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Index or wealth preservation for investments over unknown period of time?

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  • aroominyork
    aroominyork Posts: 3,292 Forumite
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    edited 31 October 2021 at 1:10PM
    A slight concern is that CGT may be quite expensive now as it has historically held a high amount of linkers and now, with inflation rising, the benefit of these could already be priced in.
  • Prism
    Prism Posts: 3,847 Forumite
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    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
  • aroominyork
    aroominyork Posts: 3,292 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
  • Prism
    Prism Posts: 3,847 Forumite
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    edited 31 October 2021 at 2:42PM
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
  • aroominyork
    aroominyork Posts: 3,292 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 1 November 2021 at 7:55AM
    Prism said:
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
    Looking at CGT, PNL, Ruffer, they all hold around 30% in linkers. You could say that's natural given their WP/inflation protecting mandate, or you could say it's unnecessary to pay a manager a fee when you could as easily but a linker index fund to complement an index-based or low cost multi-asset fund.
  • Linton
    Linton Posts: 18,133 Forumite
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    Prism said:
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
    Looking at CGT, PNL, Ruffer, they all hold around 30% in linkers. You could say that's natural given their WP/inflation protecting mandate, or you could say it's unnecessary to pay a manager a fee when you could as easily but a linker index fund to complement an index-based or low cost multi-asset fund.
    Strangely CGT don’t include any  UK index linked bonds in their full list of holdings. The do include some US index linked bonds, but nothing like 30%.

    I think you would have enormous problems duplicating CGT with index funds. Then of course CGT change their asset allocation depending on economic conditions.
  • aroominyork
    aroominyork Posts: 3,292 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 1 November 2021 at 10:15AM
    Linton said:
    Prism said:
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
    Looking at CGT, PNL, Ruffer, they all hold around 30% in linkers. You could say that's natural given their WP/inflation protecting mandate, or you could say it's unnecessary to pay a manager a fee when you could as easily but a linker index fund to complement an index-based or low cost multi-asset fund.
    Strangely CGT don’t include any  UK index linked bonds in their full list of holdings. The do include some US index linked bonds, but nothing like 30%.

    I think you would have enormous problems duplicating CGT with index funds. Then of course CGT change their asset allocation depending on economic conditions.
    CGT's annual report indeed shows most - but not all - IL govt bonds are US.
    You couldn't duplicate, but could perhaps achieve a reasonably close fit, using a risk-adjusted multi-asset funds and some linkers. I cannot, however, substantiate that view with evidence.
  • Linton
    Linton Posts: 18,133 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    edited 1 November 2021 at 10:34AM
    Linton said:
    Prism said:
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
    Looking at CGT, PNL, Ruffer, they all hold around 30% in linkers. You could say that's natural given their WP/inflation protecting mandate, or you could say it's unnecessary to pay a manager a fee when you could as easily but a linker index fund to complement an index-based or low cost multi-asset fund.
    Strangely CGT don’t include any  UK index linked bonds in their full list of holdings. The do include some US index linked bonds, but nothing like 30%.

    I think you would have enormous problems duplicating CGT with index funds. Then of course CGT change their asset allocation depending on economic conditions.
    CGT's annual report indeed shows most - but not all - IL govt bonds are US. 

    You couldn't duplicate, but could perhaps achieve a reasonably close fit, using a risk-adjusted multi-asset funds and some linkers. I cannot, however, substantiate that view with evidence.
    Interesting, the allocation in the annual report does not seem to match the list of holdings.  The holdings listed as US Treasury inflation linked are 5-6% of the portfolio.  Perhaps the plain US Treasury bonds are inflatrion linked?  Also I dont see any UK index linked Government bonds in the holdings list.

    Perhaps someone can explain.

    https://www.capitalgearingtrust.com/sites/cgt/files/2021-02/Portfolio/CGT_Portfolio_April_2021.pdf
    https://www.capitalgearingtrust.com/sites/cgt/files/2021-02/CGT-2021Annual-Report-Accounts.pdf


  • masonic
    masonic Posts: 27,009 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 1 November 2021 at 5:56PM
    Linton said:
    Linton said:
    Prism said:
    Prism said:
    If you pick through CGTs holdings you find that there is very little in traditional large cap equites and the majority of the none bond holdings are in property and infrastructure trusts. Those particular trusts focus on index (inflation) linked returns. Along with a big chunk of US TIPS there is a big play on inflation going on.
    I wouldn't call it a 'play' on inflation as that suggests a tactical gamble. It you look at the historic asset allocation you will see linkers are a long-term strategy. https://www.itinvestor.co.uk/2019/11/capital-gearing-trust-playing-ultra-defensive/
    Yes maybe play is the wrong word but what I meant was that a large percentage of its assets are there to directly preserve value against inflation and that its a long term strategy. Mainly as that is one of the core aspects of the trust and beating RPI  is one of the main objectives.

    CGT is one of the trusts that I would be reasonably happy to put money into that I needed in the next 5 years, accepting that there is a chance of loss but hopefully not a big one. Personal Assets is too similar to the rest of my investments with its quality growth focus.
    Looking at CGT, PNL, Ruffer, they all hold around 30% in linkers. You could say that's natural given their WP/inflation protecting mandate, or you could say it's unnecessary to pay a manager a fee when you could as easily but a linker index fund to complement an index-based or low cost multi-asset fund.
    Strangely CGT don’t include any  UK index linked bonds in their full list of holdings. The do include some US index linked bonds, but nothing like 30%.

    I think you would have enormous problems duplicating CGT with index funds. Then of course CGT change their asset allocation depending on economic conditions.
    CGT's annual report indeed shows most - but not all - IL govt bonds are US. 

    You couldn't duplicate, but could perhaps achieve a reasonably close fit, using a risk-adjusted multi-asset funds and some linkers. I cannot, however, substantiate that view with evidence.
    Interesting, the allocation in the annual report does not seem to match the list of holdings.  The holdings listed as US Treasury inflation linked are 5-6% of the portfolio.  Perhaps the plain US Treasury bonds are inflatrion linked?  Also I dont see any UK index linked Government bonds in the holdings list.

    Perhaps someone can explain.

    https://www.capitalgearingtrust.com/sites/cgt/files/2021-02/Portfolio/CGT_Portfolio_April_2021.pdf
    https://www.capitalgearingtrust.com/sites/cgt/files/2021-02/CGT-2021Annual-Report-Accounts.pdf
    All of the US, Japanese and Swedish treasuries are being treated as index linked. I don't know what the rationale for that is. I don't think any of them, other than the US TIPS, pay more than the fixed coupon. They would potentially give some protection from localised GBP inflation, but not global inflation.
  • Where listed, the coupons suggest that almost all of the US, Swedish and UK bonds are linkers. It's not the most informative holdings list I've ever seen, but I think you have to take it on trust that the asset allocation shown is correct.
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