Ruffer (RICA) has bolstered its defences against a summer sell-off, adding more equity put options to lock in gains should concern over US debts and President Trump’s animosity to Federal Reserve chair Jay Powell boil over.
“Trump is accelerating his campaign against the Federal Reserve under chair Jay Powell and its failure – in his eyes – to cut rates fast enough. There’s talk of a shadow chair to be appointed soon, which could further erode confidence in the US’ attractiveness for capital,” the managers of the £857m multi-asset fund said in a monthly update.
“Having failed to bring spending under control, Trump has now pivoted to a ‘run it hot’ attempt to grow out of the excess debt whilst pursuing deregulation to allow banks to hoover up more government bonds.”
“If current conditions persist, equities could grind higher over the summer,” they acknowledged, adding that they had also topped up S&P call options to capture some of any continued momentum in the US stock market.
The investment company’s assets rose 0.6% last month with the shares gaining 1.4% to take the first half advance to 6.2%, higher than rivals Capital Gearing (CGT) and Personal Assets (PNL).
New lead fund manager Jasmine Yeo and co-managers Ian Rees and Alexander Chartres took profits as stock markets continued to rally despite concerns over the US-led global trade tensions and a 12-day war between Israel and Iran.
They trimmed cash equities by two percentage points to 25%, split 10.5% UK, 5.5% Europe, 4.4% North America and 4.6% shared between Japan and the rest of Asia. The largest equity holdings are 1.7% in UK oil major BP and 1.6% in the iShares MSCI China exchange traded fund.
The managers also took profits on precious metals, reducing gold miners, silver and platinum, to take the overall allocation to 7.8%, while making a small, well-timed investment in copper.
Credit and derivative strategies made up 12.8% of the capital preservation fund at 30 June, alongside 40.9% in short-dated bonds and 4.3% cash as the main bulwarks against volatile markets.
Gold and inflation-linked bonds accounted for 13.6% and underlined the portfolio’s defensive positioning.
Currency allocation remains firmly in sterling at 81.3% with the yen the next biggest exposure at 14.8%. Just 0.9% is held in US dollars with the managers noting that the greenback had suffered its worst first half year since 1983, falling by more than 10% against a basket of peers.
“It’s another sign of the growing instability of previously reliable asset correlations in an era of greater volatility, including of inflation,” they said.
Ruffer’s board bought back another 8m shares in the second quarter in a concerted effort to bring down the discount to 3.3% from a one-year average of 4.6%. The company spent £85.5m buying 9% of its stock in the first half. The shares had come under pressure after disappointing performance that has left the portfolio in negative territory over three years with a total underlying loss of 2.1%, according to Morningstar data from Deutsche Numis. Former lead manager Duncan MacInnes left Ruffer in February.
