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Personal Assets Trust: July 2020 update

Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of Personal Assets Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • We like the simple philosophy behind this trust, with the potential for long-term growth and a focus on preserving wealth in weaker markets
  • Manager Sebastian Lyon is part-owner of Troy so we think he's incentivised to perform
  • He also has a good team of analysts around him to provide support on this trust

How it fits in a portfolio

Rather than trying to shoot the lights out, this trust aims to grow investors' money steadily over the long run, while limiting losses when markets fall. It tries to experience less ups and downs than the broader global stock market or a portfolio that's mainly invested in shares. As a result, it could form the foundation of a broad investment portfolio, bring some stability to a more adventurous portfolio, or provide some long-term growth potential to a more conservative portfolio.

Manager

Sebastian Lyon took over management of Personal Assets Trust in March 2009. He's since managed the trust using the same investment philosophy that was founded when Troy Asset Management was set up in 2000. He has also managed the Troy Trojan Fund since its launch in 2001 – this is an open-ended fund that is invested similarly to Personal Assets Trust. Investors in the trust should be aware that closed-ended funds can trade at a discount or premium to the net asset value.

Lyon is also CIO (Chief Investment Officer) of Troy Asset Management. This position takes up some of his time, but he's previously handed over some of the day-to-day company management responsibilities to capable colleagues. This leaves him to focus more of his time on investment management. Lyon also has investment management support from Charlotte Yonge, who carries out analysis across a range of assets, and overall we think Troy is home to a stable investment team.

Process

Lyon likes to keep things simple. He aims to shelter investors' wealth just as much as grow it.

To do this, the trust is constructed around four 'pillars'. The first contains large, established companies Lyon thinks can grow sustainably over the long run, and endure tough economic conditions. He has tended to focus on companies based in developed markets, such as the UK and US. This includes some of the world's best-known companies with highly recognisable brands, such as Microsoft, Unilever and Nestlé. The manager has the freedom to invest in higher-risk smaller companies as well, but the trust hasn’t had much exposure to this area of the market for several years.

Last year, Lyon reduced the trust's exposure to shares to 30%. He felt many share prices looked expensive and company earnings might not be strong enough to help prices grow much further. Investments in Canada's Imperial Oil and UK accounting software company Sage were sold from the trust. The manager later took advantage of share price falls in February and March this year, by investing in companies at more attractive prices.

The rest of the trust is made up of investments that could bring some stability to the portfolio during more difficult markets. The second pillar is made from bonds. As at the end of April 2020 (as reported in the latest annual report & accounts), 31.3% of the trust was invested in US index-linked bonds, which could shelter investors if inflation rises. Part of the trust was also invested in traditional UK government bonds (gilts).

The third pillar consists of gold-related investments, including physical gold, and accounted for 9.9%. Lyon added to gold holdings near the market lows in March. The final pillar is cash, and a very small part of the trust was invested in property. While the portfolio contains a diverse range of investments, it is concentrated. This approach means each investment can contribute significantly to overall returns, but it can increase risk. The manager has the flexibility to use derivatives and gearing (borrowing to invest) which, if used, adds risk.

Culture

We like that Troy's fund managers are dedicated to the same investment philosophy that was established two decades ago. The group has always been clear about the way its range of funds are managed, and the managers don't stray into overly complicated areas of investment markets. Wealth preservation is key, and each manager adheres to this mantra.

Lyon is a part-owner of Troy Asset Management, so we believe he's incentivised to perform, and for his funds and the business to do well over the long term. Other senior members of the group also own a part of the business, and we think this contributes to the stability and loyalty of the team. While Troy is home to a small, close-knit team of investors, the group has recruited more junior members over the years to boost resource and ensure the funds are left in good hands as and when more senior members retire.

Cost

The trust's ongoing charge for the year to 30 April was 0.73%. Investors should refer to the latest annual reports and accounts and Key Investor Information for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies.

Performance

The chart below shows the trust's performance since Lyon took over its management in 2009. Over this time it has grown 147.4%, which we think is an attractive return for a more conservative trust. It has steadily outperformed LIBOR + 4%, which we view as a fair benchmark. Remember past performance isn't a guide to future returns.

The trust hasn't done as well as the broader UK stock market, as measured by the FTSE All Share Index, which is the trust's main comparator. We expect the trust to perform in this way though. Even with the market setback this year, global stock markets have risen strongly over the past decade, and the trust's more cautious approach means it's less likely to keep up with rapidly rising markets.

Importantly, the trust has tended to come into its own and hold up much better in weaker markets. We saw this earlier in the year when global markets stumbled amid the coronavirus outbreak. Exposure to assets such as cash and gold provided some resilience, while the shares of companies that provide everyday consumer essentials, such as coffee, chocolate, toothpaste and pet food, held up relatively well. Remember though, the trust will go up and down in value, so you could get back less than you invest.

Personal Assets - Performance under Sebastian Lyon

Past performance is not a guide to the future. Source: Lipper IM to 30/06/2020.

Annual percentage growth
June 15 -
June 16
June 16 -
June 17
June 17 -
June 18
June 18 -
June 19
June 19 -
June 20
Personal Assets Trust PLC 13.2% 8.2% -0.8% 8.4% 5.6%
FTSE All-Share 2.2% 18.1% 9.0% 0.6% -13.0%
LIBOR GBP 1 Month + 4% 4.5% 4.3% 4.4% 4.7% 4.5%

Past performance is not a guide to the future. Source: Lipper IM to 30/06/2020.

Find out more about Personal Assets Trust including charges

Personal Assets Trust Key investor information


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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