary and unprecedented monetary experiment which is unlikely to end well. More than five years after the financial crisis, interest rates remain at emergency levels (in the case of the UK, at a 300 year low) and there is little sign of an appreciable increase any time soon. Stock markets are back at their all-time highs (in nominal terms, at least), but valuations are overstretched and vulnerable, and we have yet to see the negative consequences of the US’s tapering of QE on markets which have grown addicted to this sweet poison. Money printing has failed to secure the desired ‘escape velocity’ for western economies and corporate earnings have stagnated over the past two years. The disconnect between the economy and the stock market has become ever wider. Those piling into equities today may well be locking in very low prospective returns with commensurate high volatility and downside risk. Prudence will not always be punished. It is reckless behaviour that is ultimately penalised with permanent losses. Stock market bubbles make investors look foolish either before or after the peak. The last year gives no doubt as to where we stand".

In my earlier post I said 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 mmm….

Everyone makes mistakes from time to time and I think there can be little question that PNLs allocation of such a high weighting in gold and government bonds totaling 55% in recent years and just 45% in equities was a big mistake.

My mistake was to sell the likes of RPC Group and DS Smith last Summer and recycle some of the proceeds into Personal Assets. I will try to learn from this for the future.

Of course, PNL may well be proved correct when the markets head south but I have not been persuaded during my brief period of ownership and have therefore decided to sell at £333 - a 3% capital loss.

If anyone has any thoughts on Personal Assets or would like to share their mistakes of the past year, please feel free to leave a comment below.


  1. Dear DIY Investor,

    I think the allocation of the trusts funds as you highlighted is never a good idea. Why would anyone want fixed income? With good dividend companies your income has a greater chance of increasing even if markets go against you.
    Markets tend to fall when certain stocks get to PE ratio's of 25 and above, but a 3% loss is not to bad.

    Keep up the good work.

    Louis Gunn

    1. Hi Louis,
      Thanks for your comment. The management take the view that equity markets are over valued and have stocked up on gold and gilts with a view to making a profit when the correction comes. So far, they have been wrong and it will be interesting to see how long they maintain this position.

      Of course, they work on long term cycles and they could still be proved correct but I don't want to hang around long enough to find out they had it totally wrong. Lets come back to this one in 12 months and see how it has panned out?

  2. Ominous looking selling price: 333. the fabled triple nelson!

    1. Hi FI,

      Ha ha - I am standing on one leg as I write! Wish it had been £666.