Capital Gearing Trust - Performance and Prospects

Shocking_Blue

Dear all,

As part of the 'wealth preservation' element of my portfolio, I have both CGT and Troy Trojan. However, I'm considering moving the CGT money across to Troy. Have stuck with CGT for a while, but performance over the last few years has been dismal, so I'm not sure of the the point of keeping it there (and can't see any real 'risk' as such with using just Troy for this part of the portfolio).

Not sure if I'm missing something!

Any comments welcome.

masonic

Capital Gearing went through a similar wobble in 2014-2018. Trojan didn't do so well from 2012-2014, and also lagged from 2018-2020 after which the pandemic levelled the two. CGT came out of the pandemic well ahead, but shed those gains in late 2022-mid 2023. Performance through most of 2024 was aligned, whereas CGT has lagged a little in the past 12 months.

These are active funds with a similar mandate, but quite different asset exposure. So it should be expected that they will each have periods of under and over performance relative to one another. Here's the performance from 2016-date and from 2005-2016. I've included the open-ended CG Absolute Return and the investment trust PAT for comparison to show that you have the option of switching CGT to CG Absolute Return to avoid some of the additional swings due to discount/premium and gearing. While Trojan and PAT mirrored one another quite closely in the last decade, they swung apart in the 2000s, and something similar can be seen for CG Absolute Return and CGT over the last 5 years. There was no data for CG Absolute Return for the earlier period, as it launched in 2016 (hence the strange choice of cut-off for the first chart showing all four).

Over the whole period, perhaps the investment trust structure has something to do with performance:

Shocking_Blue

Many thanks for this really useful information, Masonic.

Would you know what underpinned the comparative performance difference from the start of 2023 (seems out of line with the average difference since 2005)? Rising price of Gold (which Troy (I have Trojan X Acc) has compared to CGT)? Or is it something more fundamental about CGT (just don't want to have £ there for the next several years performing comparatively as badly as last couple).

Many thanks.

masonic

The investment trust shares fell from a small premium to a 4% discount to NAV. That obviously didn't happen to the open-ended equivalent. It also had exposure to REITs and other illiquid assets at the wrong time (some of these investments weren't eligible to buy within the open-ended fund) and its exposure to UK government bonds was a further drag on returns.

You will find several threads here discussing the underperformance of CGT, and plenty of financial press coverage. I ditched my holdings in late 2022, so had a lucky escape. I was just holding during the pandemic period as a substitute for uninvestable bonds, and switched to cash when rates picked up (then more recently back to bonds).

If you plot from the pits of the Covid crash, you can see how CGT exploded and then gave up its premium (Trojan O vs Trojan X differ in fees, so are interchangeable in this comparison):

But if you were in September 2022 reflecting over the past 4 and a bit years, what would you be considering doing?

Rollinghome

Shocking_Blue said:

Many thanks for this really useful information, Masonic.

Would you know what underpinned the comparative performance difference from the start of 2023 (seems out of line with the average difference since 2005)? Rising price of Gold (which Troy (I have Trojan X Acc) has compared to CGT)? Or is it something more fundamental about CGT (just don't want to have £ there for the next several years performing comparatively as badly as last couple).

Many thanks

In addition to pf problems, there were further problems when errors by their administrator, Juniper Partners, left them unable to operate their discount control policy for 3 months. Previously, like Troy, they'd always operated strict premium/discount control. CGT swung from a premium to a discount they had no control over, which further weakened confidence.  Juniper were replaced by Frostrow and JPMorgan. https://www.theaic.co.uk/aic/news/industry-news/capital-gearing-drops-juniper-over-discount-control-blunder

There's something to be said for holding ITs in rising markets and avoiding widening discounts in falling markets by using mirror oeic funds.

Albermarle

Although during the Liberation Day drops, CGT only dropped 1 % ( now regained) so you could argue it is at least doing what it says on the tin.

Shocking_Blue

Rollinghome said:

Shocking_Blue said:

Many thanks for this really useful information, Masonic.

Would you know what underpinned the comparative performance difference from the start of 2023 (seems out of line with the average difference since 2005)? Rising price of Gold (which Troy (I have Trojan X Acc) has compared to CGT)? Or is it something more fundamental about CGT (just don't want to have £ there for the next several years performing comparatively as badly as last couple).

Many thanks

In addition to pf problems, there were further problems when errors by their administrator, Juniper Partners, left them unable to operate their discount control policy for 3 months. Previously, like Troy, they'd always operated strict premium/discount control. CGT swung from a premium to a discount they had no control over, which further weakened confidence.  Juniper were replaced by Frostrow and JPMorgan. https://www.theaic.co.uk/aic/news/industry-news/capital-gearing-drops-juniper-over-discount-control-blunder

There's something to be said for holding ITs in rising markets and avoiding widening discounts in falling markets by using mirror oeic funds.

Right. Do you think things might settle down a bit with the replacement of Juniper and their discount control issue?