/ CAPITAL PROTECTION /
S
ince the UK voted to
leave the EU, the
initial chaos and
subsequent volatility
have stirred
unpleasant memories of the fall of
Lehman Brothers eight years ago
and the sell-off that followed.
This should serve as a reminder
that as well as aiming for capital
growth, investors should keep
one eye on capital protection,
especially if they have a shorter
time horizon. Thankfully there are
a select group of investment trusts
that prioritise capital preservation
and aim to “go against the grain”
compared with regular equity
portfolios in prolonged periods of
market weakness.
Jason Hollands, managing
director of Tilney Bestinvest,
trustnetdirect.com
says the perilous state of markets
means it is more important than
ever for investors to consider
exposure to such trusts.
“Investment trusts with
exposure to absolute return
strategies or with capital
preservation as a core element
of their mandate can be an
important component of a
portfolio in uncertain times such
as these,” he said.
FALLOUT
Of course, nobody yet knows how
Brexit will play out in the financial
markets, as so far most of the fallout
has been felt in currency and
property, but this is where heavily
diversified multi-asset portfolios
such as Rothschild Investment
Trust (RIT), Ruffer Investment
Company, Capital Gearing, Personal
Assets and BH Macro can shine.
In 2008 when the FTSE All
Share lost about 30 per cent over
the course of the year, RIT and
BH Macro lost less than half this
amount, while Personal Assets fell
just 3.24 per cent. Ruffer and Capital
Gearing managed to make money.
An important consideration is to
understand that these trusts are all
quite different in their approach
and underlying holdings, says
Ben Willis, head of research at
Whitechurch Securities. However,
he adds they all share several
benefits that have become more
and more relevant in light of the
result of the EU referendum – not to
mention a host of other concerns.
“They are all quite different in
what they do, but all the same in one
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