As of 30 June 2021 the company had made 19.5% for the year, but for the same date in 2022 returns were more lacklustre, just 5.6%. However, this had not materially impacted the trust's premium, with a slight dip from 2% to 1.7%.
The trust's manager Duncan MacInnes noted that while the figures had fallen, returns remained positive for the fund, especially when compared with the wider market over Q1 2022, which saw a "best-case scenario" of a 4.5% loss offered by US high yield bonds.
In the end of year review, MacInnes added they have "achieved its objective of preserving and growing shareholder capital" but recognised that "the period has been unusually challenging for investors.
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MacInnes has also had to content with the recent and abrupt departure of his mentor Hamish Baillie, who announced last week that he would be stepping down from the firm after more than 20 years.
MacInnes paid tribute to his former colleague saying he had "much to thank Hamish for. More than a decade ago he gave me a job and an opportunity which has changed my life. As a boss he was formidable but fair, always setting relentlessly high standards. […] If the measure of a good man is to leave those around him better than he found them, then Hamish Baillie is undeniably a good man."
Refocusing on the outlook for clients, MacInnes has long been concerned about inflation and has repeatedly voiced his concerns about how nonchalant the market was to the removal of fiscal stimulus.
He said: "The punchbowl is being taken away. Quantitative easing is melting away and quantitative tightening is beginning. Combined with rapid-fire rate hikes, it is a recipe for financial market sobriety."
In his report, MacInnes said gold and equites were the biggest detractors to performance during the period. The biggest loses came from Kinross Gold, which was also the trust's largest Russian exposure.
The manager said: "Gold is a prime example of the failure of conventional safe havens in recent times. Despite inflation and war being front page news, gold has misfired. We still think it has a valuable role to play, but this greater correlation with risk assets is a consequence of gold's increased financialisation."
It was not all the fault of gold and equities though, MacInnes said: "The carnage in the long-dated inflation-linked bond market should not be understated. These assets cost the portfolio 6.0%. The 2073 index-linked bond was down as much as 54% from its November 2021 all-time high."
With nowhere to hide in conventional assets, MacInnes said it was no surprise that the main performance drivers came from unconventional protective assets.
With that, MacInnes has been de-risking the trust into what he called "crouch mode", preparing for "what we believe will be a particularly dangerous period in the second half of this year".
Fixed income suffers most as bear market sets in
This involved reducing equities to the lowest weighting since the trust launched in 2003, going to 25%.
He also increased duration as rises in bond yields have increased the assets potential effectiveness as a portfolio hedge. And finally, moving its gold exposure from equities into bullion.
This was all in preparation for his four-point outlook, which included the long-term look at inflation, the short-term balance central banks faced balancing that factor, the bear market and overall market risk.
MacInnes said: "We have never had higher conviction on the long term - that we have moved into a new regime of inflation volatility and those conventional portfolios are not going to fare well.
"In the short term - the outlook is far murkier and path-dependent as policymakers try to navigate a narrow path without either tipping the economy into a wage-price spiral or over the other side into recession. In the meantime, liquidity continues to drain from the system."