Personal Assets Trust update: optimistic on future returns despite inflation risk

Personal Assets Trust one of the components of the MoneyWeek investment trust portfolio, said it is prepared for higher inflation and believes the fund will be protected. Saloni Sardana looks at how the trust is doing.

Personal Assets Trust (LSE: PNL), one of the componets of the MoneyWeek investment trust portfolio, said it has prepared for higher inflation and believes the fund will be protected, despite marginally underperforming its benchmark, the FTSE All-Share Index, in the year to date. 

The trust‘s managers, Sebastian Lyon and Charlotte Yonge, said countries lifting restrictions and rolling out vaccines is “not uniform around the world” and has caused “imbalances and inflationary pockets”. 

But they are unsure whether higher inflation will last: “Although we are witnessing pockets of post-pandemic labour shortages in certain sectors, it is unclear whether these will persist as lockdowns and income-support schemes come to an end.” 

The trust notes that companies such as Salesforce have loosened geographic constraints on their hiring policies which makes inflation less likely as automation increases – a trend sparked by the pandemic and a growing gig economy, which makes it harder “to paint a long-term picture of too many jobs chasing too few workers”. 

PNL believes its holding in US Treasury inflation-protected securities – “TIPS” – provides “attractively valued inflation protection” and will do well in an environment where yields are assumed to remain negative. Index-linked bonds made up 31.3% of PNL’s portfolio at 31 October, with UK Treasury bills at 16.4%.

It also recommends holding gold in a world where monetary and fiscal intervention are unlikely to stop any time soon. PNL holds 8.2% of its portfolio in gold bullion.

The biggest equity holdings in the trust at the end of October were Microsoft and Alphabet at 5.5% and 5.2% respectively. Opportunities at Microsoft have grown since the fund first bought the company back in 2010: “By placing Azure, Microsoft’s cloud services platform, at the centre of the business, the opportunities for innovation and growth have ballooned”, it said.

PNL is run by Troy Asset Management and was listed in 1983 and invests in multiple asset classes. The fund has marginally underperformed its benchmark, the FTSE All-Share Index, in the year to 17 December – PNL posted a 10.2% rise in its share price, compared to 10.9% rise for the benchmark since the start of the year. As of 17 December, the trust traded at a premium of 1.73% to its net asset value (NAV) the underlying price of the assets it holds.

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