Key Morningstar Metrics for CG Absolute Return Fund
- : GoldMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
CG Absolute Return has appeal for risk-averse investors seeking long-term capital growth. Key strengths include a well-tenured and highly focused team, and a consistent philosophy employed successfully over decades, with a clear emphasis on capital preservation.
The fund was launched in 2016 to provide a more liquid, open-end version of Capital Gearing Trust, which CG Asset Management founder Peter Spiller has managed since 1982. Spiller has over 50 years of experience and initially managed Capital Gearing Trust at Capel Cure & Myers and Cazenove before setting up CGAM in 2001. Alastair Laing and Chris Clothier joined as comanagers in 2011 and 2015, respectively, broadening the team to cater for Spiller’s eventual retirement, for which no firm timeline is set. Additional team resources have also been added, and in July 2023 Clothier was made Spiller’s co-CIO. In July 2024, Hassan Raza, who joined the team in 2021, became a fourth named manager of this fund. Although relatively small, the six-member team focuses on just two strategies: this one and a real return one, focusing on inflation-linked bonds.
CG Absolute Return takes the same flexible, long-only approach as Capital Gearing Trust, sharing its objective to preserve and over time grow investors’ wealth in real terms. It allocates flexibly across a diverse mix of assets within three broad groups: risk assets, index-linked bonds, and dry powder. Top-down decisions are the main driver of returns, while another lever is the team’s specialization in investment trusts, where it can exploit market inefficiencies.
Relative to Capital Gearing Trust, which has the same strategy and asset allocation, this fund has a keener eye on liquidity, so it holds fewer small caps, giving it a slightly higher market-cap profile. We expect the vehicles’ performance and risk to be closely comparable.
Because of the strong focus on capital preservation, performance deviates at times from the Morningstar Category average and category index. Since late 2022, the managers’ cautious positioning has contributed to lackluster returns, both in absolute terms and relative to peers and the category index. However, long-term strategy performance remains strong in absolute and risk-adjusted terms, thanks to skillful asset allocation and the avoidance of large drawdowns. The strategy has proved resilient during significant market dislocations including the global financial crisis, the first quarter of 2020, and 2022.
CG Absolute Return Fund: Performance Highlights
The fund is based on Capital Gearing Trust, and since its inception in 2016, its performance and risk have been closely comparable to the trust. Long-term strategy performance has been strong in absolute and risk-adjusted terms. While Peter Spiller has a track record of over 40 years managing Capital Gearing Trust, in its early years it had a higher-beta approach and considerably adapted during the 1990s. From 2000, Capital Gearing Trust has produced absolute and risk-adjusted returns comfortably ahead of the category average and category index (composed of 50% equities/50% bonds and cash). Skillful asset allocation and the avoidance of large drawdowns have been instrumental in achieving these results.
Given the strong focus on capital preservation, we expect performance to deviate at times from the category average and category index. The strategy tends to provide some shelter in falling markets, such as 2008, 2011, and 2018 when it produced positive returns. In 2022, the fund lost 3.5%, a top-quartile result and far better than the category average and index, helped by a short-duration stance in bonds and a value leaning in its risk assets. But since 2022, performance has failed to keep pace with the category average and index, held back by cautious positioning with low exposure to risk assets while the average peer benefited from a higher allocation to equities.
