This week I am looking at the Trojan Fund, an open-ended investment fund which aims to grow investors capital (net of fees), ahead of the UK Retail Prices Index over the longer term, which the managers describe as being 5 to 7 years.
The managers aim to run a defensively positioned portfolio, which protects investors during times of market stress, but with selective equity exposure that offers long-term growth prospects. Given this objective, the fund is able to invest in a wide range of assets but this predominantly consists of equities, US inflation-linked bonds, short-term UK government debt, cash and gold related investments. Over recent years the portfolio has had around 1/3 of the assets in equities. As with all strategies under the Trojan name, they favour investment into businesses that are able to compound their cash flows through competitive advantages. This leads them towards the Consumer Goods, Healthcare and Business Software sectors. Companies such as Microsoft, Coca-Cola and Nestle form significant positions.
The fund is the flagship product of Troy Asset Management, established in 2000 by the Lead Manager of this strategy, Sebastian Lyon. Sebastian launched this fund in 2001 and has generated returns of 263% since then, compared to 67% for the Retail Price Index and 177% for the FTSE All-Share. Whilst not explicitly targeted, the defensive nature of this fund means that these excess returns have been delivered with a much lower level of volatility than the UK equity market.
Both Sebastian Lyon and the wider Troy team have created a very strong reputation in managing assets with this approach. This reputation, the strong performance and investors’ requirement for a defensive vehicle to lower their overall volatility, has seen the strategy grow to over £4.3bn in size.