Resilient performance by Troy Trojan

The last few months have been a difficult time for investors, but anyone with money in the Troy Trojan fund will have felt a lot more comfortable than most. Over the course of January its multi-asset portfolio returned 1% compared to a 10.1% fall in the FTSE All-Share. It also did reasonably well in 2015 with a gain of 3.2% versus a 1% increase in the index.

Troy Trojan aims to achieve capital preservation and growth in real terms over the longer term. It is managed by Sebastian Lyon of Troy Asset Management, who has been wary of the outlook for the equity markets for some time and has been maintaining a defensive stance ready for the current sell-off.

At the end of December he had just 13% invested in the UK stock market with a further 28% in overseas shares. Cash made up an incredible 24% and was complemented by a 10% holding in gold, with the rest of the fund divided between UK gilts, UK index-linked gilts and US index-linked bonds.

The largest shareholdings are all defensive in nature and include the likes of British American Tobacco, Philip Morris, Microsoft and Coca-Cola. Two others − Sage and Reynolds American – have done particularly well since the stock market peaked last April.

In his recent monthly commentary Lyon said that buybacks have provided a major support for share prices as companies have used their free cash flow and additional borrowings to reward shareholders. He thinks that there is growing evidence that businesses will not be able to continue with this and will have to scale back their commitments in this area.

Troy Trojan is a highly unusual fund and offers excellent diversification benefits when combined with more mainstream mandates. It is an ideal core portfolio holding for relatively risk averse investors and comes into its own when markets are in freefall.