Caledonia vs Capital Gearing

[oxomeyer]

Creating a portfolio of investment trusts and wanted to allocate 20% to a more defensive trust to give me some versatility + aim to improve performance in weaker markets.

I'm unsure between these 2. I initially seemed to favour CLDN as it seems to perform better in bull markets and as I am young (20), I'm not sure about the need for something as defensive as CGT, as I feel over time Caledonia will outperform due to the greater out-performance in bull markets and it has outperformed Capital Gearing overall since 1990. However, for a defensive trust, I was worried about its much weaker performance in the dot-com burst, 2007 and this last year compared to Capital Gearing. Is it still worth it over Capital Gearing?

I was unsure about RIT due to main Rothschild stepping down and I feel not enough of the directors aside from the main Rothschild family own significant shares meaning interests may not be as aligned.

What would people recommend for this part of my portfolio, or would any other be recommended?

The other funds in my portfolio are 25% Mid Wynd, 25% Monks, 30% Scottish Mortgage Trust

[Dod101]

Personally I hold both Caledonia and RIT. They are both as you say defensive with only modest dividends. They are not wealth preservers though or at least do not claim to be, unlike say CGT and Personal Assets. You know what I am going to say, why not split the remaining 20% equally between Caledonia and RIT? The Cayzer influence is very strong in Caledonia and I am sure we can be certain that the Rothschild influence will remain with RIT.
One or the other? Take your pick but I would probably go with Caledonia.

As long term ITs that you can just leave alone, I would think they will do well for you over say a five year period.

[SoBo65]

The other funds in my portfolio are 25% Mid Wynd, 25% Monks, 30% Scottish Mortgage Trust

Your three choices are excellent ( I hold all 3), at your age probably would not go with CLDN, perhaps instead something like FGT (Finsbury), Nick Train as substantial skin in the game with a good long term track record.

[Dod101]

I certainly would not argue about Finsbury G & I (I hold it as well) I am not sure, though what age has got to do with the choice of Caledonia. The Cayzers are likely to be around for a lot longer than Nick Train and if it is continuity we want Caledonia must be the better choice.

Dod

[Parky]

The main difference between CLDN and CGT is that CGT holds 30% index-linked government bonds and CLDN holds none, so if you think inflation will be a bigger factor in your target timescale than equity values, go for CGT. History says that equities will outperform long-term. If you are nervous about the short-term, go for CGT and switch later, perhaps, when things have settled down.

[scrumpyjack]

I have both CLDN and RIT but no 'wealth preservers'.
For the long term I am happy to hold CLDN as the Cayzer family influence IMO adds stability and a long term perspective.
The other point about CLDN is the very large discount to NAV (23.4%) due to the large Cayzer holding. That could eventually unwind, but I would regard that as a bonus if it ever happened.

[Hariseldon58]

At 20 years of age you probably have a very long investing future in front of you.

In weaker markets you could go for the growth trusts that are likely to fall furthest and may well have wider discounts.

Foreign and Colonial is a good trust for all conditions, its around £8 now, my first purchases in 90/91 were as low as 63p adjusted for splits, throw in an average yield of around 2% thats 10% plus over 30 years, pretty respectable.

Regular saving through thick and thin is the secret ! Don't change horses too often..it was my route to my present occupation of idle millionaire

[monabri]

Oxomeyer, it might be worth your while having a read through L'uni's threads.

viewtopic.php?f=96&t=27375

viewtopic.php?f=96&t=27501

viewtopic.php?p=278607#p278607

[SoBo65]

I certainly would not argue about Finsbury G & I (I hold it as well) I am not sure, though what age has got to do with the choice of Caledonia. The Cayzers are likely to be around for a lot longer than Nick Train and if it is continuity we want Caledonia must be the better choice.

Dod

I agree, nothing wrong with Caledonia, it is around 5% of my portfolio. My thinking was more around an investment horizon of some 40 years or so and that I should have taken more investment risk when younger. One other point and it is touched upon elsewhere on this tread, regular investing through thick and thin, preferably on an automatic basis has produced fantastic results over the longer term, assuming good choices are made of course.....

[Cell]

Hariseldon58

Could you please tell us what are the 15 holdings you have in your portfolio currently? I read your posts with interest and like your global tracker strategy but find it very interesting that you are diversified further into investment trusts away from trackers due to recent popular interest in these.

I want to do more research for ideas

Many thanks

[LooseCannon101]

At 20 years of age you probably have a very long investing future in front of you.

In weaker markets you could go for the growth trusts that are likely to fall furthest and may well have wider discounts.

Foreign and Colonial is a good trust for all conditions, its around £8 now, my first purchases in 90/91 were as low as 63p adjusted for splits, throw in an average yield of around 2% thats 10% plus over 30 years, pretty respectable.

Regular saving through thick and thin is the secret ! Don't change horses too often..it was my route to my present occupation of idle millionaire

I only have one trust - F&C and would thoroughly support the comments above. Chopping and changing trusts according to market sentiment, is a complete waste of time and money.

[Hariseldon58]

Hariseldon58

Could you please tell us what are the 15 holdings you have in your portfolio currently? I read your posts with interest and like your global tracker strategy but find it very interesting that you are diversified further into investment trusts away from trackers due to recent popular interest in these.

I want to do more research for ideas

Many thanks

@cell

I have now diversified further to more than 15... Whilst I have faith in the Global Tracker over an extended period, there are good reasons to diversify across asset types and equity 'tilts'.

