This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of five books [see sidebar and books tab]
The aim of this trust is firstly to preserve capital and then
to achieve capital growth in absolute terms rather than relative to a
particular stock market index, principally through a wide variety of
investments including variable weightings of investment trusts, cash,
bonds, index-linked securities and commodities when it is considered
It is just over two years since the trust was added to my
portfolio as a 'safe house' for some of the proceeds from various sales. After
several years of above-average returns from equities, it seemed like a good
plan to shelter the profits and de-risk the portfolio.
There are a few trusts which offer to preserve capital such
as Ruffer, Personal Assets and RIT Capital Partners. They all work on the
principle that accepting a more solid but lower return from a diverse asset mix
is a price worth paying for the peace of mind from not suffering potential
losses from riskier or more concentrated assets.
The trust has recently announced results for the full year to
5th April 2019 (link via Investegate). Total return per share has increased by
a respectable 7.9% with net assets increasing to £40.82.
The focus of this holding is capital preservation rather than
income. Last year the dividend was 27p however this year revenues have again
increased to 51p and the board have proposed an increased payout of 30% to 35p
which includes a special dividend of 12p. The yield however is still less than
The portfolio is currently very defensive with 35% in cash or
short-dated gilts and a further 25% in US inflation linked government bonds.
Then there is 18% allocated to preference shares and corporate debt. A further
15% is allocated to property and then a similar percentage to equities.
I was particularly pleased to note that new positions have
been opened in renewable energy infrastructure with the additions of John Laing
Env. Assets Trust, TRIG, Greencoat UK Wind, Foresight Solar and Greencoat
Renewables. The combined returns from these additions was 20% so I hope this
will encourage the management to increase their weighting over the coming year.
Commenting on the year, manager Peter Spiller said
"With real rates set to remain at
historically low levels, it is not easy to identify a short-term catalyst that
will bring an end to the current business cycle and the associated powerful
equity bull market. The fragile macro-economic backdrop, combined with elevated
equity and bond valuations, suggest that portfolio returns will be modest over
the medium term and could be negative if there is a period of recession.
with the past year, capital preservation remains the key objective of portfolio
allocation, until valuations return to more attractive levels. An objective of
merely preserving capital sounds modest. But, if it can be delivered over a
period of normalising asset prices it will represent a significant achievement
and lay the foundation for potentially more exciting returns in the future".
3 Yrs Comparison v FTSE All Share
(click to enlarge)
I am reasonably content with my first couple of years. Certainly I
would be happier if the trust did not have 2.2% holding in a FTSE 100 ETF and
maybe that positition will be reduced in due course. The current share price is £42.50
which is 10% up on my purchase price. In addition there is a further 2% in
dividends so an average of 6% p.a. is not too bad for a very defensive
portfolio. I am also encouraged to see the ongoing charges have reduced from
0.77% to 0.70%...every little helps.
The trust provides a good counter-balance to some of my racier
holdings such as Scottish Mortgage and Mid Wynd and the proof of the pudding
will be the combined return on the whole basket at the end of 5 years.
So, back to the bottom drawer with this one and review again at
the same time next year.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation -always DYOR!