Buy Capital Gearing Trust?

ChilliBob

Was anything discussed in relation to cash? - According to Trustnet a 1.1% return over a year, and -0.9% loss over 6 months are the stats for CG Absolute Return. Clearly other funds have faired far worse - e.g. Global Trackers, and peers such as Trojan X.

Cash seems a better wealth preserver at the moment than WP funds - I wonder if there was any IR spin to try and convince people to jump in now? - I suppose being an AGM perhaps not - as those there would have already jumped in!

masonic

ChilliBob said:

Was anything discussed in relation to cash? - According to Trustnet a 1.1% return over a year, and -0.9% loss over 6 months are the stats for CG Absolute Return. Clearly other funds have faired far worse - e.g. Global Trackers, and peers such as Trojan X.

Cash seems a better wealth preserver at the moment than WP funds - I wonder if there was any IR spin to try and convince people to jump in now? - I suppose being an AGM perhaps not - as those there would have already jumped in!

The 5 year return of CGT is just under 34% (6% annualised). Cash doesn't come close. Even wealth preservation funds are unsuitable to be held over very short periods, so judging such a fund over 6 months or a year would be unfair, as would doing so for any investment. It might be tempting to believe you, or a fund manager, could time the market and jump between these investments (or any investment) and cash, but I'd be sceptical such trading would lead to higher returns over the long term.

In any case, it is unlikely a fund manager is going to recommend you sell all of your holdings and stick the proceeds in a savings account for a while, and investors would be unhappy paying a management fee for a fund that is sitting entirely in cash.

ChilliBob

Yeah, I can't disagree with any of those points Masonic. I'm guessing it's their track record they would cite to somebody deciding between cash and their fund - which I suspect is the position a fair few of their investors find themselves in. The jump up risk/return from cash basically has these funds on the first rung of the ladder if you ask me (assuming by 'cash' you actually mean risk free best rate savings accounts of course).

I wonder for how many year or six month periods in its history you'd have been better off in cash? I'm guessing it's a pretty small number over the long history! 

aroominyork

The other WP fund which interests me is PNL (or its OEIC equivalent Troy Trojan). There are a few key differences:

1) PNL holds gold, about 10%. Sebastian Lyon says this is only while real interest rates are negative, ie below inflation.

2) CGT holds a chunk of property as part of its risk assets. PNL only holds equities for risk.

3) They have totally different approaches to equities. CGT has a strong value tilt; PNL has a strong growth tilt - in fact, PNL's looks like a Fundsmith/Lindsell Train cut and paste.

For diversification, holding both gold and property appeals and I am tempted to add some PNL to my portfolio. It is the equity divergence that throws me... what do people make of this?

masonic

I hold both, but my holding in PNL is smaller. PNL hasn't really paid much of a price over the last 6 months for holding a more US-centric and growth-centric basket of equities. Growth will once again have its day, so while CGT has done rather better in the short term, it would be expected that each approach is better suited to different time periods. The gold exposure could be obtained more cheaply with an ETC and you have a hint as to when Lyon thinks it should be sold, so that shouldn't be a reason in itself to add PNL.

Albermarle

The other WP fund which interests me is PNL (or its OEIC equivalent Troy Trojan). There are a few key differences:

Difference number 4) is that CGT is 40% UK and 10% US + 50% elsewhere .   PNL is 66% US and 16% UK  + 18% elsewhere.

Maybe a rather simplistic reason, but it is why I hold both.

aroominyork

masonic said:

Growth will once again have its day, so while CGT has done rather better in the short term, it would be expected that each approach is better suited to different time periods.

Albermarle said:

The other WP fund which interests me is PNL (or its OEIC equivalent Troy Trojan). There are a few key differences:

Difference number 4) is that CGT is 40% UK and 10% US + 50% elsewhere .   PNL is 66% US and 16% UK  + 18% elsewhere.

The two funds presumably broadly share a macro outlook, so it seems curious that when the world faces very clear headwinds, their equity positioning diverges so much. I doubt, Albermarle, that each feels so tied to a geography that it has to suck up whatever equities predominate in that region.

masonic said:

The gold exposure could be obtained more cheaply with an ETC and you have a hint as to when Lyon thinks it should be sold, so that shouldn't be a reason in itself to add PNL.

True, but equally I could buy some short/medium dated TIPS, some gold and Fundsmith and more or less replicate PNL. But then I turn into a trader, trying to stay just one step behind PNL.

Incidentally, while CGT has a track record of slightly outperforming CGAR, there is nothing to separate PNL and Troy Trojan - given their holdings that is understandable - so I am more drawn to the OEIC.

Type_45

masonic said:

I hold both, but my holding in PNL is smaller. PNL hasn't really paid much of a price over the last 6 months for holding a more US-centric and growth-centric basket of equities. Growth will once again have its day, so while CGT has done rather better in the short term, it would be expected that each approach is better suited to different time periods. The gold exposure could be obtained more cheaply with an ETC and you have a hint as to when Lyon thinks it should be sold, so that shouldn't be a reason in itself to add PNL.

When does Lyon say gold should be sold?

aroominyork

Presumably sell gold when real interest rates start heading towards positive territory. His view came from this interview.

So, are real interest rates and the price of gold negatively correlated? This graph (from this website) suggests there is evidence for it.

ChilliBob

I had a bit of a soft spot for Trojan when it held up rather well for me (sadly it was more of a 'test' holding so to speak, of very low value, in a JISA of all things - when I was a total newbie investor!).

I did read elsewhere that people feel this Trojan/PNL approach is fairly easy to self replicate, and save on costs in the process. Not something which can be said for CGT.

I'm just passing this on rather than validating it as I'd not be inclined to try and copy either to be honest, I'd either hold them or not. 

I know it's popular, and I've been tempted but the fees of Ruffer and the bitcoin thing they did make me far less likely to consider it.