Fund Profile

Disclaimer

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.

Overview
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Overview

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%.

Analyst's View

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.

BULL
BEAR
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
Continue to Portfolio

Fund History

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...
25 Mar 2022 Fund Analysis
RCP continues to deliver good risk adjusted returns…
21 Jul 2021 Every which way but loose
We break down the AIC Flexible sector into more useful segments…
16 Jun 2021 A better class of travel*
Sharing many features of a traditional family office, investment trusts offer ordinary investors a cost-effective solution to managing family wealth...
30 Mar 2021 Fund Analysis
RCP continues to deliver on its aims of long-term capital growth while preserving shareholders’ capital...
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…
01 Apr 2020 Mind the gap
Discounts have yawned across trusts investing in private companies, but appearances can be deceptive and as COVID-19 unfolds it pays to take care…
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...
19 Jun 2019 Fund Analysis
Aiming to deliver long-term capital growth, while preserving shareholders’ capital...
27 Jun 2018 A winning combination
New research from Cass Business school helps explain why closed-ended funds have outperformed their open-ended peers in the major equity sectors since 2000...
13 Apr 2018 Fund Analysis
We review a trust designed to protect the wealth of the Rothschild family but open to all, which places a strong emphasis on capital preservation...
09 Mar 2018 Fund Analysis
This trust, designed to protect the wealth of the Rothschild family but open to all, places a strong emphasis on capital preservation...
09 Feb 2018 The madding crowd
Recent volatility could be a taste of things to come, so we examine trusts that offer capital protection...
14 Aug 2017 Fund Analysis
This trust, designed to protect the wealth of the Rothschild family but open to all, places a strong emphasis on capital preservation...
16 Mar 2017 Having your cake and eating it too?
We look into the new fad of trusts paying their dividends out of capital and analyse whether or not it really is a sustainable strategy...
08 Mar 2017 End of the road...
With correlations between asset classes on the rise, we take a closer look at the role trusts in the IT Flexible Investment sector can play within a cautious investor's portfolio...
03 Feb 2017 Analysis: What next for European ITs?
Our analysis shows that European investment trusts have in recent years delivered strong returns to investors from their current discount, but risks abound in 2017...
28 Jul 2016 Funds for heavy weather
Investment trusts for a world without certainty...
27 Jun 2016 Broken Britain
As the UK enters a period of uncertainty the like of which has not been seen since the Suez Crisis, we highlight four trusts which have little exposure to our unfolding catastrophe....
31 May 2016 Why RIT Capital's approach is good news for Alliance Trust
Analysts at Winterflood Securities think shareholders should welcome the proposed merger between RIT Capital and the struggling Scottish giant...
03 May 2016 Mark Dampier: Today's housing market is "complete and utter insanity"
We meet the UK's best known financial adviser who thinks, sooner or later, something must break...
View all

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