Alternative To Holding Cash in SIPP?

AnotherJoe

Albermarle said:

There are various mixed asset investment funds and investment trusts which position themselves for lower-volatility long term returns

Such as this one has done what it says on the tin.

https://www.trustnet.com/factsheets/t/im46/personal-assets-trust-plc-ord

Someone who bought it in February probably wasn't  thinking that in April though ! 

So, there's no guarantee, especially since unfortunately that chart you posted unfortunately doesn't extend into the future so we don't know what PAT will do then . 

I had one if those capital preservation investments for a year, may well have been PAT, and it was down most of the time (only by one or two %) which was very annoying since that was in an up market.

coyrls

There is a fund that attempts to do what you are asking, the M&G UK Inflation Linked CorporateBond Fund, https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000JQ2U .

The fund aims to protect the value of capital and income from inflation by providing a total return (the combination of capital growth and income), net of the ongoing charge figure, that is consistent with or higher than UK inflation (as measured by the UK Consumer Prices Index), over any three-year period. There is no guarantee that the fund will achieve its objective over this, or any other, period. The income distributions and the value of your investment may rise and fall, and investors may not recoup the original amount they invested.

But as has been said above you are taking the risk that it will not achieve its objective.  From the annual report for the year ending March 2020:

The fund is currently not meeting its objective, largely as a result of the sharp downturn in financial markets in March 2020. However, we believe the fund remains well placed to meet its objective as asset prices recover.

This fund is under 5% of my SIPP portfolio; I wouldn’t ever consider putting 100% into such a fund.

TCA

Thanks to everyone above for the replies. I'll digest all properly over the weekend. What is apparent from a quick read through the comments is that I've underestimated the possible impact of inflation (given the 2% government target as mentioned by bowlhead) and been sidetracked by the current 0.6% inflation rate. This made me think that there may be something low-risk out there that would achieve that. Schoolboy error - and that's why I asked the question. So something a bit higher up the risk spectrum would be required after all. Personal Assets Trust (as mentioned above) and Capital Gearing Trust are springing to mind. Thinking hat on. Thanks again to all.

bowlhead99

TCA said:

been sidetracked by the current 0.6% inflation rate. 

Key to remember is that the rate reported in the press or on ONS's website is a measure of how prices today differ from what they were this time last year.  That is necessarily a backwards-looking measure of what happened. What you are considering is what assets to use to provide for the potential of prices changing in the future, a forwards looking measure of what might happen.

For example, the inflation for the year to May or June takes account of the fact that petrol is cheaper than last year and certain other things are having less spent on them (and retailers are discounting clothes because nobody has set foot in their clothes shops for months), so that the general background inflation in some areas gets offset by the things which dropped in price. 

If you think that petrol and other goods are going to continue to fall at that pace and keep inflation suppressed (e.g. petrol was 128.5p in the first week of June 2019, it was 105p in the first week of June 2020, it will fall another 18% to 86p by next summer etc) then that might be right, but it might also be fundamentally flawed.   Of course, there are some recessionary conditions around - whether or not we have a technical recession - and businesses and consumers are not filled with hopes of income and employment going through the roof, and people having lower incomes is not going to drive prices of things sky high. So we could have low inflation for some time. But not forever, and inflation may go up well before prevailing interest rates go up, and if Brexit goes worse than markets expect, the pound will be weak and goods and services with a foreign cost component (from an imported washing machine to a bag of rice or a Netflix subscription) will cost more. 

As such, estimate low inflation rates at your peril

TCA

bowlhead99 said:

As such, estimate low inflation rates at your peril

Indeed. Thanks again. Brexit does figure in my thinking so further sterling weakness may be headed our way. Or not.

Aminatidi

I would spend a little time reading some of the quarterlies and annual reports on the Capital Gearing, Personal Assets, and Ruffer websites.

I have about 85% of my invested wealth between Capital Gearing and Personal Assets and they frequently get viewed as anaemic but all I can say is that so far the long term track record holds up and you won't do well holding cash over the long term (trust me I wish I'd known this years ago).

Or keep 85-90% in cash and chuck 10-15% in Fundsmith or SMT and cross your fingers and accept there's a bit of a ride there for that 10-15%

TCA

Aminatidi said:

I would spend a little time reading some of the quarterlies and annual reports on the Capital Gearing, Personal Assets, and Ruffer websites.

I've haven't read any since before the Covid-19 outbreak but will make a point of doing so. Thanks.

DiggerUK

You would be well served with Gold backed ETF's/ETC's, especially on the timescale you mention..._

Aminatidi

TCA said:

Aminatidi said:

I would spend a little time reading some of the quarterlies and annual reports on the Capital Gearing, Personal Assets, and Ruffer websites.

I've haven't read any since before the Covid-19 outbreak but will make a point of doing so. Thanks.

You're welcome.

I don't suggest doing so because they're trying to "sell" their funds but simply because they are broadly classed as "wealth preservation first + growth if possible" and you tend to find the quarterlies and other publications quite insightful on what they think conditions are like.

Of course the same goes for any fund but (random example) Fundsmith whilst an excellent fund is never ever going to hold 10% in gold bullion so their factsheets and literature probably won't elaborate on pros and cons of gold bullion etc.

Those three are the three main trusts that leap to mind for "preservation" I guess in the OEIC world there are lots more.

Personally I'm cautious about Ruffer as I've held it twice and sold it twice and I can never quite shake the feeling they're trying to be a little too clever about things with the level of (costly) protections and options they use.

Aminatidi

DiggerUK said:

You would be well served with Gold backed ETF's/ETC's, especially on the timescale you mention..._

Gold fascinates me.

I'm wondering if I'd have held my nerve if I was in it heavily enough and "preservation of wealth" was my intention?