Half-year results from Personal Assets (PNL), the £1.7bn absolute return fund, show its fund managers hiked the amount invested in equities by more than four percentage points in the half-year to 30 October, even as they prepared the defensive portfolio for a bursting in the US stock market bubble. 

Sebastian Lyon and Charlotte Yonge of Troy Asset Management said “somewhat paradoxically” they had increased equities from 36.7% to 41% in a period when Wall Street led a global rebound from the market lows in April as investors recovered from their initial panic over President Trump’s tariff policies. 

While the pair are concerned by the speculative rush of capital to artificial intelligence (AI) stocks that pushed US stock valuations to a 25-year high of 40 times earnings, they said the dizzying run in the S&P 500 masked a huge divergence in performance.  

While categories such as “Nasdaq listed with no revenues” and “unprofitable small/mid-caps” were among the best performers, traditionally more defensive sectors containing many high quality, large-cap companies, had not “looked more friendless” since the 2000 dotcom crash, they said. 

London Stock Exchange Group (LSEG) was one of three new positions added by the managers on 31 July. The pair pounced on the shares, now a 2.2% weighting, when they tumbled after half-year results alarmed investors with a drop in some subscription sales, even though overall sales grew 8.7%. 

“We think sales from the business’s unmatched range of high quality, deeply integrated financial data sets, from FTSE Russell indices to tick level trade data, will continue to growth and command pricing power for years to come,” they said in words that may cheer Finsbury Growth & Income (FGT) fund manager Nick Train, who has said much the same of a big holding in LSEG that has slid 23% this year. 

The duo also opened a holding in Hubbell, a US manufacturer of grid transmission equipment, and Alcon, the world leading Swiss provider of contact lenses, and added to positions in Agilent Technologies, Canadian National Railway and Experian, the consumer credit rater. 

Meanwhile, they took profits in US tech giants Alphabet, Microsoft and Verisign and sold out of Moody’s, American Express and LVMH after a good run left the economically sensitive stocks with little room for disappointment.  

During the period the multi-asset portfolio, which is stuffed with defensive assets such as gold, inflation-linked bonds, Japanese yen and cash, generated an underlying return of 5.6%.  

That was well behind the FTSE All-Share, which rallied 16%, but more important for Personal Assets investors it beat 1.2% inflation giving them a real, absolute return. It’s been the same story over 10 years with shareholders receiving a 75.5% return including dividends against the 56.5% rise in the UK retail prices index.  

After gold shot up 53% in the first 10 months of the year, Lyon and Yonge grew wary of a setback and took profits to leave the allocation to bullion and gold miners at 11%. Although mindful that an unexpected rally in the dollar or a stock market sell-off could knock gold in the short term, they remain convinced of its defensive qualities, pointing out it outperformed the US stock market by an average of 40% on the last six occasions the S&P 500 has fallen 15% or more.

“The diversification benefits of gold are real, but they can require a little patience,” they said.