News Column

Personal Assets Trust Underperforms As NAV Declines

June 5, 2014

Samuel Agini

LONDON (Alliance News) - Personal Assets Trust PLC Thursday said its net asset value fell over its financial year, while its comparator, the FTSE All-Share Index, rose.

In a statement, the trust, which is run for private investors and aims to primarily protect as well as to increase its shareholders' funds over the long-term, said its NAV per share fell by 5.1% in the year ended April 30, while the index rose by 6.8%.

The trust's share price fell by GBP25.10 during the year, to GBP331.90 on April 30.

While the trust has previously said that its investment style tends to lead to outperformance in falling markets and a lag in sharply rising markets, the investment adviser said that to actually lose money calls for a full explanation.

"A year in which Greek government bonds rose by 50% and International Airlines Group, formerly British Airways, was one of the best performing shares in the FTSE 100 Index was never likely to be a vintage one for PAT. Some of our equity holdings made good progress, especially the software companies Microsoft and Sage (we reduced both holdings during the year after strong share price performance)," Lyon said in a statement.

"Others, such as Coca-Cola and Diageo, suffered from their currency mix and from slower demand from emerging markets. Ian Rushbrook, the founder of Personal Assets, used to describe such stock price movements as 'corks bobbing up and down in the water'. They do not distract us and occasionally they present us with the opportunity to add to our favoured holdings at attractive valuations, as we did with GlaxoSmithKline, Coca-Cola and Philip Morris," Lyons added.

"But where did we actually lose money?" Lyon asked.

He pointed to a fall in the trust's index-linked bonds, and said gold "became a four letter word" as it suffered its biggest sell-off since the crisis in 2008. "Ben Bernanke's hint last June that he would 'taper' quantitative easing hurt all asset classes except cash," Lyon said. The trust also has a "modest" exposure to miners, which fell sharply.

"We are not 'gold bugs', committed to holding bullion for ever. But we believe that the preconditions for a secular bull market in gold remain in place. Negative real interest rates in all major currencies are likely to prevail for many years to come and the only prospect of positive real interest rates is from a spell of deflation, which the Federal Reserve is determined to avoid," Lyon said.

"We are in the midst of an extraordinary and unprecedented monetary experiment which is unlikely to end well," Lyon cautioned.

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Source: Alliance News

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