Capital Gearing Trust plc Annual General Meeting July 2018 For - - PowerPoint PPT Presentation

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Capital Gearing Trust plc Annual General Meeting July 2018 For - - PowerPoint PPT Presentation

Jan 07, 2024 525 likes •771 views

Capital Gearing Trust plc Annual General Meeting July 2018 For Professional Investors Only 2018 was the 36 th anniversary since Peter Spiller started managing CGT Capital Gearing Trust Capital Gearing Trust NAV Total Return History

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Capital Gearing Trust plc Annual General Meeting July 2018

For Professional Investors Only

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2018 was the 36th anniversary since Peter Spiller started managing Capital Gearing Trust CGT

Source: Morningstar 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CGT MSCI UK 15% CAGR 11% CAGR

CGT TR 45% 49% 29% 35% 47% 3% 30% 2% 19% 18% 30% 18% 5% 20% 13% 17% 4% 10% 11% 10% 3% 22% 15% 15% 5% 7% 0% 18% 8% 10% 11% (2)% 5% 3% 13% 0%

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Capital Gearing Trust – NAV Total Return History (Rebased) Apr 1982 to Jun 2018

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Capital Gearing Trust has the dual objective of preserving shareholders real wealth and to achieve absolute returns

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Capital Gearing Trust

Source: Morningstar

Capital Gearing Trust – NAV Performance Since 2000

Update

100 200 300 400 500 Capital Gearing NAV MSCI UK UK RPI

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SLIDE 4

Fund Reporting

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SLIDE 5

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There are two key pillars to CG Asset Management’s investment strategy Investment Strategy

Long Only Absolute Return Equity Alpha Asset Allocation

Aim: Strategy: Execution: Capital protection Multi asset portfolio construction Broad investment across bond markets Superior returns on risk exposure Value focused specialist equity investing Focus on listed closed ended funds, ETFs and other collective vehicles

Downside Protection Superior Equity Returns

1 2

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Disciplined investment in the closed ended fund universe offers

  • pportunities for alpha, however discounts today are very narrow

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Equity Alpha

Source: Bloomberg Portfolio Analytics Risk Assets include funds invested in equities, property, infrastructure, private equity, hedge funds and loans.

CGT – Risk Asset Only –Three Year Returns (%)

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CGT – Risk Asset Only – Returns and Risk

  • 20.0
  • 10.0

0.0 10.0 20.0 30.0 40.0 50.0 60.0 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 CGT Risk Assets MSCI UK All Cap Investment Trust Index CGT Risk Assets MSCI All Share Investment Trust Index 0% 10% 20% 30% 40% 50% 60% 1.5 2.0 2.5 3.0 3.5

3 Year Total Return 3 Year Standard Deviation

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Disciplined investment in the closed ended fund universe offers

  • pportunities for alpha, however discounts today are very narrow

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Equity Alpha

Source: Numis

Investment Trust Discounts – 2005 to 2018

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  • 30
  • 25
  • 20
  • 15
  • 10
  • 5

5 10 15 Q4 05 Q2 06 Q4 06 Q2 07 Q4 07 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q3 10 Q2 11 Q3 11 Q2 12 Q3 12 Q2 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q4 15 Q3 16 Q4 16 Q3 17 Q4 17 Premium(+) / Discount (-) %

Equity Funds Alternative Funds

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How liquid are the risk assets compared to their history?

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Source: CG Asset Management Analysis and Estimates. Based on

0% 10% 20% 30% 40% 2014 2015 2016 2017 2018

% Of Risk Assets Capable Of Liquidation In 1 Day Based on 10% Market Participation

Equity Alpha

1

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With prospective returns low, duration is short, waiting for more attractive opportunities to present themselves

CGT Asset Allocation – June 2018 – By Asset Class

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Source: CG Asset Management Analysis and Estimates, Northern Trust, Bloomberg Portfolio Analytics, Morningstar

