Trust has one key mission: to protect wealth
INVESTMENT trust Personal Assets goes about its work slightly differently to most funds. Its main objective is to preserve the ‘real’ value of investors’ wealth – that is, to ensure it increases in value sufficiently to beat the corrosive impact of inflation. The pursuit of growth and income are lesser priorities.
On the surface, it’s not a particularly sexy investment proposition, but demand for its shares has never been stronger. Since Sebastian Lyon, of Troy Asset Management, took over the fund nearly 11 years ago, the number of shares in issue has quadrupled. ‘It’s a trust that private investors, charities and wealth managers all like,’ says Lyon. ‘It’s broadly diversified and they like the fact that we aim to protect wealth in real terms.’
The result is a £1billion investment trust that since Lyon’s appointment has generated shareholder returns of more than 140 per cent. Over the past ten years, annual returns have averaged 6.1 per cent – less than the 8.2 per cent annual return from the FTSE All-Share Index, but with less volatility.
The portfolio comprises a mix of assets, from physical gold through to US index-linked Treasury bonds, cash and equities. The result is a trust that tends to underperform global equity funds when stock markets are racing ahead, but whose share price falls less when markets correct.
Currently, the trust has 32 per cent exposure to equities, primarily via the US. It’s the smallest percentage position in equities since Lyon took over in March 2009. He says the stock market’s upward re-rating of many companies over the past decade will not be repeated over the next ten years, hence his caution.
Yet with interest rates in both the US and the UK in downward mode, and yields available from bonds so pitiful, he believes the trust’s equity exposure will not fall much lower. He’s sure there will be ‘no cataclysmic’ fall in equity markets this year although he predicts it could be a ‘messy’ 12 months.
Most of the trust’s key equity holdings are longstanding, going back to Lyon’s appointment in 2009 – the likes of Nestlé, Unilever and Coca-Cola.
Yet he has not been frightened to ring the changes. Last year, positions in tobacco and alcohol giant Altria as well as Glaxo and Imperial Oil were all wound down. New holdings were made in US medical device manufacturer Medtronic, US manufacturer Agilent Technologies and tech giant Alphabet. Outside of equities, the trust’s exposure to gold has been tickled up while the biggest position is now in US index-linked Treasury bonds – offering Lyon the opportunity to make a return ahead of inflation.
Unlike other investment trusts, its board prefers to keep the price of the shares in line with the value of the underlying assets. This is done through the issuing or redeeming of shares, thereby ensuring the shares do not trade at a big premium or discount.
Lyon says: ‘The last thing investors want in a problematic market is to see the price of their shares fall further than the value of the underlying assets.’
The trust’s growth in assets has resulted in the annual charge falling to 0.74 per cent. The dividend, a lowly 1.3 per cent, makes it income unfriendly while its shares are valued at more than £430, making it unsuitable for investors looking to invest small amounts every month. London Stock Exchange identification number: 0682754.