Ruffer (RICA), the £909m “all-weather” multi-asset fund, recovered its stride in the second half of last year as “significantly lower volatility” in world markets helped it overcome its underperformance in the first six months of 2025.

The investment company, whose assets are run by Ruffer fund managers Alexander Chartres, Jasmine Yeo and Ian Rees, made a 4.9% investment return from July to December with the performance mainly driven by the surge in gold and precious metals and a rally in equities after the US tariffs shock earlier in the year.

Cash and bonds made a small contribution to returns, according to the half-year review, while defensive holdings in credit and derivative strategies and the Japanese yen lost money.

This took Ruffer’s total underlying return on net assets for the year to 10.9%, beating the 8.7% of its twice of Bank of England base rate benchmark which it had fallen behind in the first half.

Shareholders did better than this, receiving a total of 12.1% as the shares narrowed the gap – or discount – between their price and the net asset value (NAV) of Ruffer’s investments from 4.5% to 3.6%.

The discount narrowing was in response to the company buying back 11% of its cheap shares at a cost of £105m, a move that added 0.5% to NAV per share.

Longer term, the company believes it has delivered on its goal of generating real positive performance that is not correlated to stock markets. Since launch in 2004 the company has made an underlying annualised return of 6.9%. That is probably fine for a lower-risk fund competing in the AIC Flexible Investments sector against the likes of Capital Gearing Trust (CGT) and Personal Assets (PNL) so long as the share price transmits those steady gains to shareholders.

Eye on inflation

Acutely aware of the “delicate balance” global markets and economies are in with the era of low inflation decisively over and US “exceptionalism” being eroded by Trump’s erratic protectionism, Ruffer’s investment team nonetheless believed they had positioned the portfolio to do well whether benign reflation, resurgent inflation or deflation took centre stage in the future.

They took profits in gold miners as bullion soared 31% in the second half, but kept their allocation at 5%, confident that inflationary pressures and geopolitical tensions will continue to stoke demand for the safe-haven metal.

Over 53% of the defensive portfolio remains in bonds but the bulk of this is in short-dated debt with the trio lowering long-dated bonds as their yields rose, and prices fell, on concerns over the unsustainability of government finances in developed markets.

Despite viewing the US dollar as a less reliable haven, the managers increased exposure to the greenback by 4.8% to 5.7% in the second half, believing it would rise if US growth accelerated. The fund’s biggest currency allocation remains to sterling although this dropped 6.8% to 74.5%.

Overall holdings in equities, or shares, pushed 1.4% higher to 29.3% as the managers took a shine to the UK stock market, lifting it from 10.6% to 12.7% of the portfolio.

“Whilst the bearish outlook for the UK is well known and public finances remain strained, private sector balance sheets are comparatively robust. A rise in new borrowing catalysed by rate cuts could support demand and help initiate a recovery,” they said.

Cautiously optimistic on US

In the US, having made highly profitable trades in and out of pharmaceutical and biotechnology companies last year, the managers remain cautiously optimistic, lifting North American equities by 2.1% to 6.5% in the second half.

“We continue to believe US asset prices understate the underlying risks. However, fiscal stimulus and ongoing monetary easing from the Federal Reserve may keep conditions supportive into 2026. The company has selectively increased its US exposure, focusing on assets positioned to benefit from real economic growth and favourable policy conditions,” they said.

Hanging over all three of their potential scenarios was the debate over artificial intelligence (AI) as a source of “both potential opportunity and concentration of risk”. The managers said they would closely monitor the “Magnificent Seven” US mega-cap tech companies for signs of a bubble particularly as they faced growing competition from Chinese “hyper-scalers” such as Alibaba, Huawei and Tencent which could offer an alternative to BRICS countries and other emerging markets.

“AI is clearly impactful and a source of real change, yet it also carries the risk of triggering or exacerbating market fragility,” they concluded.