Friday, June 10 2022

Over its financial year ended April 30, 2022, Personal Assets generated a return of 7.1% in NAV terms and 8.0% in terms of share price. Inflation (measured by CPI or Consumer prices Index.

Variations of RPI include RPIX (which excludes mortgage payments), RPIY (which is RPIX excluding taxes like VAT and Council Tax) and RPIJ (which is RPI calculated on a geometric rather than an arithmetic basis).

" class="glossary_term">RPI) was 11.1% over this period and the return on the UK market was 8.7%.

Personal Assets returns came from a very defensive environment wallet. As of April 30, 2022, liquidity was 62.2%. This included 16.9% in UK Treasuries, UK cash, overseas cash and net running Passives and 45.2% in various risky asset classes other than equities: 35.7% in US TIPS and 9.5% in gold bullion. This compares to holdings as of 30 April 2021 of 12.7% in UK Treasury bills, UK cash, overseas cash and net current liabilities and 41.5% in various non-risky asset classes. linked to equities: 32.6% in US TIPS and 8.9% in gold bullion.

The Read our guide to Boards and Directors

" class="glossary_term">plank remains committed to paying an annual fee dividend from £5.60. High levels of inflation during the year, particularly in the US, meant that the trust earned significantly higher income on its holding of US TIPS than in previous years. Therefore, in order to meet the distribution requirements of investment trusts, the board has decided to pay an additional amount special dividend for the year to 30 April 2022 of £1.40 per share.

The board also considered the appropriateness of the current share price of around £500 per share. After careful consideration, the board believes it is appropriate to seek shareholder approval at the next quoted UK domiciled company holds a meeting each year where shareholders get to vote on matters important for the company. The agenda usually includes approving the Annual Report and Accounts, approving the remuneration policy and the Directors' remuneration report, reappointing the auditor and approving their fee, approving the dividend and re-electing some or all of the directors. For an investment company in particular, the Annual General Meeting also includes approval of the terms for share buy-backs and share issuance. Shareholders are welcome to go to the Annual General Meeting and, for many, it is the best chance they get to actually meet the company's management and ask them questions.

" class="glossary_term">annual general meeting split each common share on a hundred-for-one basis. Under the proposals, each existing ordinary share will be subdivided into 100 new ordinary actions. [This is great news. I have criticised the unwieldy share price in the past. It makes it much harder to investors to reinvest their dividends or invest through regular savings plans.]

The Chairman pays tribute to Robin Angus, who died on May 4, 2022. Robin served as Trustee of the Trust from 1984 and Executive Director from 2002 until his retirement in September 2020. Robin and Ian Rushbrook were instrumental in the establishment of the company’s vision. and for overseeing its success, as evidenced by the growth of market capitalisation from £4.7m to £1.3bn during his tenure.

Extract from the statement of the manager of Sebastian Lyons

We’ve been warning for some time that the dumbbell “balanced” portfolio strategy of placing nominal obligations alongside the shares has long passed its expiration date. The short term negative correlation between the two asset classes has been of great value to asset allocators in diversifying portfolios and producing consistent returns. Bonds have thrived on low inflation and weak growth, while equities have performed during periods of improving economic activity. However, over the decades, falling interest rates have supported ever-higher valuations for both stocks and bonds. Today, the short-term negative correlation between the two asset classes seems to have broken. In a new regime of higher inflation, the risk is that bonds and stocks fall together. This is why we have long preferred index-indexed bonds and gold bullion, relative to conventional bonds, and they have held up relatively well to the recent bond market sell-off and should thrive in an environment of negative real interest rates, also known as “financial repression”.

During the year, the majority of our stocks contributed positively to returns, led by core names such as Microsoft, American Express, Nestlé, Diageo and Franco Nevada. The only significant detractors were Medtronic and Unilever. As markets rose in 2021, we reduced exposure to the company’s shares, fearing that valuations had gone too far. After starting the year with 46% equity, we ended the year with 38% exposure. Shiller’s cyclically adjusted price-to-earnings ratio (CAPE), a long-term valuation measure, for the US stock market peaked at 38.6x in November 2021, not far off the level reached in December 1999.

The situation today is different from that of the technology bubble. In 1999, the overvaluation was concentrated in a smaller number of stocks (Dotcoms, Cisco, Microsoft and Juniper Networks). The value was offered elsewhere. Thanks to the dominance of cheap and plentiful capital over the past decade, overvaluation is much more evenly distributed today, offering fewer opportunities to hide from an equity devaluation. We are skeptical of those who promote equities as a good defense against inflation. Historically, stocks love disinflation, not inflation. Equity returns in times of inflation have been volatile and poor in real terms, despite earnings growth – such is the corrosive effect of inflation. Based on current starting valuations, we believe returns will be modest and we are waiting for lower equity valuations before putting shareholders‘ savings to work.”

PNL: Personal Assets expects 100 for a stock split

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