Fund Profile

Disclaimer

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.

Overview
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Overview

Ruffer Investment Company (RICA) is designed to achieve positive annual total returns (after expenses) of at least twice the Bank of England base rate. The trust invests internationally across a range of asset classes, seeking to hold both growth and protective strategies in an appropriate balance to ensure they generate gains and avoid losses over rolling 12-month periods.

The trust consists of different pools of assets designed to provide different return profiles in various environments. The managers, Hamish Baillie and Duncan MacInnes, have positioned RICA in alignment with Ruffer’s core investment outlook, believing that the expansion of leverage in the global economy will drive policy decisions in the coming years. Ruffer expects that the absence of productivity driven growth means the only feasible recourse available to policy makers to deleverage economies will be to attempt to push inflation higher and keep real (i.e. inflation-adjusted) interest rates negative.

With monetary efforts at reflating the economy having largely failed, Ruffer expects fiscal policy to be employed to the same end in the coming years, and ultimately anticipates a deterioration in confidence in fiat currencies. To protect against this the trust contains assets, particularly index-linked bonds, designed to benefit from an inflationary environment. However, the managers are wary of trying to time the market, and also hold a sizeable allocation to equities which should benefit from a more benign environment; this has helped improve NAV returns in 2019. Similarly, they hold sizeable protective strategies which seek to protect the trust in the event of substantial dislocations in equity and/or credit markets, which could occur around a period of deflationary data.

As a function of the rise in global leverage, they note a converging assessment of risk within the corporate bond market, and a huge expansion of BBB-rated investment grade debt. In the event that an economic slowdown precipitates downgrades of some of this debt (making it sub-investment grade), they note that a significant proportion of market participants (ETFs and mutual funds) will become forced sellers of already illiquid assets. This could cause a dislocation in corporate bond markets, which will have a direct impact on equities through both the impact of higher debt costs on profits and the likelihood of equities being sold when investors cannot de-risk by selling their corporate bond holdings. As such, the managers hold significant protection against rising corporate bond spreads and equity market volatility.

Performance has struggled in recent times, with the managers’ protective strategies acting as a drag on performance, but has improved in 2019 to date (NAV total return +7.6% in the first three quarters of the year). The managers have retained their positioning, using market fluctuations as tactical opportunities to rebalance positions in different asset classes.

Kepler View

There is a very clear outlook and identity to RICA, and the portfolio is appropriately invested in alignment with the managers’ expectations of higher inflation and aversion to losses. They have a successful long-term track record, generating strong positive returns of around 25% in the 2008 financial crisis and generally succeeding in providing positive rolling 12-month returns. However recent years have been challenging, with structural disinflationary forces – and increased market expectations that these will remain pervasive – providing a headwind to returns. Still, the absence so far of a significant pick-up in inflation has not prevented the ‘growth’ aspects of the portfolio from helping generate stronger recent returns. The managers note that outright deflation would be negative for their returns, though some of their assets should do well in that kind of environment, which may somewhat mitigate that adverse scenario.

For the trust’s return profile to improve significantly, we would likely need to see a change in environment from the one that has prevailed in recent years. In our view, the trust is likely to avoid substantial losses, but opportunities for substantial gains will remain scarce as long as inflation refuses to rear its head. Nevertheless, as seen so far in 2019, the equity book should help to ensure RICA makes absolute gains if the equity bull market continues. There are tentative signs that inflation could start to push ahead once again, alongside indications of increased political pressure to increase fiscal stimulus. Several strategies within the trust offer sizeable asymmetry in their return profile from here, and could generate substantial payouts in periods of equity or credit market inflection. Of late things have not gone so well for the managers; but they remain committed to their course and should inflation gather pace once again, or the global economy slow significantly, RICA should once again come back into its own.

bull bear
Should offer protection in an equity or credit market sell-off Monetary policy has so far failed to stimulate the expected pick-up in inflation; whether the next policy steps will do so remains contentious
Offers substantial potential upside if inflation picks up significantly Substantial duration (interest rate sensitivity) in the portfolio (around six years)
Signs of cyclical inflationary pressures picking up
Continue to Portfolio

