Investment trust awards 2017: Best mixed asset trust

Lord-rothschild

Contenders: 13 trusts in the flexible investment sector

Winner: RIT Capital Partners

RIT Capital Partners (RCP) retains this award with the best three-year returns in its sector bar Miton Global Opportunities, which sparkled in 2016 but was disappointing in the two preceding years. MIGO’s turnaround reflects improved returns for more cyclically oriented stocks, which left RCP’s defensively oriented equity holdings out in the cold.

Including hedged as well as long-only portfolios, equities represented 56 per cent of RCP’s total assets at end January, and barely scraped into the black last year. The trust’s sizeable exposure to unquoted companies and to absolute return & credit strategies also achieved very muted returns. It was therefore largely thanks to a large gain on its currency overlay that the trust achieved net asset value total returns of 15.3 per cent in the year to end January 2017.

Executive chairman Lord Jacob Rothschild puts as much emphasis on preserving shareholders' capital as on delivering long-term capital growth. He is proud it has participated in 75 per cent of market upside while suffering only 39 per cent of market declines since its 1988 launch, but is likely to be disappointed that the external managers to whom he entrusts a substantial proportion of assets were badly wrong-footed last year.

Looking ahead, he comments on a continuing background of ‘daunting uncertainty and political turmoil’ in many countries, and is therefore sticking to a very cautious approach.

At end January the US dollar accounted for 65 per cent of RCP’s currency exposure, with 26 per cent in sterling.

Highly commended: Personal Assets

Personal Assets Trust (PNL) also makes preservation of capital its top priority. Its board believes most asset classes are dangerously overvalued, so it has been very cautiously positioned for several years. This has resulted in three-year NAV total returns of just 29.3 per cent, however PNL’s progress has been more consistent than that of other defensively managed trusts in the sector. It is therefore highly commended for those prioritising wealth preservation.

PNL’s board believes interest rates are bound to rise over the next few years and inflation is likely to pick up. It contends this would be bad for medium to long conventional bonds but good for index-linked stocks, to which it has entrusted 24 per cent of shareholders’ funds. It could also be good for gold bullion, to which it has devoted 10.5 per cent, and bearable for quality blue chips with decent yields, which account for 47 per cent.

So far as the equity holdings are concerned, PNL’s investment adviser Sebastian Lyon favours entrepreneurial, conservatively financed and possibly family owned businesses, such as Nestle, Colgate and Unilever. Most of the equity holdings are UK- or US-based as the board does not buy into the current enthusiasm for European equities, believing their relatively low valuations are often justified by their poor earnings records.


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