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
RCP continues to deliver good risk adjusted returns…
Overview

RIT Capital (RCP) aims to generate long-term capital growth, but also to protect shareholders’ capital. The managers invest in a broad range of asset classes – both directly and through third-party managers – which are expected to deliver returns in a range of different market conditions. As well as portfolio construction helping to reduce risk through diversification, the team can bolster risk management through various hedging strategies. It is this approach, and the underlying funds that RCP is exposed to, that makes RCP a very different beast from many other multi-asset funds.

Overall, RCP has tended to exhibit relatively defensive qualities. For example, over the last five years, the NAV beta relative to the MSCI ACWI has been 0.72, NAV volatility of 8.7% compares with the MSCI ACWI of 12.2%, and RCP’s maximum drawdown is 10.2%, compared to the index’s 16% (all statistics from Morningstar). RCP provides a statistic that, since inception, the trust has participated in 74% of market upside, but only 38% of market declines since inception.

The last two years have been particularly strong for RCP in NAV terms, in which the trust has (perhaps uncharacteristically) outperformed during strong years for equity markets (see Performance). We understand that much of this is attributable to the private investments sleeve of the portfolio. The team made a conscious decision several years ago to invest in the digital transition theme through private investments, correctly anticipating that this would allow the trust to benefit from “a typically longer duration value creation cycle”.

The KID Reduction in Yield is 4.85%, including 2.7% of performance fees. RCP announces NAV’s monthly, and the shares currently trade on a 4.5% discount to the 28/02/2022 NAV.

Analyst's View

RCP now has net assets north of £4bn. This fact, and RCP’s heritage and continuity of the senior team, means the trust provides access to an unrivalled network of contacts and relationships which provide investment opportunities outside the grasp of many investors. The evidence for this comes not only in the long-term track record of providing strong risk-adjusted returns, but also the contribution to returns from private investments which have been particularly evident over the past two financial years.

RCP’s strategy is one that aims to harness alpha to generate stronger risk-adjusted returns over the long term. RCP has a broadly spread and diversified portfolio, aiming for a number of independent drivers of returns (more detail on this in the Portfolio section). At any one point, the managers hope that one or more of these ‘cylinders’ is firing, making returns more consistent than the equity markets, but delivering strong returns overall. Having captured plenty of value in the past two years from an astute decision several years back to invest in private technology companies, it may be that other parts of the portfolio are called on to perform in the current year.

RCP’s shares have traded on a premium for a significant part of the last five years. However, RCP moved to a discount in the turbulent market conditions of Q1 2020, which saw indiscriminate selling pressure, and it has not yet regained a premium rating. If uncertain market conditions remain, investors’ appetites may return to more defensive strategies such as RCP, and the current discount could revert to a premium (the average for the past five years is a premium of 2.2%).

Bull

  • Highly-diversified portfolio, offering access to a full range of asset classes and many soft-closed or inaccessible managers
  • Long-term performance track record, which has seen the trust protecting capital well in falling markets and delivering strong cumulative returns
  • Unique approach, with very few comparators in either closed or open-ended fund worlds

Bear

  • Monthly NAV announcements mean it is hard to ascertain what the current discount (or premium) really is
  • Higher costs than a typical fund, but – then again – this is not a typical fund
  • Opaque portfolio may not give granularity of underlying exposures that some investors may want
Continue to Portfolio

Fund History

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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