P ERSONAL A SSETS T RUST PLC A NNUAL G ENERAL M EETING T HURSDAY 23 J ULY 2015 & L ONDON M EETING F RIDAY 24 J ULY 2015
P ERSONAL A SSETS T RUST T OTAL A SSETS £590 M AS AT 30 J UNE 2015 I RREPLACEABLE C APITAL “The shareholder is god” Ian Rushbrook Source: Google Images 2
P ERSONAL A SSETS T RUST D ISCOUNT T O N ET A SSET V ALUE 2000-2015 Source: Datastream, Numis Securities & Troy Asset Management Ltd, 30 June 2015 “ The discount is voluntary” Robin Angus 3
P ERSONAL A SSETS T RUST S HARES I N I SSUE 1995-2015 Source: Personal Assets Trust/Troy Asset Management Ltd, 30 June 2015 4
P ERSONAL A SSETS T RUST T RACK R ECORD 2000-2015 Source: Personal Assets Trust, 30 April 2015 5
P ERSONAL A SSETS T RUST V OLATILITY C OMPARED T O P EER G ROUP 2000-2015 % TR, ExD, GBP Personal FTSE A Assets British Gov’t All Stocks Trust FTSE All FTSE Share Global Gov’t S&P 500 TR LIBID Bond Source: Lipper, 30 April 2015 Seeking above average returns with below average volatility over the cycle 6
I S T HE F INANCIAL C YCLE D EAD ? Source: Google Images 7
N O D ELEVERAGING G LOBAL D EBT ($ TRILLION ) Compound annual growth rate (%) 2000-2014 2000-07 2007-14 199 Total 7.3 5.3 +57 trillion Household 8.5 2.8 142 Corporate 5.7 5.9 87 Government 5.8 9.3 Financial 9.4 2.9 Total debt as 269 286 246 % of GDP Source: McKinsey Global Institute, Debt and (not much) Deleveraging February 2015 8
I NTEREST R ATES – S UB Z ERO N O N ORMALISATION Y ET Country Policy Rate Switzerland -0.75 Sweden -0.35 Euro 0.05 Denmark 0.05 (market rate -0.75%) Japan 0.075 (market rate) US 0.25 Singapore 0.4 (market rate) UK 0.5 Hong Kong 0.5 Canada 0.75 Source: Bloomberg/Troy Asset Management, 6 July 2015 Rates cannot go much lower… 9
M ONETARY E XCESS H AS D RIVEN U P M OST A SSET P RICES Not All Money Is Created Equal Source: Bloomberg, 31 May 2015 10
P RESERVING C APITAL W HAT W ORRIES U S T ODAY ? TINA Source: Google Images 11
Y IELD O N A “ B ALANCED ” P ORTFOLIO 1987-2015 (50% Equity, 40% Bonds, 5% Corporate Bonds, 5% cash)* 6 6 5 5 4 4 Yield (%) 3 3 2 2 1 1 0 0 1987 1991 1995 1999 2003 2007 2011 2015 (*Yield Indices – Sovereigns - BoA Global Gov’t Bond 10 year+, Global Equity - MSCI World, Cash - US T-Bill, Corporate Bonds - BAA US Corporate Yield) Source: Societe Generale, February 2015 Low yields lead to high volatility 12
C ORRELATION B ETWEEN US 10 YR T REASURY & S&P 500 I NDEX Pre-2010 (correlation = -0.6) Post-2010 (correlation = +0.3) 250 250 200 200 150 150 100 100 50 50 0 0 2010 2011 2012 2013 2014 2015 S&P500 (rebased to 100) US 10 year Treasury Price (rebased to 100) Source: Bloomberg/Troy Asset Management, 30 June 2015 13
“N O M ORE B OOM & B UST ” G ORDON B ROWN S&P 500 – Length Of Bull Phases In Months 1943-2015 80 70 60 (Months) 50 40 30 20 10 0 1943 1947 1950 1953 1956 1960 1963 1966 1969 1973 1976 1979 1982 1986 1989 1992 1995 1999 2002 2005 2008 2012 2015 2015 Source: Société Générale, 30 th June 2015 “Sell everything that is not nailed down” Leon Black, Apollo Global Management 14
B UYBACKS A RE C YCLICAL 1999-2015 Source: CLSA Corporations are the major marginal buyers of equities 15
D O N OT R ELY O N C ONSENSUS F ORECASTS … …Rely on value Source: Google Images 16
G LOBAL E QUITY M ARKET V ALUATIONS : M EDIAN P ERCENTILE O F M ARKET C AP /GDP R ATIO O F 24 M AJOR E CONOMIES 1991-2015 Source: National Inflation Association, Independent Strategy “Sell when you can: you are not for all markets” Rosalind, As You Like It 17
V ALUATION D ISPERSION N EAR H ISTORIC L OWS Source: Bernstein, 31 March 2015 A rising tide lifts all boats 18
S ECULAR B EAR M ARKET – I S I T O VER ? Source: Bloomberg, 30 June2015 “Progress is cumulative in science and engineering but cyclical in finance” James Grant (Money of the Mind) 19
I NVESTMENT O VERREACH 2003 & 2009 2000 & 2007 2015? Source: Google Images 20
T ROY E QUITY S ELECTION A VOIDABLE D ISASTERS Capital Intensity Technological Change Too much debt High sales, low cash flow Acquisitive 21 Source: Google Images, 30 November 2014
B UYING Q UALITY / T IPPING T HE S CALES AIMING TO OWN BUSINESSES THAT ARE LIKELY TO GET HEAVIER WITH TIME BP BAE Systems Newmont Mining Dr Pepper Snapple Tesco Becton Dickinson Nestle Unilever “Time is the friend of the wonderful company, the enemy of the mediocre ” Warren Buffett Source: Google Images, 30 November 2014 22
H IGH Q UALITY C OMPANIES B ACK O N T HE P ODIUM O F P OPULARITY Forward P/E multiples of some typical Troy stocks 2007-2015 Source: Bloomberg, 30 June 2015 23
A SSET A LLOCATION AS AT 30 J UNE 2015 C AUTIOUSLY P OSITIONED Top 10 Holdings Currency Exposure (excl short dated-govt bonds) % Fund at 30.06.15 Gold 10.2 GBP 70.0% USD 9.5% British American Tobacco 4.5 Gold 10.2% Philip Morris 3.9 CHF 3.7% Nestlé 3.7 SGD 3.8% Coca Cola CAD 2.8% 3.4 Sage Group 2.8 Microsoft 2.6 Altria 2.3 Imperial Oil 2.3 Becton Dickinson 2.2 Total al Top 10 37.9 .9 8 other holdings 11.5 Cash & equivalent 50.6 Total al 100.0 .0 24 Source: Troy Asset Management Ltd 30 June 2015
O UTLOOK “… the chief losses to investors come from the purchase of low-quality securities at times of good business conditions.” Benjamin Graham, The father of value investing 25
D ISCLAIMER 26
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