YOUR PORTFOLIO
Going the extra mile
Peter Spiller
Manager , Capital Gearing Trust
Risk and reward are supposed to be at opposite ends of the investment spectrum – the more risk you take , the higher your returns should be over the long term . In practice , the highest risk someone investing on your behalf should take is having a 100 % exposure to equities . This means any fund manager who cuts their exposure to this asset class in favour of more defensive instruments is more likely to underperform the longer they are invested . However , a small number of UK-listed investment trusts with less than half their assets invested in equities have managed to outperform the FTSE All Share over the very long
When Peter Spiller became manager of the Capital Gearing Trust in 1982 , he geared up the portfolio to take advantage of the looming bull run . However , the manager began to reduce his exposure to equities in the late 1990s as the dotcom bubble pushed valuations to extreme levels , which marked a change of approach by the trust in which it placed a higher emphasis on capital preservation and consistency of returns . This hasn ’ t stopped it making money – it is up 368.8 % over 20 years , compared with 243 % from the FTSE All Share , although it has lagged the index over 10 years . Looking ahead , Spiller thinks inflation will remain persistently high , so he is maintaining a significant exposure to index-linked bonds to protect against this threat . “ The greatest imbalance that has developed over the last 40 years
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