Investment Manager’s Report
Over the year to 30 April 2025, the net asset value per share (‘NAV’) of Personal Assets Trust (‘PAT’) rose by +7.5% while our traditional comparator, the FTSE All-Share Index (‘FTSE’), rose by +7.5% (both in total return terms). The UK Retail Price Index (‘RPI’), which we also use as a comparator (see the inside front cover of this Report and Key Features and Record 1990-2025 on pages 2 and 3 respectively), rose by +4.5%. The Company’s NAV and share price (thanks to the discount control mechanism ‘DCM’) continued to demonstrate below-average volatility compared to peers and the stock market.
Our aim is to protect and grow shareholders’ capital over the long term. Our desire is to generate equity-like returns (high single-digits) with bond-like, or considerably lower, volatility. The performance of your Company over the past year has happened to be almost exactly in line with the return for the UK stock market, our comparator, but this is merely a coincidence as our portfolio could not look more different. Shareholders should expect returns to vary materially from the stock market. Our focus is on absolute returns rather than returns relative to an index. We are very aware that shareholders cannot spend relative pounds!
The performance of markets over the year belies considerable volatility – especially after the tariff announcements on ‘Liberation Day’ in April. PAT shareholders were sheltered from much of the volatility with the Company’s NAV falling only modestly (-1.9%), compared to near double digit falls of -9.7% and -10.5% in the MSCI World and FTSE All-Share respectively. Moreover, in a period in which many investment trust discounts have widened materially, shareholders have been protected by the DCM, with the shares consistently trading close to the NAV.
Our investment views in recent years have been shaped by an expectation of regime change. This began with policy decisions made during the pandemic. The shift to substantial monetary expansion by central banks, combined with fiscal spending by governments led to a more inflationary environment. Since the blow out of inflation in 2022 and 2023, in which UK RPI peaked at 14% and US CPI peaked at 9%, central banks have struggled to get inflation back to target, despite the tightest monetary policy in almost two decades. The fiscal genie is out of the bottle and government spending has grown, despite recent attempts (in the United States) to reverse fiscal commitments. Elon Musk’s attempt via the Department of Government Efficiency (DOGE) to rein in federal spending appears to have failed. Government debts have grown dramatically across the developed world. This was fine whilst interest rates were close to zero but today, with interest rates and bond yields at 4%-5%, the interest burden has become a material part of government spending. In the US, this cost has ballooned in the past three years from 8% of federal government tax receipts in 2022 to 19% in 2025 (source: Jefferies). Globalisation, which provided growth and helped depress inflation, appears to be firmly in reverse. President Trump’s recently announced trade war and isolationist inclinations have only accelerated the deglobalisation trend. Finally, the war in Europe, now in its fourth year, is leading to a wholesale change in defence spending. All these factors have led to a world of greater uncertainty, higher inflation and a bond bear market, which began in the summer of 2020. Thus far, the 2020s are looking very different from the 2010s.
Amid this environment, we have attempted to avoid the trap of rising bond yields, which affects the valuations of fixed income securities and some equities. We have sailed close to the shore with a relatively low equity exposure and short bond duration; preferring index-linked to nominal bonds. Gold bullion has played a critical role in the portfolio as a diversifier and an offset to falls in other asset prices, when they occur. We hold plenty of liquidity for when we see selective and more wholesale opportunities in the stock market.
The biggest contributors to performance during the year included our holdings in Visa, VeriSign, Unilever and American Express. The biggest detractors were Diageo and Pernod Ricard, which continue to suffer from weaker trading in spirits markets. Following a boom both during and following the pandemic, the sector has suffered from a nasty hangover of weaker demand and pricing. Our experience informs us that demand will ultimately recover but it may take time. The valuations are low today by historic standards, which should offer support and, ultimately, opportunity. During the year we made several changes to the portfolio and by our standards, we were more active than usual. We sold longstanding holdings in Becton Dickinson and Procter & Gamble (‘P&G’). Despite making a positive total return since our purchase in 2020, Becton Dickinson continued to face operational challenges and financial progress has been sluggish.
Subsequent to our sale, the shares have fallen materially on further deterioration in the company’s operating environment. P&G was first acquired in 2015. It proved to be an excellent investment for us; a well-executed long term turnaround. In addition, P&G benefited from a strong US domestic economy, when peers struggled in Europe and emerging markets. The shares have materially re-rated over many years of clinical delivery by competent management but performance is looking less resilient, with slowing organic sales growth and a valuation that looks hard to justify compared to peers like Unilever. Over the last year, we have added new holdings of Canadian National Railway, Chubb and VeriSign. We have followed Canadian National for five years. Its natural monopoly, as a North American railroad, allows the company to generate high, sustainable profit margins. Adverse weather and port strikes provided an opportunity to purchase this structurally advantaged business at a below-average valuation. We have also been looking for companies that benefit from a rising yield environment. Chubb, the world’s largest property and casualty insurer, has an exceptional track record of managing its risks with a consistent track record of profitability and capital allocation. The company is well-known for its strong market position serving high net worth customers. There is an opportunity to materially grow investment income from higher bond yields. As Chubb’s bonds held on its balance sheet mature, they are reinvested at higher yields, providing a tailwind to earnings, which was not present in a zero-interest rate world. Lastly, VeriSign is the exclusive registry for .com and .net domain names, meaning any company that buys a .com web address ultimately purchases it from VeriSign. The company has provided uninterrupted service for over 20 years and is rewarded by being able to gradually raise prices for domains. We expect VeriSign to grow sales and profit margins through modest growth in the number of web addresses, gradual price rises and operating leverage. We were also attracted by its strong balance sheet, with very conservative debt levels. In the stock market falls that followed the announcement of United States’ tariffs, we increased existing equity holdings as well as adding two new European companies to the portfolio, LVMH and L’Oréal. Both meet our careful, quality criteria and had fallen to valuations which looked fair.
