Wealth preservation trusts, including Personal Assets Trust (LSE: PNL), Capital Gearing (LSE: CGT), and Ruffer (LSE: RICA), have experienced a decline in real value over the past five years, with their returns failing to keep pace with inflation.
Over this period, UK consumer price index (CPI) inflation averaged 5% annually, accumulating to 27.5%. In contrast, Personal Assets Trust saw a 20.8% increase in its net asset value (NAV) to the end of August, equating to 3.85% per year. Ruffer recorded a 20% gain (3.7% per year), while Capital Gearing returned 11.5% (2.2% per year).
The trusts' performance is partly attributed to a relatively low equity allocation during a strong bull market for stocks, particularly as the market has favoured big technology companies. Additionally, a higher-for-longer interest rate environment has made it more challenging for bond investments.