Asset Allocation

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Equities Property

Alternatives Gold Index Linked Bonds Conventional Bonds Cash & T- Bills

0% 20% 40% 60% 80% 100% 7% 14% 3%

  • 1%

0% 3% 0% Equities Property Alternatives Gold Index Linked Bonds Conventional Bonds Cash & T-Bills

CGT 12 Month Asset Class Return – to June 2018

Summary 12M Return CGT UK MSCI All Cap UK RPI 3% 8% 3%

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Over the last three year the defensive asset allocation has lowered returns but also significantly lowered risk

CGT 3 year total return (Jun 2015 = 100)

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Source: Bloomberg, Northern Trust, Morningstar

Asset Allocation

CGT 3 year total return & Max Drawdown

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CGT MSCI UK UK Gilt Index 0% 5% 10% 15% 20% 25% 30% 35% 2.0% 4.0% 6.0% 8.0% 10.0%

3 Year Total Return 3 Year Maximum Drawdown

80 90 100 110 120 130 140 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Capital Gearing NAV MSCI UK UK RPI

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Strongest returns were generated by property holdings, and the weakest by disappointing special situation investment trusts

Contributors and Detractors – 12m to Jun 2018

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Source: CG Asset Management Analysis and Estimates, Northern Trust, Bloomberg

Asset Allocation

Largest Positions -12 Months to Jun 2018

Asset Return Av Weight Cont’ Equities % % % North Atlantic Smallers 12 2.8 0.3 Vanguard FTSE Japan 9 2.8 0.2 Vonovia 22 2.8 0.6 Deutsche Wohnen 27 1.9 0.5 Residential Secured Income

  • 3

1.8 0.0 Bonds UK Index Linked 2019 6.6 0.0 US TIPS 2026 4.4 0.0 US TIPS 2025 3.9 0.0 UK Index Linked 2025 2.3 0.0 Swedish Index Linked 2022

  • 5

1.9

  • 0.1

Zeros/Credit NB Private Equity Zero 5 1.7 0.1 JZ Capital Partners Zero 5 1.2 0.1 Asset Return Av Weight Cont’ Top Contributors % % % Vonovia 22 2.8 0.6 Deutsche Wohnen 27 1.9 0.5 Unite Group 37 1.1 0.4 North Atlantic Smallers 12 2.8 0.3 Segro 27 0.5 0.2 LEG Immobilien 18 0.9 0.2 Largest Detractors Ground Rents Income Fund

  • 18

1.1

  • 0.2

EPE Special Opportunities

  • 50

0.3

  • 0.2

Swedish Index Linked 22

  • 5

1.9

  • 0.1

Candover

  • 17

0.3

  • 0.1

US TIPS 2020

  • 0.4

1.1 0.0 Residential Secure Income

  • 3

1.8 0.0

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Macro Outlook

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CGAM’s asset allocation is built on two simple principles

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Asset Allocation Asset returns mean revert over a long horizon Market timing is possible over a long horizon therefore

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Valuations today suggest prospective returns will be modest and risk is elevated

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S&P 10 Year Return Model – 1982 to 2018

Source: CG Asset Management Analysis, Shiller CAPE, Bloomberg

10 Year Index Linked Bond Yields – 1982 to 2018

Return Prospects

  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

  • 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% US Real Yield UK Real Yield Implied

Dividend + Earnings Growth + Valuation Change

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Global Debt The key feature of recent years has been dramatic build of debt, which has continued since the financial crisis

20 40 60 80 100 120 140 160 180 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USD Trillion GDP Debt

Global Non-financial Debt Stock vs. Global GDP ($ tn)

Source: BIS, CGAM Analysis

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Unemployment is low, global growth is strong and there are signs that wages are starting to pick-up

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Global Economy

Unemployment Rate – US, UK & Germany (%)

Source: Bloomberg (LHS), IMF (RHS)

Real GDP Growth –World (%)

  • 1.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018f Annual Real GDP Growth (%) 2 4 6 8 10 12 14 1992 1993 1995 1997 1998 2000 2002 2003 2005 2007 2008 2010 2012 2013 2015 2017 Unemployment Rate (%) Germany UK US