I have a passive allocation that is more equally weighted with respect to regions and market caps etc ( I like the idea of 'smart beta' but the passive rules bound approach to date have been lacklustre to say the least...much better imho to have an investment trust to tackle these areas)

WIth regard to Investment Trusts I have a 'growth' , a 'balanced', a 'smaller companies', an 'income/value' and a 'thematic/other assets' mini portfolios.

I am going to put down the names of a few trusts I would consider for these groups, it's worth taking the time to download a few annual reports, not just the current ones but go back 3 or 4 years and read them with the benefit of hindsight...

Some of these are pretty fully valued, either dip your toes or look out for when they are on" sale"..

The "Growth"section, Scottish Mortgage, Monks, Finsbury Growth and Income, Baillie Gifford European Growth

The 'Balanced' section Mid Wynd, Foreign & Colonial, Alliance Trust ( much improved over recent years), Bankers, Brunner ( large family holding and large discount) and from JPMorgan Emerging, Japanese,Asia Growth and Income, Invesco Asia also Berkshire Hathaway ( not an investment trust but a diverse collection of interests)

"Smaller Companies" Section BlackRock Smaller Companies ,Baillie Gifford Shin Nippon, JPMorgan Japan Small Cap Growth and Income,Edinburgh Worldwide, Smithson

I am not going to comment on Thematic assets as they are by their nature transient, but under other assets I do like Brookfield Asset Management...

Under Income/Value the usual suspects plus Scottish American.

It's vital to take the time and read annual reports, posts from me or anyone else should be regarded as of possible interest, subject of your own further research.

You don't have to do anything in a rush. I started with just 8 trusts in 1990/1 ( including Foreign and Colonial, JP Morgan Emerging Markets, Dundedin Income Growth, Invesco Asia Trust, City of London, the others from that era changed names/ merged) if I had never done anything else it would have turned out ok.


In connection with the actual thread I have looked closely at Capital Gearing and Caledonia but chose not to invest at current prices.

[scrumpyjack]

You mentioned Brunner. I have had a small holding of it for a long time. It had been a serial plodder for many years but Lucy MacDonald has greatly improved it and performance has been much better in recent years and I increased my holding modestly. The discount (about 14% at present I think) is not really warranted IMO. The Brunner family holding is quite modest (23% - they were part founder of ICI in 1927 I think it was), and does not seem to exercise any control, so again I don’t think that should contribute as much to the discount as in the case of Caledonia and the Cayzers. It does limit the scope for buybacks a little but not much (they can’t buyback shares that would push the family holding over about 27% I think).

It may be a good home for when I reduce SMT back to a more sensible level.

[richfool]

You mentioned Brunner. I have had a small holding of it for a long time. It had been a serial plodder for many years but Lucy MacDonald has greatly improved it and performance has been much better in recent years and I increased my holding modestly. The discount (about 14% at present I think) is not really warranted IMO. The Brunner family holding is quite modest (23% - they were part founder of ICI in 1927 I think it was), and does not seem to exercise any control, so again I don’t think that should contribute as much to the discount as in the case of Caledonia and the Cayzers. It does limit the scope for buybacks a little but not much (they can’t buyback shares that would push the family holding over about 27% I think).

It may be a good home for when I reduce SMT back to a more sensible level.

Just in case you weren't aware, Lucy McDonald, the Manager of Brunner, has left and joined the JEMI board:

https://citywire.co.uk/wealth-manager/n ... d/a1446085
https://www.investmentweek.co.uk/news/4 ... ld-exit-19

[Cell]

Many thanks Hariseldon58

Hope you are well.

[AndrewSmith259]

Interesting post. I’ve been looking at CLDN for a while now. I like that Cayzer family still have a significant holding in the company.

[richfool]

I was just reading though this thread. Both Caledonia and Brunner have been doing very well over this last year. I have been looking at adding either or both to my portfolio, but have been put off by their recent rises in the SP's and in the case of Brunner, the reduction in the discount currently to c 9.5%. So I may just accumulate the cash and await a correction!

[vand]

I have a portfolio of what I consider multi-asset defensive trusts, and both these guys are in it, together with Rit Capital (RCP). I'm very pleased with all of them, and believe they are all very good money managers.

I couldn't believe how much of a discount to NAV CLDN was trading at at times last year when the discount was approaching 30% after they had announced a large NAV increase and yet the shareprice didn't move for a little while. Now it's caught up handsomely!

[scrumpyjack]

I see Caledonia reported their quarterly update today showing a 27.6% increase in NAV over the last year and diluted NAV per share of 5032p

Still on a large discount at 3635p, due I suppose to the Cayzer family holding, after rising 120p today in a falling market.

A good long term tuck away IMO

[Dod101]

I see Caledonia reported their quarterly update today showing a 27.6% increase in NAV over the last year and diluted NAV per share of 5032p

Still on a large discount at 3635p, due I suppose to the Cayzer family holding, after rising 120p today in a falling market.

A good long term tuck away IMO

Thanks for that. Year end for Caledonia is 31 March so we will no doubt get their annual figures before too long. I have held them since 1992 and they are one of my few shares still to be in certificated form without any capital reconstructions in these 30 years. The share price hasfallen back a bit after the year end when they were around £40. Surely we might see that again before too long.

Dod