Capital Gearing: A Fortress Against Market Shocks

Capital Gearing, an investment trust established to safeguard investors' real wealth against inflation, has demonstrated remarkable resilience. Since Peter Spiller assumed management in 1982, the trust has navigated numerous market crises, including Black Monday in 1987, the dotcom bubble, the global financial crisis, and the pandemic. In its 44-year history, Capital Gearing has only experienced losses in two years.

The trust's current £810 million portfolio is heavily defensive, with 45% invested in inflation-linked bonds, primarily UK gilts, 2% in cash, and 1% in gold. This allocation strategy aims to protect capital during economic downturns and periods of rising inflation.

Co-fund managers Alastair Laing and Chris Clothier, who joined Spiller in 2011 and 2015 respectively, adjust the trust's bond duration based on economic forecasts. They recently shortened the duration of their bond holdings to five years, a strategic move anticipating potential interest rate increases.

Capital Gearing's equity allocation is at an all-time low of 15%, reflecting managers' concerns about overvalued sectors such as AI-related tech firms. The trust also avoids direct exposure to US equities, with managers perceiving significant market risk and stretched valuations there.

Over the past year, Capital Gearing returned 6.7%, outpacing inflation of 3.1%. Its five-year and ten-year returns stand at 15.5% and 63% respectively, against inflation rates of 28% and 39.4%. The trust's annual charges are 0.56%, with shares currently trading at a 2% discount.