Wealth preservation trust Capital Gearing (CGT) delivered net asset value (NAV) and share price totals returns of 5.8% and 6.4% respectively in FY26.
While the defensively-positioned trust lagged global equity markets, it met its objective of beating inflation last year. The rate of CPI (Consumer Price Index) inflation was 3.3% over the same period.
What are Capital Gearing’s aims?
For the uninitiated, Capital Gearing aims to preserve and grow shareholders’ real wealth over time. While the FTSE 250-listed fund has a long-term investment horizon, it has an aversion to short-term losses. That means greater emphasis is placed on avoiding losses than on maximising returns.
Capital Gearing is steered by CG Asset Management trio Peter Spiller, Alastair Laing and Chris Clothier. The trust also aims to beat inflation over the medium term by at least 2%, compounded over time.
Weathering rougher seas
The managers believe we have moved from a disinflationary world with falling interest rates to an inflationary environment with higher interest rates.
Against this backdrop, Capital Gearing’s chairman Karl Sternberg conceded: ‘Other asset classes may ultimately perform better, but they will have much scarier interludes. Having CGT in a portfolio makes it easier to weather those rougher seas without panicking.’
And if markets start to price in greater inflation and inflation volatility, Capital Gearing ‘should perform much better than the 30% or 40% in conventional bonds that investors are often herded into owning as they approach retirement.’
Positives across the board
All major parts of the trust’s portfolio delivered a positive contribution in FY26, including the inflation-linked bonds and risk assets. ‘Property holdings delivered positive, though unexciting returns,’ admitted the managers.
Capital Gearing’s exposure to risk assets is predominantly through other investment trusts. The strategy is to buy trusts on discounts where the managers believe there is a catalyst for those discounts to close.
Notable successes in FY26, where both the discount narrowed and the underlying performance was strong, included Blackrock Energy & Resource Income (BERI) and Monks (MNKS). Other winners were Fidelity Emerging Markets (FEML) and Aberdeen Asia Focus (AAS).
Underperformers included Smithson, Finsbury Growth & Income (FGT) and Mobius (MMIT). Capital Gearing’s largest equity holding, North Atlantic Smaller Companies (NAS), also had a poor year. ‘This level of performance is not good enough and we are engaging with the company to improve corporate governance,’ said the managers.
Doing the splits
Capital Gearing’s ‘exceptional’ performance since launch has driven the share price to elevated levels. The stock price is north of £51 today, which is unhelpful for those investing smaller amounts. As a result, the trust plans to carry out a 10-for-1 share split in July.
‘We hope that sub-dividing the company’s ordinary shares will make buying the shares more attractive to new investors and increase market liquidity,’ explained Sternberg.
‘I would like to reassure existing shareholders that the splitting of the shares will not affect the overall value of their holdings in the company as the reduction in the price per share will be offset by a commensurate increase in the number of shares they hold.’
Investors seeking shelter from market storms should examine the merits of Capital Gearing. It is also worth investigating its fellow capital preservation trusts Ruffer (RICA) and Personal Assets (PNL).
Capital Gearing’s portfolio proved defensive during the sell-offs relating to US tariffs and the outbreak of the Iran war. The trust also has pedigree when it comes to growing investors’ real wealth by delivering returns in excess of inflation.
In fact, Capital Gearing has outperformed CPI by 1.9% per annum over 10 years and 2.5% per annum over 20 years. Under Spiller’s tenure, the trust has exceeded inflation in 37 of the last 44 financial years.
Learn about Capital Gearing Trust here: https://capitalgearingtrust.com/
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