RIT Capital Partners 30 March 2021
Disclosure – Independent Investment Research
This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.
To deliver long-term capital growth, while preserving shareholders’ capital; to invest without the constraints of a formal benchmark, but to deliver for shareholders increases in capital value in excess of the relevant indices over time.
RIT Capital Partners
J. Rothschild Capital Management Limited
Ron Tabbouche & Francesco Goedhuis
Association of Investment Companies (AIC) Sector
12 Month Yield
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
RIT Capital (RCP) aims to generate long-term capital growth and to protect shareholders’ capital. The managers invest the portfolio in a broad range of asset classes – both directly and through third-party managers – which are expected to deliver differentiated returns.
RCP now has net assets north of £3.6bn (having listed in 1988 with £280m) and a senior management team that have been working together for over nine years. The team have a wide network of contacts and relationships, which provide many investment opportunities. They believe that their propriety network of contacts and their permanent capital give them a distinct edge in finding the best opportunities in any asset class on a global basis.
RCP’s team have a consistent investment philosophy, aiming to identify differentiated sources of returns that, when combined, will deliver strong returns with lower volatility. Fundamentally, the managers are thematically driven, and use their world view to set risk levels as well as look for profitable investments. They balance natural caution with strong structural themes, as well as retaining the ability to be opportunistic.
2020 proved to be a good example of how this approach can work well, as shown by the strong NAV total returns RCP delivered over 2020 and, so far, this year. That said, it also illustrated the risks of investing in trusts on a large premium. Whilst the NAV per share increased by 14.4%, the share price fell by 2.4% (both excluding dividends), reflecting the premium to NAV of 5.5% at the start of the year giving way to a discount of c. 10% as at 31/12/2020.
Look-through management fees are c. 1.48% before performance fees. The most recent KID Reduction in Yield is 4.1%.
RCP is a differentiated trust, and it has a strong track record of achieving its twin objectives of growing and protecting wealth. 2020’s NAV performance has shown how strong the model is, with the team having started the year with net listed equity exposure in the low 40%’s, mitigating downside in Q1 2020 before delivering strong absolute returns subsequently. Over the past three years, RCP’s NAV volatility was around half the volatility of its equity benchmark but delivered cumulative outperformance of c. 1.9%.
We characterize RCP as aiming for a lower beta than the equity market but harnessing alpha to generate strong risk-adjusted returns over the long term. The different drivers to returns for each of RCP’s six ‘cylinders’ is key to how they achieve this. RCP’s proprietary network is an advantage, as is the nature of their ‘permanent capital’, not to mention the c. £4bn of assets. Investing in private companies has always been a key part of the strategy, and the last 12 months has seen a particularly strong contribution from this part of the portfolio.
RCP publishes its NAV monthly. Notwithstanding the difficulty of accurately assessing the actual discount or premium on a specific day, RCP’s shares have traded on a premium for most of the last five years. Over 2020 however, the shares derated to a discount, which seemingly persists at the time of writing (next NAV due mid-April). For long term investors, this could be an opportunity.
|Highly-diversified portfolio, offering access to a full range of asset classes and many soft-closed or inaccessible managers
||Monthly NAV announcements mean it is hard to ascertain what the current discount (or premium) really is
|Long-term performance track record, which has seen the trust protecting capital well in falling markets and delivering strong cumulative returns
||Higher costs than a typical fund, but then again – this is not a typical fund
|Unique approach, with very few comparators in either closed or open-ended fund worlds
||Opaque portfolio may not give granularity of underlying exposures that some investors may want