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Ruffer reports drop in NAV despite better second half

Ruffer has published its results for the year ended 30 June 2016. The NAV fell by 1% on a total return basis. The target return, being twice the Bank of England base rate, amounted to 1% over the financial year and by way of context the FTSE All-Share Total Return index rose by 2.2%. Earnings for the year were 1.93p per share on the revenue account. Over the course of the year dividends totalling 3.4p per share were paid. A third interim dividend of 1.70p per share in respect of the year to 30 June 2016 was approved on 14 September 2016 for payment on 14 October 2016. They are having to call on
income reserves to pay the dividend. The directors do not believe it to be in our shareholders’ best interests to start making distributions from capital reserves and therefore the dividend is likely to be reduced within the next 12 months.

The manager says that, in the interim report at 31 December, they stated that the outlook was as challenging as they could remember, but say this was not a prediction of the volatile market movements which followed a few weeks later. Last August/September, they felt we were faced with a sharp decline in global equity markets brought about by the co-incidence of fears of an economic slowdown in China and tighter monetary policy in the US. Japan was caught in the crosshairs as the majority of the mainland Chinese stock market was suspended and Tokyo became the Asian destination of choice for short sellers. At best the Company’s protective investments only stood still and thus failed to offset the losses in the equity book. This meant that in the first half of the financial year the Company’s NAV fell by 4.6%. The performance through the market sell-off in January/February was better. They say there are two reasons for this. Firstly, they were running a lower equity weighting (36%) and secondly the traditional offsets, which failed to fire last summer, sprang back to life. The portfolio has subsequently been tested through the Brexit shock and they say that, once again, it has held up well. Since the interim report
positive contributions from index-linked bonds (5.9%) and gold (3.1%) have comfortably offset the losses in equities (-4.3%). For example the 2062 index-linked Gilt is up 33% over the period and the CF Ruffer Gold Fund has appreciated by 93% since we added to the position in January.  This has resulted in a 3.8% rise in the net asset value during the second half of the financial year.

RICA : Ruffer reports drop in NAV despite better second half

 

 

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