Kepler Trust Intelligence:New Research-Replacement

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Ruffer Investment Company Limited

03 October 2018

 

Ruffer Investment Company: New research       

03/10/2018     

Highlights:

·      A defensive but balanced portfolio, designed to protect capital during downturns while paying investors for the wait in between

·      Has delivered annualised returns of 7.3% since launch, not far behind the annualised return from the FTSE All-Share Index (8.6%) - whilst recording far less downside during negative periods

·      The managers have moved with the times to diversify away from depending solely on equities and bonds, as the two have become more correlated, and the portfolio now includes illiquid strategies and derivatives designed to protect the portfolio in a downturn

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Ruffer Investment Company is designed to deliver steady all-weather returns across the cycle - aiming to protect capital in falling markets and deliver double the Bank of England base rate on a twelve-month rolling basis.

Primarily a long only vehicle, the trust also uses currencies and derivatives as part of its investment process and is managed on a day-to-day basis by Steve Russell, Hamish Baillie and Duncan MacInnes.

The managers have believed for a long time that efforts to reflate the economy will eventually result in too much inflation, which central banks will find hard to control, and the portfolio is designed to perform well in an inflationary environment, with significant exposure to UK and US index linked treasuries.

In the meantime, however, the managers are keen to ensure that investors are paid to wait - and just under half of the portfolio is invested in equities which are a mix of special situations, macro-opportunities and value plays.

The trust has delivered muted returns in recent years as the managers' bearish stance has not matched the mood of the market. The trust has done well over the longer term however, and particularly held up during negative periods. The trust won acclaim for its performance in 2008 - when it delivered positive returns of 24% while over the same period the market lost 29% - but it has shown similar resilience in other negative periods.

Since the fund was launched, it has delivered annualised returns of 7.8%, not far behind the FTSE All Share's 8.6%, whilst keeping a tight grip on volatility; with a max drawdown over that period of -8.6% in stark contrast to the 45% recorded by the index.

The managers are keen to stress this combination of long-term annualised returns which keep up with the market and resilience during times of crisis and the message appears to work well with investors; the trust has been issuing shares actively in recent months in response to ongoing demand for the shares.

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