RIT Capital results for 2015 show a share price total return of 22.7% (as they moved from a discount of 5.8% to a premium of 6.9%) and a net asset value per share return of 8.1%. This compares well to the return on RPI plus 3% which was 4.2% for the year and the return on the MSCI AC World Index of 2.3% over the year,They are intending to pay a dividend of 31 pence per share in 2016, an increase above the current rate of inflation. This will be paid in two equal payments of 15.5 pence in April and October. They intend to maintain or increase this level in the years ahead, subject to unforeseen circumstances.
The equity portfolio added 5.8% to the NAV over the year, unquoted investments added 0.7%, absolute return strategies +0.2%, government bonds +0.2% and currency +2.7%. On the downside, their “real asset” portfolio cost them 0.5% and borrowings took off 1.0%.
The equity portfolio return included a strong outperformance from their core long-only funds and hedge funds. In addition, they benefited from thematic or tactical exposures to China, Japan and biotech. Strong gains from stocks such as eBay and Japan Post were offset by more tactical allocations to energy stocks. The contribution is also net of defensive equity hedges; held at various times during the year to moderate exposure when the macro picture worsened. Hedge funds represented 21% of NAV at the year end and returned 14.0% over the year. 2015 was a year when the ability to hold both long and short positions profited this category. Many of the funds such as BlackRock European Hedge and Three Corner Global made significant profits from their short activity, for example in relation to energy and emerging markets.
Private Investments saw strong performance from external funds, in particular those with an early-stage focus. This was partially offset by weaker performance from a few direct investments, impacted by regulatory changes and other headwinds. The direct private investment portfolio totalled £210million at the end of December, representing 9% of NAV. This category had a difficult year overall contributing -1.4% to the NAV, notwithstanding good progress in many of thier investments. The most significant detractors to performance were Infinity, our data centre business, and Tamar, our anaerobic digestion company. The former was impacted by fundraising difficulties and the latter by unfavourable changes in the UK’s regulatory regime. Investments in Williams & Glyn and EDRRIT produced good returns over the year and they completed the sale of KIK Custom Products for a modest uplift to opening NAV and a healthy return over its life. The fund portfolio contributed 2.1% to the total return, helped by performance from early-stage investments. Of these, Augmentum I and Thrive III were the strongest performers. Augmentum I (who reported December figures) saw its early stage portfolio benefit from valuation uplifts, in particular from its largest investment in Zopa. This peer-to-peer lender raised a sizeable round during the year at a meaningful uplift to the previous valuation. Thrive III also benefited from increases in the valuations of its underlying investments, in particular Oscar Health Insurance, the New York-based private healthcare insurer.
The allocation to Absolute Return & Credit held up reasonably well in the context of the significant losses in credit over the period.
The Real Assets category ended slightly down over the year with gold’s weakness offsetting modest returns from the property portfolio.
In Sterling terms, currency contributed 2.7% to the overall return. This reflects a combination of a relatively high US Dollar position, modest Sterling positioning and gains from taking positions against various Asian currencies.
RCP : RIT Capital outperforms the world index