Capital Gearing Trust

Aminatidi

What do people think of RIT Capital Partners as a complement for CGT for a "slow and steady" allocation?

With the benefit of hindsight a 50/50 mix of both would have averaged a little over 10% since inception.

Appreciate they've gone through conditions much more favourable than the future may be, but that seems a compelling case to consider them both for a "cautious" allocation?

jamei305

seacaitch wrote: »

This sounds to me like you've maybe not fully appreciated what it "says on the tin" of some of these trusts: they don't have fixed asset allocations but dynamic; their AAs vary in line with the value they see on offer (or conversely the price/valuation risk they perceive).

Hence, high valuations in eg. equities will see them make low allocations, as at present and for years now. But if very obviously low valuations ever arise in an asset class such that they perceive limited downside price risk but very significant upside then I would expect them to significantly raise their exposure. They write about this frequently in their commentaries, such as CG this week; no reason to disbelieve them.

It might not seem like this though because they are extremely demanding on valuation, perhaps crazily so, but they take their commitment to protect the downside (and investors' capital) very seriously.

They are like Buffet's patient baseball batter who'll let the market pitch thousands (or even millions?!) of balls at them before ever deciding to swing. So you might have to wait for a (very) long time to see any big shifts in AA. It'd be interesting to see what they'd do if we we lucky enough to encounter some '87-esque Black Monday episode, ie. whether they'd load up.

This note gives some details on the history of CGT, and states that in 1982 when equities seemed very cheap, they were 100% equity and then even borrowed to buy more equity.

After a future crash they could potentially be at 120% equity through leveraging.

It should be viewed very differently from a passive fund.

A_T

jamei305 wrote: »

This note gives some details on the history of CGT, and states that in 1982 when equities seemed very cheap, they were 100% equity and then even borrowed to buy more equity.

After a future crash they could potentially be at 120% equity through leveraging.

It should be viewed very differently from a passive fund.

yes it's largely a bet on global index-linked bonds and has been that way for over a decade