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Shares explains why the time is right to invest in all-weather investment vehicle Ruffer
Thursday 03 Sep 2020 Author: James Crux

Investors nervous about economic and market uncertainties in the wake of the coronavirus pandemic should look at Ruffer Investment Company (RICA), whose shares trade at a 2.4% discount to net asset value. 

Managed by Hamish Baillie and Duncan MacInnes, Ruffer aims to preserve shareholder capital regardless of financial market conditions by investing in shares, equity-related securities such as convertibles, and corporate and government bonds, among other assets.

Its portfolio includes US and UK inflation-linked government bonds, gold, cash and shares such as Kinross Gold, American Express and General Motors.

‘In a raging bull-market we lag, but we come into our own when markets are falling,’ explains Baillie, adding ‘our main preoccupation is not losing money for people.’

Since Ruffer started in 2004, its investment process has produced returns ahead of equity markets, but with much lower volatility and risk.

Baillie concedes there will be times when the trust ‘looks a bit dull’, but investors can take comfort that Ruffer should hopefully avoid capital losses that can take years to claw back. However, there is no guarantee that it will not lose money.

Since launch 16 years ago and up to 31 July 2020, Ruffer has delivered a positive net asset value total return in all but two years (2015 and 2018). Gold and gold mining shares, credit protections and index-linked bonds have driven the positive year-to-date performance with a helping hand from shares in Ocado (OCDO).

The trust is currently interested in cyclical, unloved businesses geared into economic recovery such as Walt Disney and French toll roads operator Vinci.

Ruffer’s cautious managers argue that if GDP does pick up, the premium ascribed to growth stocks investors have chased higher would become unwarranted, and if GDP growth fails to pick up, then equities as an asset class would suffer because the economy remains mired in a slump. This is where the portfolio protections that the trust has been increasing of late would come into play.

‘Actions by government and central banks have ignited a rally in global equities, and this rising tide has raised most boats,’ says Investec analyst Alan Brierley. ‘However, given the lack of visibility on the depth and duration of the global recession, the apparent failure to control the pandemic, the ongoing spike in the US and with no sign of a vaccine, we believe greater challenges lie ahead.

‘In this environment, we would not be averse to locking-in some of the recent profits from equities. Meanwhile, those companies that can successfully preserve capital regardless of market conditions may have significant value.’

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