Tuesday, 5 May 2020

Personal Assets Trust - Portfolio Addition

The markets have been kind to the small investor these past few years. I have been lucky and managed an average return from my portfolio of 8% per year for the past decade. However, the mood has suddenly turned darker and I am looking to lock in some of those gains. I have now added a few government bonds to my portfolio but I recently had another look at an old favourite Personal Assets Trust (PNL).

This is one of the trusts designed to preserve capital and so is loaded with defensive assets such as government bonds and large, globally diverse equities. The trust joined my portfolio back in 2013 at a purchase price £343 but was sold the following year as I needed a higher income yield during the period between taking early retirement and state pension.

It is listed in the 'Flexible' sector on the AIC website and other similar trusts include RIT Capital, Ruffer and one of my former holdings, Capital Gearing.

Its stated aim is to protect and increase (in that order) the value of shareholders' funds over the long term.

In 2009 PNL engaged Sebastian Lyon as its 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. Troy have now been appointed as manager from this month.


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.

Personal Assets v FTSE A/S Index YTD
(click to enlarge)
Personal Assets' investment style tends to outperform in falling markets and lag in sharply rising ones. This is certainly the case for the current market turmoil.
Over the past 10 years the trust's share price total return has been 5.7% p.a compared to around 5% p.a for the FTSE All-Share index.
Commenting on the current crisis Seb Lyon says
"...the pandemic has exposed inherent fragilities in our economic system. Our view is that this crisis will be a prolonged and drawn out process. We consider the suspension of economic activity across the globe will result in the deepest downturn since the 1930s with few businesses unaffected."

According to the latest quarterly report, equities make up around 44% of the portfolio - largely USA and UK. The manager favours large, well-financed companies which have stable demand and low debt... preferably net cash. UK-listed holdings include Unilever, Diageo and BATS. In the US there are Coca-Cola, Microsoft, Google, Procter & Gamble and Berkshire Hathaway. Gold accounts 10% of the portfolio and the remainder consists of assorted government bonds - mainly US TIPS -  so fairly defensive!

Over the past year the manager has sold GlaxoSmithKline and Imperial Oil and reduced Coca Cola. Additions include Alphabet (Google), Visa and Medtronic.

Many of the directors as well as the manager Lyon have significant share holdings in the trust which is always a good sign as they obviously have an interest in ensuring the success of their investment.
5 Yr Performance v FTSE A/S Index
(click to enlarge)

I am no longer interested in income but the trust has paid dividends of £5.60 p.a. in each of the past 7 years - a current yield of 1.3% which is probably better than interest on most building society cash savings at present.

Fortunately they have recently sold the only oil & gas holding so the portfolio is fossil-free and therefore eligible for my portfolio as a replacement for Capital Gearing which holds the iShares FTSE ETF with its high exposure to the likes of Shell and BP - and hence the reason for that trust being sold last year. Likewise with my multi-index funds like Vanguard Lifestrategy and HSBC Global Strategy which had to be set free last year.

I would be happier if the trust did not hold the shares in the tobacco companies and also I would prefer the more traditional gilts to short dated index-linked TIPS but I can account for this via my other portfolio holdings. The main consideration for the next year or two (...five?) is stability and preservation and I hope this will help on both counts.

I like the look of this trust for its conservative/defensive qualities - and the fact it is different to most other investment trusts. I also like the concept of preserving capital in these uncertain times.

The shares were added to my portfolio this week at the price of £432. The trust is due to publish results for the full year to end April next month.

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!


  1. Interesting, thanks for this write-up, DIY. I took at look at PNL recently, with a view to adding a more robust/defensive investment trust to my portfolio. Also had a look at RIT Capital. The latter's management fees put me off and the main reason why I didn't jump on PNL was the price per share, as I only had a couple of hundred to spare! It's on my watchlist anyway so something for the future when I'm rebalancing.

    1. Thanks weenie. Yes charges are not too high on this one, maybe OCF 0.8% but portfolio turnover is very low so a bit like Nick Train's FGT, I'm not sure quite what they do for the fees!

      And yes you don't get too many shares for your money at £430 each but you could ask Freetrade if they could make this available for fractional trading? Good luck if you decide to add it at a later date.

      I may well top up my holding if there is a second dip later this year.