Ruffer has published its annual report for the year ended 30 June 2015. Over the year the total return on net assets was 7.8%. The dividend was maintained at 3.4p per share. the shares moved from trading on a discount of 1.8% to a premium of 1.9% and so the return to shareholders was 11.9%.
The Company currently has 36% of its capital exposed to UK and US government issued index-linked securities,
which, in spite of the lack of discernible inflation, performed exceptionally well over the past year.
The exposure to Japanese equities once again proved profitable contributing 4.9% to the overall return. After the blip of October’s vol-shock, which knocked equity markets across the world, it was pretty much one way traffic in
Japan and the news flow has been positive. The effects of the Bank of Japan’s Quantitative Easing (QE) program (expanded on 31 October) persisted and Abe won a resounding election victory in December almost unopposed. His economic reform program continues to make progress as companies are forced to focus on better corporate governance and they have returned record amounts to shareholders through dividends and share buybacks. Remarkably, companies are now being made to justify themselves to a new government department should they fail to attain centrally mandated return-on-equity targets. It is indeed rare for a government in Japan, or anywhere else for that matter, to be so supportive of shareholders, but Abe realises that this is key to Japan escaping deflation. Balance sheets are too cautiously positioned and cash needs to be put to work elsewhere in the economy. As well as the flow back to shareholders they also saw an improvement for employees with another year of positive wage growth in Japan and signs of tightness in the labour market. Foreign investor interest is growing (but from a very low level).
Western equities continued to make progress over the period and this contributed positively to the portfolio, adding 1.5% to NAV (As at 30 June 2015 the US equity bull market had lasted 89 months – the third longest such streak on record. It is worth noting in passing that the other two episodes did not end well). Another helpful development was the continued strength of the US dollar through the second half of 2014. This position was reduced in the first quarter of 2015 and at 30 June their USD exposure stood at 8%.
RICA : Ruffer’s index-linked and Japanese exposure benefit investors