IC Top 100 Fund Personal Assets Trust (PNL) has a strict discount control policy so that it trades close to net asset value (NAV), although more often than not trades on a slight premium. The trust has, however, recently swung to a slight discount. Personal Assets has not done so well recently, in particular over the year to 30 April 2014. But it has a strong long-term performance record, including in difficult years such as 2008 and 2011, in keeping with its investment aim of protecting and increasing the value of shareholders' funds over the long term.
- Discount to NAV
- Protects in difficult times
- Good long-term record
- Defensive positioning
- Poor recent returns
"While the current discount is only small, it represents the wider end of the discount range and an attractive entry point into (fund manager) Sebastian Lyon's London-listed strategy," says Mick Gilligan, head of fund research at Killik & Co.
Because of the strict discount control mechanism it is unlikely that the discount will get wider and it might move back to a slight premium. When it issues shares to keep the premium down this helps to provide liquidity in the secondary market.
The trust has also recently amended its articles to allow it to pay dividends from capital. Personal Assets Trust has either increased or maintained its dividend since 1990 and wants to maintain this record. Its board says taking dividends from capital is a better way to protect and increase shareholder funds over the long term than buying equities its managers would not otherwise own, for example because they are overvalued.
It says drawing on capital to pay dividends will not prevent it from protecting shareholder funds in the longer term as it will only do this to maintain the dividend at 560p - not increase it. This will also be a temporary solution while income is hard to find: when the trust is fully invested and the portfolio offers a higher income any earnings in excess of 560p a share will be used to replace the full capital amount distributed and then rebuild its revenue reserves, before increasing the dividend.
As well as being attractive for shareholders, maintaining and maybe eventually increasing its dividend could also help the share price and maintain the rating.
The trust has substantial exposure to US and UK index-linked bonds, which could be useful if inflation or interest rates in these countries start to rise in the coming year, something that is expected in the US as early as next month and the UK early next year. The trust's manager also thinks markets will be extremely vulnerable if interest rates rise, so he has positioned Personal Assets to exploit market falls. For example, the holdings include defensive, high-quality blue-chip shares, which tend to fall less when markets are going down.
In the short term, the trust's management plans to reduce further or sell out of investments where they have concerns about the ratings.
The trust has an ongoing charge of 0.93 per cent, which is lower than a number of multi-asset and wealth preservation funds.
Personal Assets Trust typically lags behind in strong equity markets and there is no guarantee that its performance will turn. Investors also wouldn't benefit from a strong re-rating as the discount is never more than slight.
But the trust has delivered on its aim of preserving capital in difficult times and over longer periods has made strong returns. So if you have a long-term outlook and want a cautious fund with which to preserve capital, now could be a good time to add Personal Assets Trust. Buy.
PERSONAL ASSETS TRUST (PNL) | |||
|---|---|---|---|
| PRICE | 34229.64p | GEARING | 0% |
| AIC SECTOR | Global | NAV | 34,446.29p |
| FUND TYPE | Investment trust | PRICE DISCOUNT TO NAV | 0.22% |
| MARKET CAP | £596.98m | YIELD | 1.63% |
| No OF HOLDINGS | 23 | ONGOING CHARGE | 0.93% |
| SET UP DATE | 222-Jul-83 | MORE DETAILS | http://www.patplc.co.uk/ |
Source: Morningstar
Performance
| 2008 (%) | 2009 (%) | 2010 (%) | 2011 (%) | 2012 (%) | 2013 (%) | 2014 (%) | |
|---|---|---|---|---|---|---|---|
| Personal Assets Trust share price | -3.2 | 19.4 | 14.4 | 8.3 | 4.2 | -4.8 | 10.3 |
| FTSE World Index | -18.2 | 19.6 | 16.3 | -5.8 | 11.8 | 22.4 | 11.3 |
| FTSE All-Share index | -29.9 | 30.1 | 14.5 | -3.5 | 12.3 | 20.8 | 1.2 |
| Morningstar Global Investment Trust sector | -27.5 | 26.5 | 20.1 | -8.5 | 12.3 | 23.3 | 11.5 |
Source: Morningstar as at 31 July 2015
TOP TEN HOLDINGS as at 30 June 2015 (%)
| British American Tobacco | 4.6 |
| Philip Morris International | 4 |
| Nestlé | 3.9 |
| Coca-Cola | 3.5 |
| Sage Group | 3 |
| Microsoft | 2.7 |
| Altria | 2.4 |
| Dr Pepper Snapple Group | 2.3 |
| Imperial Oil | 2.3 |
| Becton Dickinson | 2.2 |
Sector breakdown (%)
| Equities | 40.3 |
| US TIPS | 16.9 |
| UK Index-Linked Gilts | 4.6 |
| Gold Bullion | 10.2 |
| UK cash and equivalents | 22 |
| Overseas cash and equivalents | 6 |