Apart from the portfolio’s equity exposure, we are seeking complementary asset classes that may offset falls in equity markets. The US dollar has been kind to us over many years, especially during periods of stock market turbulence such as 2008, 2020 and 2022. The greenback has ridden to our rescue in these times of trouble, dampening the volatility of the Company’s NAV. More recently the currency has not stuck to the script. Our view is that this may prove to be a lasting change as investors increasingly question the dollar’s position as the world’s reserve currency. We have reduced the dollar exposure in favour of the yen, which we expect to behave more reliably as a safe haven in periods of market stress. Gold remains a cornerstone of the portfolio. As no one’s liability, bullion has a special place, and it is once again being appreciated as the ultimate reserve asset. In a world of heightened geopolitical risk, and the desire to diversify away from the US dollar, central banks continued to add to their holdings during the past year. There are very rational reasons for the recent rise in the price, when compared to paper money. Charlie Munger used to say, “Always invert”. Consider the gold price not rising but the value of paper currencies, like sterling and the US dollar, depreciating in value when compared to gold. We would not wish to get disproportionately more bullish into rising prices, so we have reduced the trust’s holding
into strength, retaining a percentage weighting of 10-12%.
During the past year, the investment narrative has changed from ‘American exceptionalism’ to one best summed up by the acronym ‘ABUSA – anything but the USA’. We are not convinced life is so simple. Such views demonstrate changes to sentiment and a voting machine mentality, over the weighing machine of substance. The US stock market remains very fully valued, yet it also hosts some of the very best companies including Microsoft and Visa, held by the Company, which are not available elsewhere. We will continue to add selectively to equities in the US, Europe and the UK, as we did during market falls in April when presented with improved valuations and better prospective returns.
Finally, in March we were delighted to announce the promotion of Charlotte Yonge as Co-Manager of PAT, which became effective on 1 May. This changes very little as to how the Company is managed day-to-day and I very much look forward to continuing our partnership in the years ahead. As longstanding investors in the Company, Charlotte and my interests are firmly aligned with fellow shareholders. Charlotte has been at Troy since 2013 and is one of several employees who have been with the business for over a decade. We see great value in hiring, developing, and retaining talent, and believe that our high rates of retention underline the stability and depth of our broader team.
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Please refer to Troy’s Glossary of Investment terms here. Performance data relating to the NAV is calculated net of fees with income reinvested unless stated otherwise. Past performance is not a guide to future performance. Overseas investments may be affected by movements in currency exchange rates. The value of an investment and any income from it may fall as well as rise and investors may get back less than they invested. The historic yield reflects distributions declared over the past twelve months as a percentage of the Trust’s price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions. Tax legislation and the levels of relief from taxation can change at any time. The yield is not guaranteed and will fluctuate. There is no guarantee that the objective of the investments will be met. Shares in an Investment Trust are listed on the London Stock Exchange and their price is affected by supply and demand. This means that the share price may be different from the NAV. Information on the risks of an investment in the fund can be found in the Prospectus.Neither the views nor the information contained within this document constitute investment advice or an offer to invest or to provide discretionary investment management services and should not be used as the basis of any investment decision. Any decision to invest should be based on information contained within the Investor disclosure document the relevant key information document and the latest report and accounts. The investment policy and process of the Trust(s) may not be suitable for all investors. If you are in doubt about whether the Trust(s) is/are suitable for you, please contact a professional adviser. References to specific securities are included for the purposes of illustration only and should not be construed as a recommendation to buy or sell these securities. Although Troy Asset Management Limited considers the information included in this document to be reliable, no warranty is given as to its accuracy or completeness. The opinions expressed are expressed at the date of this document and, whilst the opinions stated are honestly held, they are not guarantees and should not be relied upon and may be subject to change without notice. Third party data is provided without warranty or liability and may belong to a third party. Ratings from independent rating agencies should not be taken as a recommendation.Please note that the Personal Assets Trust is registered for distribution to the public in the UK and to Professional investors only in Ireland.Although Troy’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. All references to FTSE indices or data used in this presentation is © FTSE International Limited (“FTSE”) 2025. ‘FTSE ®’ is a trademark of the London Stock Exchange Group companies and is used by FTSE under licence. Issued by Troy Asset Management Limited (registered in England & Wales No. 3930846). Registered office: 33 Davies Street, London W1K 4BP. Authorised and regulated by the Financial Conduct Authority (FRN: 195764) and registered with the U.S. Securities and Exchange Commission (“SEC”) as an Investment Adviser (CRD: 319174). Registration with the SEC does not imply a certain level of skill or training. © Troy Asset Management Limited 2025.