The trust aims to avoid permanent capital loss while growing income over the long term
Thursday 21 Feb 2019 Author: James Crux

While equity markets have recently rallied, myriad uncertainties remain in the form of worries over global growth, the impact of trade wars and the effects of monetary tightening, meaning investors need to be on their guard.

Those of a more nervous disposition might be looking to add some defensive ballast to portfolios. We suggest you snap up Personal Assets Trust (PNL), a defensive fund with strong capital preservation credentials, intent on avoiding permanent capital loss and with a focus on growing income over the long term through investments in sustainable business franchises.

Personal Assets Trust is a self-managed investment trust, run by its board, with an absolute return mandate. Its ongoing charge is 0.89%.

The fund’s stated objective is to protect and increase (in that order) the value of shareholders’ funds over the long-term.

The quarterly dividend paying trust has a well-established zero discount policy, issuing shares at a premium to satisfy demand for the shares. Even though it currently trades at a modest 1.4% premium to net asset value, Personal Assets is a liquid trust that should tempt defensively-minded investors.

Troy Asset Management has been investment adviser to Personal Assets since 2009. Under the management of seasoned investor Sebastian Lyon, the fund has exhibited considerably lower volatility than the FTSE All-Share.

We believe Personal Assets Trust should continue to preserve capital in testing times while delivering attractive absolute returns over the                          long term.

Lyon’s emphasis is on strategic asset allocation and stock selection. He is currently cautious which explains why Personal Assets Trust has material exposure to gold, the yellow metal and store of value boasting inflation-busting credentials, as well as cash and US and UK index-linked bonds.

This mixture means Personal Assets Trust is likely to lag a rising market, yet protect capital during periods of strife.

On the equities side, the focus is on excellent businesses trading at attractive prices. An owner not a trader, Lyon has a rigorous focus on quality, investing in businesses with high returns on invested capital which are sustained by durable competitive advantages.

Personal Assets Trust favours sectors with low cyclicality and capital intensity such as healthcare and consumer goods, while Lyon avoids the likes of airlines, miners and housebuilders and also shuns highly acquisitive and indebted companies.

The portfolio currently includes technology giant Microsoft, beverages behemoth Coca-Cola, food group Nestle and PG Tips brand owner Unilever (ULVR). You will also get exposure to Warren Buffett’s Berkshire Hathaway investment vehicle. 

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