COVER STORY
Peter Spiller
Capital Gearing Trust
Peter Spiller has managed the Capital Gearing Trust since 1982 , but says there have been few discoveries in this time that have caused him to leap out of the bath . “ One was in 2007 to 2008 when conversations with a client who ran a large London bank revealed the extraordinary behaviour and appetite for financial risk that prevailed in the market ,” he admits . “ Much earlier , my cynicism about the published accounts of companies was markedly deepened by Charles Raw ’ s book Slater Walker , containing the remarkable quote from an employee that ‘ we don ’ t have a P / E ratio , we have a PR ratio ’.” Instead , Spiller ’ s philosophy has evolved over the long term . One of his beliefs that separates him from his peers is that while asset allocation should reflect the timeframe of the investor , this doesn ’ t automatically mean someone with a long-term horizon should hold equities . “ Instead , it is better for long-term investors to shift the duration of their portfolio to reflect the prospective returns of each asset class ,” he explains . “ Fundamentally , the valuations of most assets should reflect the longterm real risk-free interest rate . When real interest rates are high , valuations will be low and prospective returns will be good , meaning that asset allocation should overweight equities , which are broadly speaking the longest-duration asset . “ Similarly , bond portfolios should also have long duration . Conversely , when risk-free rates are low , the duration of the portfolio should be kept as short as possible .”
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