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Spiller’s ‘great sadness’ at Capital Gearing's first loss since 1982
by Robert St George on May 30, 2014 at 10:43
The £98 million Capital Gearing Trust has recorded its first negative annual return in over three decades.
In the year to 5 April 2014 the trust lost 2.5%, the first time it has not achieved a positive absolute return since Peter Spiller became manager in 1982. Back in 2009, for instance, Capital Gearing returned 12% while the FTSE All Share index dropped 30%.
Former Cazenove partner Spiller (pictured) expressed ‘great sadness’ at not delivering a positive return over the past year.
Spiller compared the market environment with that of 1998 and 2006, years when he recalled ‘lacklustre performance against the backdrop of a strong equity market’.
However, he observed that the situation was distinct today insofar as bonds are as highly valued as equities.
‘Asset allocators are faced with the unedifying choice of defensive assets that offer a small but guaranteed real loss, or risk assets that offer a modest real return and the risk of considerable permanent capital loss,’ Spiller stated.
Spiller has reacted by reducing his portfolio’s exposure to index-linked bonds from 43.9% a year ago to 33% now.
‘In time the proceeds from these sales are likely to be reinvested back into the index-linked market,’ said Spiller.
‘However whilst there is elevated volatility around the end of quantitative easing, we are managing the bond duration shorter and holding higher levels of cash than normal.’
The cash allocation has jumped from 3.1% to 9.8%, while the equity weighting – expressed through other funds – has risen from 27.4% to 28.9%.
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