Personal Assets Trust (PNL) has released its annual results for the financial year ending 30 April 2023.
- Over the 12 month period PNL reported a NAV total return of -0.9%, and share price total return of -3.0%, this compares to the 6.0% total return of the FTSE All-Share Index.
- PNL’s main objective is to preserve the capital in real terms, and over the period it underperformed UK RPI, which came in at 11.4%.
- Over the year PNL’s share price largely traded around its discount, with the board issuing 23,998,300 shares, and bought back 2,160,000. PNL currently trades on a 1.2% discount.
- PNL maintained a high level of liquidity over the year, with 76% of assets in cash or highly liquid assets as of 30 April 2023, a 14% increase on the level at its last financial year end.
- PNL paid a dividend of 5.60p per share, in line with its 2022 payout.
PNL’s investment manager Sebastian Lyon commented:
“This was a dull year for returns for your Company; while we would always prefer to make healthy positive real returns, occasionally we must accept they are not always readily available. This is especially true over shorter time frames when starting valuations are high for all asset classes. We are aware that, after a benign period of inflation, the RPI is catching up with us. Our mandate remains to preserve capital in real terms over the long run and, as such, outperforming inflation remains our objective. Over the past eighteen months the nature of the challenge has intensified, and we expect that inflation will remain higher and more volatile than it has been in the recent past. We have positioned the portfolio accordingly, recognising that all asset prices, including equities, bonds and real estate, along with many ‘alternatives’ such as private equity, will be much more vulnerable in such an environment.
“We are no longer in a buy-and-hold market, in which valuations expand as lower yields support higher prices. We expect that inflation has become embedded. This is the product of several factors, but of particular importance is the increased bargaining power of labour in the aftermath of the pandemic. Wage inflation is the most important component in driving higher prices on a more sustained basis. This is coinciding with slowing globalisation and increased intervention from governments, often in pursuit of more nationalist agendas. These factors are inflationary, and they come at a time when central banks have less room to manoeuvre. We expect that interest rates can only rise so far without severely injuring indebted economies. This unfamiliar backdrop has called time on a 40-year bull market in bonds, with all the implications that brings for investors.
“Investor focus seems to be on coincident indicators as opposed to looking forward to the effects of higher interest rates and tighter lending conditions. These are likely to lead to a recession. Bond markets, often a more reliable and rational indicator than more emotional and volatile stock markets, are indicating the most inverted yield curve since 1981. The lower yields in longer duration bonds are a clear warning of a hard landing. This is currently being ignored. Ayrton Senna said, “You cannot overtake 15 cars when it’s sunny…but you can when it’s raining”. We know the companies we want to own should attractive valuation opportunities present themselves and we are ready to increase our equity exposure, from currently prudent levels, as conditions become more treacherous.”