Capital Gearing Trust 50% bigger than last year – the impressive track record and tight discount control mechanism have been helping to attract new investors to Capital Gearing Trust. Coupled with NAV returns well ahead of inflation and matching those provided by UK equities, the trust grew by 46% over the year to the 5 April 2019, achieving a market cap of £329m. 2.1m shares were issued, raising £86.2m. As the company expands, its ongoing charges ratio is falling. This year it was 0.70%, down from 0.77%.
The NAV return for the year was 7.9% and the return to shareholders 7.4%. These compare to inflation of 2.4% and a return on the MSCI UK Index of 7.9%. The underlying dividend has been increased to 23p from 21p and the company is also planning a special dividend of 12p, reflecting strong income generation from the portfolio. One reason for this is an asset allocation switch from investments in zero dividend preference shares to short dated bonds. The board were concerned that this might prove temporary, hence the decision to pay a special dividend.
Extract from the manager’s report
“For a portfolio as defensive as Capital Gearing Trust’s to deliver high single digit returns, almost everything had to go our way in the year. Many assets that were selected primarily for their defensive characteristics delivered double digit returns in sterling terms. These notably included material holdings in Swedish and German property companies, renewable and PFI infrastructure funds and the near 25% holding in US inflation linked government bonds. The strong performance of these assets allowed the Company to deliver acceptable returns whilst holding in excess of 35% of the portfolio in cash or short-dated high quality sterling bonds and preference shares. These defensive cash and cash like holdings were important in minimising NAV declines during the equity market weakness of late 2018. Stock selection and asset allocation worked together to protect the downside. In short it was a fortunate year.”
CGT : Capital Gearing Trust 50% bigger than last year
Admirable frankness on fortune