Capital Gearing Trust AGM + discount control policy

aroominyork
aroominyork Forumite Posts: 2,585
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edited 17 August at 2:31PM in Savings & investments
If anyone here attends tomorrow's CGT AGM, could they please report back? Given performance over the last year it will be interesting to dig into their explanations for how, presumably, they believe it will again start meeting its wealth preservation mandate.

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  • JohnWinder
    JohnWinder Forumite Posts: 1,499
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    Over the last 10 years to April the return has been 46% according to the annual report. The CPI went up 30% during that time. That’s consistent with ‘objective is to preserve and over time grow shareholders' real wealth’.

  • aroominyork
    aroominyork Forumite Posts: 2,585
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    Yes, but shareholders will want to hear more than that. Plenty will have compared recent performance to its nearest comparator PNL and not like what they see. Peter Spiller will not just be able to do his "grandmother's footsteps" routine this time.
  • Mothman
    Mothman Forumite Posts: 256
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    Over the last 10 years to April the return has been 46% according to the annual report. The CPI went up 30% during that time. That’s consistent with ‘objective is to preserve and over time grow shareholders' real wealth’.


    RPI over the same period has been 50%, and you have to go back more than 6yrs for it to have outperformed CPI. As a CGT investor I am certainly looking forward to hearing what they have to say.
  • coastline
    coastline Forumite Posts: 1,577
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    Bond yields are now at similar levels to Oct.

    United Kingdom Government Bond 10Y - 2023 Data - 1980-2022 Historical - 2024 Forecast (tradingeconomics.com)

    Peter Spiller blasts Truss and Kwarteng for blowing up Capital Gearing’s boat | Market News | The AIC

    Peter Spiller: Capital Gearing’s best asset in the Truss selloff | Market News | The AIC

    Impressive performance over the decades . Got to be careful looking at figures as much of the early gains were due to one off changes to portfolio. Switches into equities around 2000 dotcom crash and another earlier event skewed the returns. Still timed the market and got it correct bit more cautious now so who knows what the future brings.
  • aroominyork
    aroominyork Forumite Posts: 2,585
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    edited 17 August at 4:21PM
    CGT's discount control policy, which is keeping the discount between 2-2.5%, means it is buying shares practically every day and now holds over 7% of the shares. Is there a point this becomes unsustainable and, if so, how could that play out? Will they sell the underlying assets to reduce the total number of shares?
    Also, is CGT borrowing cash to buy the shares with the interest being charged to the fund and hence edging the share price slightly lower?
  • Rollinghome
    Rollinghome Forumite Posts: 2,641
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    edited 17 August at 6:19PM
    When PNL introduced a discount control, I remember several commentators saying they'd regret it. When CGT were selling at a premium, it was one of the factors that contributed to the returns, but no free lunch I suppose. FGT is another IT that adopted a DCM to the annoyance of many holding investors. Then apparently, all but abandoned it and discount now c. 5% but stable.

    Their last CGT AGM I attended was just before covid hit. (Was on hols this year.)   I had a long chat then with all three managers, including Peter Spiller.  Very straight and frank, and he did make clear that it was going to get more difficult for absolute returns in the coming years, and it was all about going for the best available options - which may or may not turn out as hoped. He had no way of knowing what a new virus would do to property.

    I'd already started moving more than a half of my holding to the fund version, CG Ab Return.  Did the same with PNL and others, though the premium there was a little smaller and discount now still only 1%ish but still edging higher.   Investors had got far too relaxed about paying premiums, including where there was a suitable mirror fund. They used to say you make your profit when you buy.
  • aroominyork
    aroominyork Forumite Posts: 2,585
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    edited 17 August at 9:11PM
    Very interesting, @Rollinghome. The discount control is perhaps chickens coming home to roost since it is also a premium control policy which led CGT to issuing more shares which it is now having to buy back.
    A year or so ago I inherited some money which I wanted to drip feed into equities in chunks so in the meantime I parked it 50/50 in CGAR and Troy Trojan. I chose CGAR to protect against premium/discount issues, but for long term investing I prefer CGT given its consistently better performance and the safety blanket of the discount control policy. I generally prefer OEICs over ITs (sounder sleep) so I hold Trojan instead of PNL since the performance difference is minimal.
  • Rollinghome
    Rollinghome Forumite Posts: 2,641
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    edited 18 August at 11:29AM
    Well sleep is priceless, and the fund versions have done better than the ITs, so sounds like you chose well on both counts. The ITs might be the better bet going forward at some point. Or not.
    TR over 1 year:
    CGAR –7.27% (+15.41 over 5yrs)
    CGT  -11.16%  (+14.13 )
    Trojan X  -3.12% (+24.69)
    PNL –5.36% (+21.97%)
    Vanguard LS 40 -5.97% (+ 6.43%)
    Vanguard LS 60 –4.45% (+15.4%)

    CGT has assets of 1,129m and no gearing, so I see no problem on sustainability. I assume they’ll cancel the shares and their fee income will fall a bit as it will for the fund. The premium was allowed to rise to 2.5% so had further to fall than PNL. CGT has some less liquid assets than in CGAR, but otherwise similar, and the DCM and zero gearing policies are there to make it behave more like a fund. I tend to put a fair bit of value on the greater transparency of ITs, but there are fewer of them to choose from, and they aren't always the best option.

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