By Val Cipriani, Investors’ Chronicle, October 6, 2022:
Jonathan Ruffer’s all-weather philosophy of trying not to be wrong rather than attempting to be right used to sound thoroughly unexciting. Then 2022 came, and these days it feels like the best anyone can hope for.
The team at the helm of Ruffer Investment Company (RICA) has done a decent job at putting that into practice, creating a portfolio that is unlikely to outperform in a bull market but will save you from losing too much money in troubled times. Out of the three main wealth preservation trusts, the other two being Personal Assets Trust (PNL) and Capital Gearing Trust (CGT), it is the top performer in the year to date.
At a time when there have been precious few places to hide, how did Ruffer achieve the relative success of a 3.4 per cent return over the past year?
One key has been its use of derivatives. James Carthew, head of investment company research at QuotedData, describes it as a willingness to be “a bit more inventive” about its strategies compared with its peers.
As of August, the trust’s second-biggest exposure after short-term bonds was illiquid strategies and options, which accounted for 17.8 per cent of its assets. Under this fairly generic label, the trust groups its holdings into two funds also managed by Ruffer, which invest in derivatives such as interest rate options, equity puts (protection against falling markets) and credit protection…
Carthew notes that the trust’s exposure to options comes with a degree of credit risk, since the counterparty of these transactions is normally an investment bank. “I don’t think anybody’s saying that we’re going to see another Lehman type of thing. But when markets are flying around like this, sometimes one of these investment banks gets caught on the other side,” he says, although he adds this is probably a low risk to Ruffer.
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