Fund History

13 Jul 2022 Ready player one
We wonder where, if anywhere, should investors look for returns after a tumultuous first half of the year…
06 Jul 2022 A game of two halves
In the second article of our series on the AIC Flexible Investment sector we see how performance has stacked up during two years when markets were poles apart...
22 Jun 2022 Spider's web
We outline our new quantitative system for mapping the crucial performance characteristics of investment trusts…
11 May 2022 Catch a tiger by the tail
As inflation bites harder than it has for decades, we consider the best ways for investors to hang on to their capital...
26 Jan 2022 Fight or flight...
Two of our analysts debate the impact that war in Ukraine could have on investors' portfolios...
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
22 Dec 2021 No humbug
Our analysts look back at a year of predictions, theories and ideas, and highlight those they think could matter most…
20 Dec 2021 Fund Analysis
RICA’s strong performance during the pandemic and in the market recovery has highlighted its credentials as an all-weather strategy…
01 Sep 2021 Winter is coming
Summer was a welcome opportunity for exhausted investors to turn their backs on the legion threats they face, but they haven't gone away and the days grow short - we examine four in detail...
25 Aug 2021 Is the UK’s debt a ticking time bomb?
Our analyst argues Rishi is right to worry about government debt and borrowing…
21 Jul 2021 Every which way but loose
We break down the AIC Flexible sector into more useful segments…
30 Jun 2021 Inflation – a real threat or hot air?
Two of our analysts ask whether recent high inflation numbers indicate something long-lasting and troubling is happening…
13 May 2021 Fund Analysis
RICA is an all-weather proposition, aiming to deliver over a range of market and economic outcomes…
05 May 2021 Vive la revolution
For thirty years quality has had a structural tailwind; but revolt is in the air and value is on the barricades…
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: Ruffer Investment Company
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 04 March...
06 Jan 2021 This time next year Rodney...
We review the performance of the team’s ‘top picks’ for 2020 – including some proper plonkers – and place our bets for the year ahead…
02 Dec 2020 Fund Analysis
RICA is an all-weather proposition, aiming to deliver over range of market and economic outcomes...
15 Jul 2020 Why stagflation is likely and how to protect your portfolio from it
Our analysis suggests a combination of cost-push inflation and economic hardship could lead to a short, but unpleasant, period of stagflation...
01 Jul 2020 Oh the humanity...
We consider two strategies to cope with markets which, boosted by massive government support, may be witnessing the start of a ‘melt-up’ which may be followed swiftly by a melt-down...
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
16 Apr 2020 Fund Analysis
RICA uses a range of asset classes to generate absolute returns for investors with an approach emphasising loss-aversion...
08 Apr 2020 Children of the Revolution
The outperformance of technology hints at an exciting possible future for the market when the virus is beaten…
30 Jan 2020 Is it time to run away?
With a sense of complacency in the air, our analysts debate the best ways to shore up your portfolio's defenses...
30 Oct 2019 All that glitters? The case for and against gold
Two of our analysts go head-to-head, debating whether gold is the ultimate safe haven asset...
16 Oct 2019 Fund Analysis
RICA uses a range of asset classes to generate absolute returns for investors with an approach emphasising loss-aversion...
16 Oct 2019 Life on Mars: could inflation take us back to the '70s?
We discuss two potential catalysts for inflation - and the assets that could offer a hedge against it...
25 Sep 2019 Master of all trades: the best multi-asset trusts on the market
Investment trusts are particularly suited to multi-asset strategies. Our research identifies the leaders in this increasingly popular field...
16 Jan 2019 There may be trouble ahead
We analyse why multi-asset macro funds have struggled and attempt to identify some possible closed-ended alternatives...
16 Jan 2019 Fund Analysis
This trust is well positioned to perform well if markets bounce, or the sell-off intensifies...
19 Sep 2018 Fund Analysis
A multi-asset fund which aims to protect and grow capital and has delivered annualised returns of 7.3% since launch, with very limted drawdown during tough periods...
28 Feb 2018 Gimme shelter
As the bear market for bonds and corresponding volatility in equities escalates we examine trusts that offer excellent capital protection..
27 Feb 2018 Fund Analysis
A diversified multi-asset trust with a clear focus on absolute returns which has seen it perform well in previous crises...
12 Jul 2016 Fund Analysis
12 Jul 2016 Riders on the storm
Multi-asset investment trusts for an environment where a global, active, currency-aware approach is essential...
12 Jul 2016 Anarchy in the UK
We collate the reactions of the City's leading investment companies analysts in the wake of the EU referendum...
View all

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