Forecast for 2018 of 3.7% in line with average since 1992 of 3.6%

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5,000 10,000 15,000 20,000 25,000 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Mar-19 Jul-19 Nov-19 Mar-20 $ bn PBOC ECB BoJ Fed SNB BoE

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Monetary Policy Yet globally interest rates are at emergency levels and monetary policy remains extreme

Source: PBOC, ECB, BOJ, Federal Reserve, SNB, BoE, Bloomberg, CGAM Analysis & Estimates

CGAM Forecasts

Major Central Bank Balance Sheets – Total Assets (USD bn)

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The New York Fed’s UIG has proved to be a good leading indicator

  • f inflation and points to a firming inflationary environment

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US Core CPI vs. FRBNY Underlying Inflation Gauge (Advanced 15 Months)

US Inflation

Source: BLS, New York Fed, CGAM Analysis

  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

% Chng YOY

Core CPI FRBNY Underlying Inflation Gauge (15 Months Advanced)

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Today’s situation is reminiscent of the late 1960s in the US with a combination of full employment and rising fiscal deficits

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US CPI and U3 Unemployment (%)

History

Source: BLS, US Office of Management & Budget, Federal Reserve Bank of St Louis

Federal Budget Balance (% GDP)

1 2 3 4 5 6 7 8 Jan-60 Jul-60 Jan-61 Jul-61 Jan-62 Jul-62 Jan-63 Jul-63 Jan-64 Jul-64 Jan-65 Jul-65 Jan-66 Jul-66 Jan-67 Jul-67 Jan-68 Jul-68 Jan-69 Jul-69 Jan-70 Jul-70

%

CPI (YOY) Unemployment

  • 3.0
  • 2.5
  • 2.0
  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

%

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Historically few assets have provided protection against rising inflation Asset Performance

Source: Credit Suisse Global Investment Returns Yearbook 2012, Dimson and Marsh

  • 74%
  • 62%
  • 52%
  • 33%
  • 20%

26%

  • 100%
  • 50%

0% 50% Bonds Bills Equities Real Estate Housing Gold

Regression of annual real return vs. same year inflation across 19 developed countries

“Equities are at best a partial hedge against inflation;

their nominal returns tend to be higher during inflation, but not by a large enough margin to ensure that real returns completely resist inflation.” Dimson and Marsh, February 2012 Credit Suisse Year Book “For a variety of reasons reviewed here, inflation tends to raise investors’ required real rate of return on equity and to lower real capital income for tax-related

  • reasons. As a result there is a strong negative

correlation between inflation and real and nominal stock prices.” John Tatom, November 2011 Inflation and Asset Prices

Real Return vs. Inflation 1900-2011

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Historically gold has performed well during financial repression, however it now stands at a premium to its long term value Gold

Source: Bloomberg, CGAM analysis

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30 60 120 240 480 960 1,920 1971 1973 1974 1976 1978 1979 1981 1983 1984 1986 1988 1989 1991 1993 1994 1996 1998 1999 2001 2003 2004 2006 2008 2009 2011 2013 2014 2016 Gold Price - Indexed to 100 August 1973 CPI - Indexed to 100 August 1973

Gold Price & CPI Indexed to 100 in August 1973 (Log Scale)

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Capital Gearing Trust has the dual objective of preserving shareholders real wealth and to achieve absolute returns

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Capital Gearing Trust

Source: Morningstar

Capital Gearing Trust – NAV Performance Since 2000

Update

100 200 300 400 500 Capital Gearing NAV MSCI UK UK RPI

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DISCLAIMER

This presentation is issued and intended for professional investors and eligible market counterparties only. Performance figures have been calculated by CG Asset Management Ltd based on information provided by Morningstar and Northern Trust International Fund Administration Services (Ireland) Ltd. CG Asset Management Ltd has an obligation to point out that the value of all investments and the income there from can go down as well as up and the investor may not get back the amount invested. Past performance is not necessarily a guide to future performance. CGAM IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY REGISTERED IN ENGLAND NO 4056163

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