Wealth Preservation vs Multi Asset Funds

Linton

JohnWinder wrote: »

..... and maybe the ‘unlikely to be repeated in our lifetime’ bond rally of the last 20 years, as interest rates fell.

That doesnt explain the performance of CGT during and after the .com boom/bust but before the interest rate collapse following the 2008/9 crash which is where most of the equity index outperformance was achieved. Over the past 20 years a gilt fund would have returned 140% whereas CGT returned about 400%. I am afraid you will have to try a bit harder.

Aminatidi

Audaxer wrote: »

It seems quite amazing that CGT with around 36% equities has produced such high returns over 20 years with low volatility. I don't really understand how it can generate returns so much better than a 100% equity world index? As they have such good returns it almost seems a no-brainer to invest in such Wealth Preservation funds rather than a multi asset fund or even a 100% equity world index, as they seem to do much more than just protect your wealth. Am I missing something?

I think one of CGTs major principles is to try to "lock in" returns.

Simply put, don't lose money.

Audaxer

bowlhead99 wrote: »

a) it might have under 40% equities now, but that has not always been the case

Although CGT may have had a higher percentage of equities at times over the last 20 years, it presumably never got near to 100% equities and always had a significant percentage of bonds. That being the case, I'm really surprised it has returned so much more, with lower volatility, even than a 100% equity FTSE World index.

So while I like low-cost globally diversified funds like VLS and HSBC GS, it does seem that ITs like CGT is much more likely to produce a better long term performance than a low cost multi asset fund with a similar percentage of equities.

Thrugelmir

Linton wrote: »

That doesnt explain the performance of CGT during and after the .com boom/bust

Avoiding crazy valuations wasn't difficult. Remember lastminute.com, launched onto the market with a £29 million turnover and having never made a profit. Opening day on the markets reached a market capitalisation of £523 million. Owning tech stocks was an easy way of losing money at the time. Even BT traded at over £20 at the time.

Thrugelmir

Audaxer wrote: »

It seems quite amazing that CGT with around 36% equities has produced such high returns over 20 years with low volatility. I don't really understand how it can generate returns so much better than a 100% equity world index?

Lack of exposure to the finance sector. While people talk about a recovery in 2009 in share prices. This overlooks the fact that many did fail and those that stayed in business have never recovered since.

Linton

Ref the .com boom/bust...

Thrugelmir wrote: »

Avoiding crazy valuations wasn't difficult. Remember lastminute.com, launched onto the market with a £29 million turnover and having never made a profit. Opening day on the markets reached a market capitalisation of £523 million. Owning tech stocks was an easy way of losing money at the time. Even BT traded at over £20 at the time.

Avoiding the crazy valuations was easy in retrospect, but most investors failed to do it hence the rise and collapse in the indexes. Woodford was one of the few who stood out and kept to his strategy, another well respected manager who tried was sacked.

The .com boom/bust is a key example of why controlling equity asset allocation is important.

Aminatidi

If you want to know more about CGT take a look at the full portfolio on their website.

Read their annual reports.

Read their quarterly reports.

There is a wealth of information in them around what the managers think is happening and how they're positioning.

Keep in mind they do try to "play" value v many passives that will just buy buy buy regardless of valuations or anything else because 50% world index is their mandate (or whatever).

CGT Portfolio

Half Year Report

coastline

Audaxer wrote: »

Although CGT may have had a higher percentage of equities at times over the last 20 years, it presumably never got near to 100% equities and always had a significant percentage of bonds. That being the case, I'm really surprised it has returned so much more, with lower volatility, even than a 100% equity FTSE World index.

So while I like low-cost globally diversified funds like VLS and HSBC GS, it does seem that ITs like CGT is much more likely to produce a better long term performance than a low cost multi asset fund with a similar percentage of equities.

There's no doubt CGT has impressive returns over the decades. As explained in earlier posts the fund manager moved a greater percentage into equities around 2000-2002 ? The buying opportunity can be seen in the link below.

https://en.wikipedia.org/wiki/Stock_market_downturn_of_2002

If you set the following link to 20 years it clearly shows a greater performance level than the MSCI World index around 2000-2005.
Set the same to 5 , 10 and 15 years and the chart shows a different picture . I've chosen the M&G Gilt fund as it goes back 20 years to illustrate the point.

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100,F0ZDP,FITCGT

https://moneyweek.com/501010/superior-returns-from-capital-gearing-trust/

https://monevator.com/capital-gearing-investment-trust/

Linton

coastline wrote: »

There's no doubt CGT has impressive returns over the decades. As explained in earlier posts the fund manager moved a greater percentage into equities around 2000-2002 ? The buying opportunity can be seen in the link below.

https://en.wikipedia.org/wiki/Stock_market_downturn_of_2002

If you set the following link to 20 years it clearly shows a greater performance level than the MSCI World index around 2000-2005.
Set the same to 5 , 10 and 15 years and the chart shows a different picture . I've chosen the M&G Gilt fund as it goes back 20 years to illustrate the point.

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100,F0ZDP,FITCGT

https://moneyweek.com/501010/superior-returns-from-capital-gearing-trust/

https://monevator.com/capital-gearing-investment-trust/

CGT is intended as a wealth preservation fund and so should not be expected to take full advantage of a very long bull run - that is not its purpose.

However, even in the past 10 years it outperformed the standard vehicle for wealth preservation. a gilt fund, by an annual return of 6.1% against 4.5%. And this was at a time when gilt prices rose to unprecedented heights because of the fall of interest rates.

A_T

CGT is essentially a play on index-linked treasuries with aggressive rebalancing when there is an stock market downturn (PNL/Troy Trojan is similar). It's an exceptional investment instrument and I never quite understand why it doesn't attract much interest from pension funds.