Personal Assets Trust Warns Stock Market Recovery Could Be “Short-Lived”

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The Personal Assets Trust share price has remained flat on Wednesday following the release of full-year financials. At £473.50 per share the FTSE 250 share remains a whisker off May’s record highs of £474.40.

NAV Growth Lags The Broader Market

Personal Assets Trust said that its net asset value per share (NAV) rose by 9.1% during the 12 months to April 2021. This lagged a 22.1% rise in the FTSE All-Share Index over the same period.

This marks a change of fortunes for Personal Assets Trust, a trust which greatly outperformed the FTSE All-Share Index during its previous fiscal year. Its NAV rose 5.3% year-on-year back then, whilst its traditional comparator dropped 19.8% during the period.

The FTSE 250 investment trust pointed out that its NAV was still up 19.8% during the past three years, however. In that same period the FTSE All-share index fell 3.5%. And on a 10-year basis Personal Assets Trust’s NAV has risen 47.8%, beating the 26.3% increase recorded on the FTSE All-Share Index.

Taking The Foot Off The Gas

Commenting on last year’s performance, investment manager at Personal Assets Trust Sebastian Lyon said that “during the pandemic we protected shareholders’ capital on the downside.” But he added that “shareholders may question why we have not participated more in the upside in recent months.”

Lyon said that financial markets “have experienced a strong bounce back as a reflation-driven, re-opening trade has taken hold following the good news of vaccine approvals.” But he noted that “the worst thing we could do would be to increase our risk the more speculative markets become,” describing the adoption of a riskier approach as “the equivalent of pressing harder on the accelerator the closer we get to the cliff.”

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He added that technological change creates material business risk and that the Covid-19 crisis has served to accelerate these trends. As a consequence Lyon commented that “[the] share prices of recovery stocks may prove short-lived as economic reality re-asserts itself on challenged business models.”

Comings and Goings

Reflecting the company’s focus on “durable and profitable businesses,” Personal Assets Trust’s additions last year included American Express AXP , Franco-Nevada, Nestlé, Philip Morris and Unilever. In recent months it has welcomed aboard Alphabet, Visa V and Agilent amongst others.

The FTSE 250 company jettisoned its long-term holdings in Coca-Cola, Colgate-Palmolive CL and British American Tobacco last year, it added.