BY JEN HILL, Citywire Investment Trust Insider, 13 July 2023:
Whatever investors have been doing this year, they haven’t been buying wealth preservation fund Ruffer Investment Company (RICA). But is that exactly what they should be doing?
Last week we flagged the slump in its shares in the latest Trust Watch and this week the fund’s monthly investment report for June moved to explain the source of the ‘disappointing six-month period in the context of our focus on capital preservation’.
The trust targets consistent positive returns regardless of how financial markets perform and aims to not lose money in any 12-month period. But in the six months to end-June its net asset value (NAV) fell 6.8%, while the shares shed 10.9% as the discount widened to 3.4%…
While large cap US tech stocks have soared, the growth assets to which Ruffer is exposed – commodities and equities geared to the real economy, a play on China’s reopening – have lagged at best.
‘Commodities have created a further headwind,’ Ruffer said. ‘Equally, whilst our equities have contributed positively, this has not been sufficient to offset the cost of protection.’
Ruffer’s ‘protective’ investments have suffered this year. Among note is its exposure to long-dated index-linked bonds, which have sold off amid quantitative tightening and muted demand from pension schemes…
Another contributor to the rough period for Ruffer is its lack of a discount control mechanism…
‘A couple of months ago, Ruffer was issuing shares. The last of these was on 11 May at 298.25p, about a 2% premium to NAV,’ said James Carthew, head of investment company research at QuotedData and a columnist for this website.
‘Since then, the shares have slid almost 10% and, in my view, it might be helpful if the company bought back a few shares to stop them sliding further. However, it seems unlikely that the board would let a wide discount persist for too long.’
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