Ruffer Investment Company (RICA) has announced its annual report for the year end 30 June 2024. The company delivered a NAV total return of 1%, while shares fell 0.6%. Dividends for the 12 month period were 3.65p for an annualised  dividend yield of 1.4%. The discount widened to 5% at the end of the period. Throughout FY 2024, the RICL portfolio continued to be defensive. The manager notes that the positive performance from exposure to equities, gold, commodities, cash and short-dated bonds was largely offset by the costs of protection strategies and yen exposure, both of which are now extremely cheap, with a small negative contribution from long-dated inflation-linked bonds.

2024 has marked the 20th anniversary of the company. Over the period from inception to 30 June 2024, the annualised total NAV return of RICL shares was 6.9%. This has provided an equity-like return with bond-like volatility and a positive return when equity markets have suffered a significant down-draft.

Commenting on the performance, the manager noted: “The first six months of 2024 felt like a continuation of 2023. Markets rallied to all-time highs on a tide of AI-fuelled optimism, a US led fiscal boom, and a belief that the Fed is willing to be supportive of markets is back. Global markets were once again led higher by US exceptionalism and by the ‘Magnificent Seven’ in particular. Importantly though, the Ruffer portfolio exhibited a better balance in the first six months of 2024 than in 2023. Our growth assets in equities and commodities kept us in the game whilst our protection assets continued to hold the portfolio back. Looking forward, we are excited about the opportunity we see in front of us. We believe investors are complacent and we have arguably never seen an equity market as crowded, narrow, and myopic as the one we see today. We think the prospective rewards, relative and absolute, for having a portfolio unlike both peers and benchmarks have never been higher. However, it comes with a large ‘but’ – the price you must pay is feeling uncomfortable, and lagging the herd, whilst waiting for the market to turn.”

Regarding the outlook for the trust, chair Christopher Russell, commented:

“The American Economist, Hyman Minsky, famously observed that stability tends to breed instability. Minsky highlighted debt accumulation as an ingredient of the instability, amplified by financial institutions and only mitigated, in due course and usually too late, by Central Banks acting as lenders of last resort. Instability is likely to be exacerbated by a prospective lack of government fiscal discipline and the probability of a higher average level and volatility of inflation than in recent history. Your investment manager has been warning for a while that stability in financial markets creates complacency. That complacency has been reflected not only in a high level of market valuations but also in the multi-decade low pricing of volatility, a fundamental element in the pricing of derivative protection strategies which are a key component of Ruffer’s ‘all-weather’ portfolio management.

“The company’s portfolio suffered earlier in the financial year from higher costs of protection and some exposures which had yet to have significant positive impact on the portfolio. However, financial markets are barometers not thermometers and while the consensus may have observed the falling barometric pressure, implying strong winds later, most fund managers have remained under full sail. Ruffer’s history on the other hand has shown that it pays to shorten sail early and certainly well before the storm arrives by which time it is too late. The current combination of lower cost protection and cheap exposure to unloved and under-owned areas in the currency, commodity, inflation-linked bond and equity markets provides anti-fragility to the portfolio strategy. Anti-fragility means more than just a resilient or robust response to stress. It implies a positive reaction and that anti-fragility is not simply provided by a ‘buy and hold’ approach to portfolio construction but by continuing dynamic management, as evidenced during the year. The year has seen active management of exposures to precious metals, inflation index-linked securities and equities. Net exposure to equities, after adjusting for hedges, has moved between 0% and 34% of NAV during the year. ”