Monthly Investment Report March 2022

RNS Number : 0252I

Ruffer Investment Company Limited

12 April 2022

 

RUFFER INVESTMENT COMPANY LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 41996)

LEI 21380068AHZKY7MKNO47

Attached is a link to the Monthly Investment Report for March 2022.

http://www.rns-pdf.londonstockexchange.com/rns/0252I_1-2022-4-11.pdf

During March, the net asset value of the Company rose by 1.7% after allowing for the dividend paid during the month. This compares with a rise of 1.3% in the FTSE All-Share index.

Operation Stable Door began in earnest during March as the Federal Reserve raised interest rates for the first time in four years to try to contain inflation running at a near-half century high of 7.9%. Government bond yields moved abruptly to price in the most aggressive interest rate hiking cycle since 1994. Global bonds have just endured their worst quarter ever despite war, pestilence (Covid disruption in China) and growing fears of a recession. So much for conventional bonds acting as a 'safe haven'. This should not come as a surprise to regular readers of this report, as we have written about the vulnerability of conventional bonds for some time.

What was the impact on the Company? We made positive returns in each of the first three months of this year as both equities and bonds ended up in negative territory. During March long-dated inflation-linked bonds ('linkers') fell in value as yields rose faster than inflation expectations, but our interest rate options - which profit from rising yields - more than offset this fall in value. Active duration management via derivatives continues to be essential to the Company's resilience in a rising yield environment. Long linkers remain a key holding for the world we are heading into and so this balance will be maintained.

While fixed income volatility hasn't been this high since the Great Financial Crisis, equity markets look increasingly complacent, with many recovering all losses since the start of the Ukraine War. We trimmed equity exposure to 36% reflecting greater uncertainty and profit taking in some equity derivative protections. Overall, equities were a positive contributor for the month, with energy stocks once again leading the charge.

Commodity markets continued to perform well with higher prices helping the Australian dollar, where we now have exposure of around 5%. In World War II, America was famously dubbed the 'great arsenal of democracy'. In the era ahead, Australia looks set to be the 'great arsenal of commodities' for western democratic states. On top of this, Australian pension funds may soon start to close their net short position in their domestic currency, adding a further kicker to the Aussie dollar. The allocation was funded from the US dollar.

Finally, we added 2% to bullion exposure. Gold exposure and gold mining equities were the largest positive performance driver during the month. Total gold exposure now stands at close to 10%.

Near-term the path ahead remains highly uncertain - as ever, we aim to be resilient whatever happens. Longer-term, Covid and the Russia-Ukraine War mark successive great accelerations towards the more inflation-prone and volatile era ahead. We believe we have the right asset mix to deal with the challenges and capture the opportunities in this new regime.

Enquiries:

Sanne Fund Services (Guernsey) Limited

Jamie Dodd

DDI: [phone]

Email: [e-mail]  

 

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