Rated Fund 2016-2017. A defensive stance, waiting for the right opportunities
This trust appears in the Association of Investment Companies' flexible investment sector, which was created at the beginning of 2016 for trusts investing in a range of assets.
Capital Gearing is also one of the few investment trusts that aims to produce an absolute return. It has seen periods of underperformance such as in 2013, but manager Peter Spiller's long-term record is widely regarded as exceptional. He has managed the trust since inception in 1982.
The trust's portfolio is made up of equities, bonds and commodities. Investment in equities is normally through trusts and other collective investment vehicles.
It is flexible in its asset allocation and had a near 100 per cent weighting to equities in the early 1980s when valuations were low and corporate balance sheets looked strong. In recent years, Spiller has been more sceptical about valuations and as a result the trust's equity exposure has been kept low.
The trust finished 2016 with a very defensively positioned portfolio, with a low allocation to equities and an emphasis on short-duration in the fixed income portfolio. Spiller believes that high asset prices mean that the prospects for medium-term returns are muted.
His main aspiration is to preserve capital after fees and inflation, in the expectation that better opportunities will present themselves in future. He therefore has a tranche of liquid assets waiting to be deployed into equity markets when valuations are more compelling.