Ruffer Investment Company 13 June 2023
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Ruffer Investment Company. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
Ruffer Investment Company (LON:RICA) is managed with a highly flexible investment strategy, all asset classes being fair game when it comes to creating a robust portfolio which should be able to generate positive returns in all market environments. Achieving this is most difficult when equities and bonds are losing money, and this is where RICA really stands out, with the adept use of various derivative strategies and non-conventional assets helping it to historically perform very well in falling markets and rarely lose money (see Performance).
The core thesis of the management team is that inflation will remain higher on average and be more volatile than markets currently expect and that this is the main threat to asset values and investors’ capital in the coming years. In recent years, RICA has made good money from being positioned for a more volatile investment environment. While a period of high and volatile inflation remains a key scenario considered when allocating assets, the portfolio contains positions designed to perform in multiple other scenarios too, particularly in the shorter term (see Portfolio).
The portfolio is managed by Duncan MacInnes and Jasmine Yeo. Duncan has been on the management team since 2016, and he was joined by Jasmine late last year. They work within a large team of investment professionals under co-CIOs Henry Maxey and Neil McLeish, another to join Ruffer last year, as well as Jonathan Ruffer, chairman and founder of the company.
The success of the trust over the years has seen RICA trade on a premium for long periods. However, in 2023, as the market has become less concerned about inflation, a small Discount has opened up in the shares.
RICA has an outstanding track record of generating attractive returns while avoiding market blow-ups. In our view, it is an attractive way to invest for the long run, either as a core portfolio holding or potentially a hedge against sell-offs in equities and bonds. There has been some turnover in the management team over the years, but the strategy has been consistently applied and the strong house view and teamwork behind the scenes gives us confidence the same approach will be consistently followed for years to come.
In the short term, we think RICA looks attractive on a small discount, which has been rare in recent years. In fact, the board has had to issue huge amounts of shares in recent years to keep up with demand. We view this discount as reflecting market assumptions that interest rates and inflation are at or near their peaks in the US and UK, and the subsequent drop in demand for assets which can protect against inflation. We think this is a dangerous assumption, and should there be any resurgence of inflation, or a growing realisation that it is a persistent feature of our economies, alongside higher interest rates, then we could see the discount close.
- Strong track record of making good returns while limiting drawdowns, especially in crises
- Well-positioned for an inflationary environment, in contrast to many other equity strategies
- Current discount may offer a rare opportunity
- Long-term and contrarian approach can lead to periods of sluggish performance
- Could suffer if central economic theses are proven wrong – i.e. inflation falls, remains low and stable and/or real rates stay positive
- Shareholders often have to pay a premium for new shares