Using Wealth Preservation Trust as alternative to cash.

green_man

Just wondering if people tend to use Wealth Preservation Trusts ( I.e PNL (Personal Assets) and CGT (Capital Gearing Trust)) as a way of reducing the amount you hold in cash?

Further to the thread on amount of cash buffer to hold within your SIPP/pension or similar.  If let’s say you had decided you were going to hold 3 years withdrawals in cash,  Would instead holding 12 months cash and 2 years PNL  increase your risk profile significantly? Does anyone do this?

In the recent crash (March 2020) PNL lost around 15% but only very short term, it had gained around 10% in the previous year (cash would have given maybe 1%) 

Audaxer

I've considered Wealth Preservation Funds and ITs but not invested in any yet. I think they would be okay as defensive assets in a balanced portfolio, and you could therefore reduce the cash percentage. However if you are planning some big spend items within the next 5 years, I would still rather hold cash for that purpose.

83705628

Why not just buy what they buy? I think they're both basically a mix of government nominal and inflation linked bonds and some equity. VMVL or VMID aren't comparable but they may fulfil that kind of function.

Moe_The_Bartender

tcallaghan93 said:

Why not just buy what they buy? I think they're both basically a mix of government nominal and inflation linked bonds and some equity. VMVL or VMID aren't comparable but they may fulfil that kind of function.

CGT has 196 holdings, the largest being 3.3% of the portfolio and the smallest about 0.1%. Good luck in buying what they buy. The dealing costs would exceed any possible gains.

I hold both these trusts accounting for around 40% of my portfolio. There is no way that they can be compared to a savings account or used as an alternative to cash. Their volatility in the recent market turmoil is a clear indication of that.

DairyQueen

This thread on a similar theme may be of interest. It's from 2017 but the thrust remains current. bowlhead's post (first reply) is particularly informative:
https://forums.moneysavingexpert.com/discussion/5709276/wealth-preservation-funds-its

[Deleted User]

I have PNL, CGT, Royal London Sustainable Growth and MyMap 3 (which is the core %) in my 3-5 years of spending bucket of wealth preservation, cash is in years 1-2. Note - I am very close to drawdown (2 months) so not in the wealth accumulation side of things.
Here is an indication of the MyMap3 current holdings.

green_man

Thanks Dairyqueen (and bowhead).  Having read a bit of that thread it doesn’t seem as though it would be a cash proxy.  Maybe the approach above of Deleted_User is more appropriate, but having 5 years of drawdown in very defensive assets seems a bit too cautious for me.   My main core holding will be HSBC balanced Strategy fund which obviously already has a chunk of none equity.   hummm...

tcallaghan - you could make this argument about any trust or fund, but these are actively managed and also have access to lots of bonds/gilts that normal retail investors don’t. 

[Deleted User]

green_man said:

Thanks Dairyqueen (and bowhead).  Having read a bit of that thread it doesn’t seem as though it would be a cash proxy.  Maybe the approach above of Deleted_User is more appropriate, but having 5 years of drawdown in very defensive assets seems a bit too cautious for me.   My main core holding will be HSBC balanced Strategy fund which obviously already has a chunk of none equity.   hummm...

My defensive assets are offset by assets which are above my risk profile in later years spending. I do have exactly your main core holding as mine in my middle bucket.

[Deleted User]

Have a watch of this video, this got me really thinking about buckets of different risk etc Very informative
@16:12 they discuss how many years of cash should be in your strategy
 https://www.youtube.com/watch?v=NdcAjIu8W1w&t=1234s

Albermarle

tcallaghan93 said:

Why not just buy what they buy? I think they're both basically a mix of government nominal and inflation linked bonds and some equity. VMVL or VMID aren't comparable but they may fulfil that kind of function.

Because I prefer to pay for someone who knows what they are doing . These mainly defensive portfolios can be quite complicated and in any case the fund charge is not that high and as it is an IT you have almost no platform charge with certain platforms. 

BritishInvestor

Deleted_User said:

Have a watch of this video, this got me really thinking about buckets of different risk etc Very informative
@16:12 they discuss how many years of cash should be in your strategy
 https://www.youtube.com/watch?v=NdcAjIu8W1w&t=1234s

Important to bear in mind the downsides of bucketing and holding cash
https://www.timelineapp.co/blog/cash-buffers-sustainable-withdrawal-and-bear-markets/
"Ultimately, the evidence shows that a bucket approach underperforms static strategies, and it does so based on four different ways of assessing performance. For this reason, however plausible, comforting, consistent with mental accounting, and easy to implement the bucket approach may be, simple static strategies, which call for periodic rebalancing and are just as easy to implement, would make retirees better off."