Gold and bonds pay off for Personal Assets Trust

Wealth preservation strategy Personal Assets Ord (LSE:PNL) produced a 7.5% net asset value (NAV return), in line with the UK equity market (+7.5%) and exceeding UK RPI (+4.5%) in its latest financial year to the end of April.

Aided by successful discount control, a share price total return of +7.4% nearly matched the NAV return of the portfolio.

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Contribution came from the allocation to physical gold, as well as US Treasury Inflation-Protected Securities (TIPS) and short-dated Treasuries.

The equity book also produced a positive return, with the greatest contributors being Visa Inc Class A (NYSE:V), VeriSign Inc (NASDAQ:VRSN), Unilever (LSE:ULVR), American Express Co (NYSE:AXP) and Moodys Corp (NYSE:MCO), although certain spirits names, Pernod Ricard SA (EURONEXT:RI) and Diageo (LSE:DGE), did weigh on returns as demand in the sector was weaker.

The numbers in detail (for financial year to 30 April 2025)

Net Asset Value (NAV) Return: 7.5%
Share Price Return: 7.4%
Benchmark one (FTSE All-Share) Return: 7.5%
Benchmark two (UK RPI) Return: 4.5%
Premium/Discount: -0.9% (vs -0.7% in prior year)
Full-Year Dividend (including Special): 7.2p (vs 7.7p in prior year)
Net Gearing: nil

Outlook

The managers, Sebastian Lyon and Charlotte Yonge, highlight ever more severe interest burdens for indebted governments, the new US trajectory towards isolationism and question marks surrounding the dollar’s reserve currency status.

Nonetheless, they see more nuance than the permeating “anything but the US” rhetoric given the greatness of certain US companies, Visa and Microsoft Corp (NASDAQ:MSFT) to name two, preferring to use periods of volatility to add selectively to equities across the US, Europe and UK.

Discount

Throughout the year, Personal Assets traded predominantly at a small discount, although swung to marginal premium briefly in 2025. PNL began the year at a discount of -0.7% and ended at -0.9%. The board enact a strict discount control policy, which succeeded in minimising discount volatility throughout the period.

Portfolio

PNL remains conservatively positioned, reflective of the managers’ outlook. Bond positioning favours short duration (bonds with short lifespans), with the vast majority of issuances maturing in less than five years – a decision proven prudent given the movement of yields in the year.

US TIPS (26.7%) are the largest bond allocation, followed by UK Gilts (9.8%) and US Treasury (4%).

A cash position, now favouring being held in Japanese yen over US dollars, forms just over 10% of the portfolio (from less than 2% last year).

The equity allocation increased on the prior year to around 37%, up from 27.5% a year earlier. New holdings included the addition of the natural monopolist Canadian National Railway Co (TSE:CNR) on valuation weakness, as well as to Chubb Ltd (NYSE:CB) – well positioned in a rising yield environment, and VeriSign – with minimal debt and strong pricing power.

Disposals included the sale of Procter & Gamble Co (NYSE:PG) and Becton Dickinson & Co (NYSE:BDX), despite positive returns since their purchases in 2015 and 2020 as conviction in future returns waned.

Gold bullion, which offers a diversifying quality, remains a meaningful allocation at around 11% of the portfolio, although the managers have been careful not to over-allocate in a period of strengthening prices.

Dividend

Income production within the portfolio was again strong. In addition to the annual dividend of 5.6p, due to the substantial yield received from the allocation to US TIPS stemming from higher US inflation, it will once more pay a special dividend (1.6p), making for a total 7.2p.

Management developments

Earlier in 2025, it was also announced that Charlotte Yonge, who has worked at Troy since 2013, would be promoted to co-manager alongside longstanding fund manager Sebastian Lyon, who established Troy in 2000 and is the firm’s chief investment officer.

ii View

PNL made progress in the year towards its long-term objectives of protecting and increasing shareholders’ funds, producing real returns above inflation and (as is typical for PNL) with volatility far less than equity markets.

Despite a trend of deteriorating discounts in the investment trust universe, investors were more-or-less delivered the NAV return. The discount averaged -0.9% in the year and significant numbers of shares were bought back, with even small amounts of issuance also taking place – now a rarity across the investment trust universe.

It is notable that PNL has experienced some of the lowest discount volatility of any AIC member trust in the last 12 months, meaning investors haven’t had to concern themselves with portfolio returns diverging from the return they actually receive.

Returns on a NAV and price basis were strong compared to the trust’s two close peers - Ruffer Investment Company (LSE:RICA) and Capital Gearing Ord (LSE:CGT) trust - and most facets of the portfolio produced positive returns.

The meaningful allocation to gold buoyed returns, given a broad uplift in the metal’s price as central banks continued to allocate heavily to the asset and the quality-focused equity book produced a net positive return.

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The decision to remain cautious and lean towards shorter-duration fixed income was productive as a climb-down of yields (in the US in particular) did not transpire, hurting investors positioned for falling yields. In addition to the usual dividend, investors will be satisfied again with a special dividend payment owing to the higher interest collection from US TIPS, with the entire distribution for the year of 7.2p being healthily covered by revenue generation in the portfolio.

All these defensive factors came together in the wake of marked decline in equity and certain bond markets following the US administration’s Liberation Day tariff announcements in early April 2025, when the portfolio and share price of PNL showed impressive resilience.

Notable in terms of positioning is an uplift in equity allocation, as the managers capitalised on weakness in valuations brought about by macroeconomic noise. While this may bring a degree of more risk to the table, it is notable that the equity book is more heavily positioned within defensive sectors than a global or even UK benchmark. Moreover, the increase is complemented by the trust’s now circa 10% cash position, which is increasingly diversified across currencies.

Mounting sovereign debt burdens, a US administration that seems intent on reshaping global trade and immigration patterns and a series of developments in international conflicts present challenges to risk assets that at times recently have felt insurmountable.

For long-term investors with reasonable appetite for risk, the efficacy of equity markets among major asset classes is fairly undisputed. However, for those with a more cautious outlook and minimal capacity for losses wealth preservation solutions can be attractive. PNL has shown its ability in periods of market stress to fulfil its objective of protecting investor capital and produced good absolute returns over its long track record.

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Investors may be disappointed that over three to five years, the trust has not exceeded the rate of UK inflation, much due to the double-digit increase in RPI throughout 2022. However, an annualised 5.2% return over 10 years has meant real returns with a level of volatility less than half that of UK equities.

The trust has impressive scale, at over £1.6 billion in assets, and this is reflected in an ongoing charge that has generally trended down over the past decade (currently 0.67%) and is a compelling option for investors in the market for a wealth preservation vehicle.

This trust does not form part of ii’s rated lists.