Ruffer Investment Company (RICA) 303p

Gain to date: 5.5%

We originally said to buy capital preservation trust Ruffer Investment company (RICA) to add some protection to your portfolio during inflationary times. We highlighted its proven track record of making money in up and down markets.

It continues to deliver against a difficult market and macroeconomic backdrop, making a positive return year-to-date return (+3.1%) against a fall of 10.2% in the FTSE-All Share index.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

The managers have ‘battened down the hatches’ more than usual with the lowest allocation to equities (16.4%) in over two decades and a clear focus on the trust’s primary objective to preserve capital.

The trust has also bolstered unconventional protections to defend against a worsening of financial conditions. Chief investment officer Henry Maxey says: ‘So far this year, we have seen a repricing of risky assets. Now, we see the potential for something worse: a growing pressure for the liquidation of risky assets.’

For Maxey illiquidity has become the new leverage. He notes the ingredients for a liquidity event have been around for some time, but the combination of rising interest rates and the start of quantitative tightening raise the odds of it happening.

Maxey adds: ‘I remain extremely cautious of asset prices generally and equities in particular. For the first time in my Ruffer career, I believe we should have the minimum practical amount of ‘sail in the wind’.

‘I prefer to be highly liquid and take short or long risk exposure contingently via options as liquidity and real-world events play out over the next few months.’

The trust’s biggest weighting at the end of August was in short-dated bonds and inflation-protected bonds, each representing just under 30% of assets. Illiquid strategies and options along with cash holdings represented just under a quarter of assets.

WHAT SHOULD INVESTORS DO NEXT?

Ruffer has done a great job of protecting capital and appears well positioned to continue to do so should markets fall further. Keep buying its shares.

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