Ruffer Investment Company (RICA) has announced that it has undertaken a share buyback. Ordinarily, with just 150,000 shares or 0.039% of its issued share capital repurchased, this wouldn’t be of much interest to investors but this is the first time in its 19-year life (it was launched in 2004) that the multi-asset fund has undertaken a repurchase. For many years, there has been no need as the defensively positioned fund has been strongly in demand and has predominantly traded around par or at a small premium to NAV.
However, in common with the wider investment companies sector, Ruffer’s discount has widened this year so that it is trading at around a 6% (as noted in our coverage of Ruffer’s results on 23 July – click here to read – 2023 is one of just four periods in Ruffer’s life where it has traded at a sustained discount), which is a level that has been rarely seen. The move has been relatively recent – at the beginning of May it was still trading at a premium and issuing stock – which appears to have prompted the board to step in, presumably in an attempt to limit the slide.
[QD comment: We are pleased to see that Ruffer’s board is prepared to step in and provide liquidity to underpin the discount. We have long argued that trusts that undertake a lot of share issuance when times are good (and they’re consistently trading at a premium) should also provide liquidity to shareholders when conditions are more challenging. Ruffer has certainly passed that test. As we have previously discussed, Ruffer, unlike say Personal Assets or Capital Gearing, has not made any commitment to keep the discount close to par but, for a fund that has a strong focus on capital preservation and is seen as a good store of value, this seems fair. Readers should also note that Ruffer has the option of operating a redemption facility for up to 25% of its shares in November. This is an annual facility that was last used in 2007, when Ruffer repurchased 16% of its shares. Making use of this facility again could be a good way to mop up any excess supply in its stock if repurchases haven’t done the job in the meantime. With a market capitalisation and total assets in excess of £1bn, and a large chunk of the portfolio being in liquid assets, Ruffer certainly has plenty of capacity to provide shareholders with liquidity without adversely affecting the operation of the fund.]