- The trust aims to not lose money over any 12-month period, while trying to provide higher returns than cash
- Jonathan Ruffer, Henry Maxey and Neil McLeish have significant experience of asset allocation decisions, while Duncan MacInnes and Jasmine Yeo focus on the day-to-day running of the trust
- The team has a strong track record of providing long-term investment returns with lower volatility than shares
How it fits in a portfolio
Rather than trying to shoot the lights out, Ruffer Investment Company Limited’s primary aim is to preserve investors’ capital. The managers aim to grow investors' money by more than the return on cash on an annual basis. Our view is that it is better to measure this over the long run (more than five years).
As a result, it could form the foundation of a broad investment portfolio, bring some stability to a more adventurous portfolio, or provide some long-term growth potential to a more conservative portfolio.
Manager
Ruffer Investment Company launched in 2004 and Duncan MacInnes took over management of the trust in 2016. Jasmine Yeo joined MacInnes in 2022 as a named Investment Manager on the trust. They continue to run the trust in the same way as the previous managers, with no changes to the investment philosophy or process.
MacInnes and Yeo manage the trust on a day-to-day basis, making decisions on exactly what investments to buy and sell. They are supported by the wider business at Ruffer, where asset allocation decisions are taken centrally by Henry Maxey and Neil McLeish, with input provided by Jonathan Ruffer. Asset allocation is where decisions about how much the trust should invest in different types of assets, such as shares, bonds or commodities, are made. Maxey, McLeish and Ruffer are seasoned investors, with Maxey and Ruffer having worked on the asset allocation for the trust since it launched.
Ruffer set up the wider business in 1994 and is the current Chairman. Maxey joined in 1998 and is the current Co-Chief Investment Officer. During that time, their asset allocation decisions have provided some shelter to client money during times of significant market stress, such as the Financial Crisis and, more recently, COVID-19 and the market turmoil in 2022.
McLeish joined Ruffer in 2022, having worked at Morgan Stanley for nearly 30 years in a variety of roles, most recently Head of Macro Research. He became Co-Chief Investment Officer at Ruffer in 2023. This is a significant appointment, which is viewed positively as it reduces the reliance on Ruffer and gives Maxey another experienced investor to help with decision making. That being said, Ruffer remains involved in regular investment strategy discussions with Maxey and McLeish, meaning that his vast experience still benefits the team.
As a business, Ruffer uses the same investment philosophy and strategy across all of their products, which is the outcome of the combined expertise from across the business. Therefore, while the trust is run by MacInnes and Yeo, we think the input from other teams within the business means that they are adequately resourced to run the strategy.
Process
Ruffer uses a team-based approach and considers broader economic conditions to decide where to invest and how much risk to take. The key building blocks used by the trust include global company shares, conventional and index-linked government bonds, as well as cash and commodities, such as gold. The managers also use some less conventional investment strategies, with the aim of providing some protection to the portfolio. These strategies have tended to help during times of market stress but can be complicated and are a higher-risk part of the trust.
Portfolio construction is a combination of aiming to provide some shelter against longer-term market risks, alongside investments aimed at taking advantage of shorter-term opportunities. This second element means that where the trust is invested can, and does, change quickly in response to market conditions.
Investors in the trust should be aware that closed-ended funds can trade at a discount or premium to the net asset value (NAV). The manager looks to limit the size of the discount or premium to the net asset value (NAV).
During the trust's financial year to 30 June 2023, the managers have reduced the amount invested in company shares to 14%. They increased their level of duration from around two years to four years too. Duration is measured in years and reflects how sensitive the fund is to interest rate changes. The higher the duration value, the more sensitive the fund is to interest rate changes. They have also increased exposure to overseas currencies such as the Yen and US dollar and they have reduced exposure to gold and copper.
The reason for all of these changes is the same: the team at Ruffer believe a recession is coming. They view these changes as providing greater protection alongside potential for higher returns in a recessionary environment.
The manager has the flexibility to use derivatives and gearing (borrowing to invest) which, if used, adds risk. However, the manager has not used gearing in the past and has stated that they have no intention to do so in future.
Culture
We like that the asset allocation team at Ruffer has been in place for a long time and has a good track record of sheltering clients’ wealth during times of significant market stress. This philosophy runs through the entire business.
The business is a Limited Liability Partnership and not publicly owned, which helps the investment team to take a longer-term view, without having to focus on shorter-term revenues and performance for shareholders. All controlling partners in the wider Ruffer business are investors in the strategy, this helps to align investor and client interests.
ESG Integration
An ESG (Environment, Social and Governance) framework is used for each investment in the trust. This means that MacInnes and Yeo are aware of the ESG risks for each investment that they make. Their ESG analysis can also highlight things that could provide positive future returns. Sometimes these are specific to individual shares and sometimes these are at wider sector or regional levels which help steer idea generation for the trust.
The wider Ruffer business is a UN Principles for Responsible Investment signatory, as well as being part of Climate action 100+, Transition Pathway Initiative and the Institutional Investors Group on Climate Change. We think that the business is aligned with broad ESG investment principles. However, the investment risk and return profile is a higher priority for investment teams.
Cost
The trust's ongoing charge for the year to 30 June 2023 was 1.07%. Investors should refer to the latest Annual Reports and Accounts and Key Investor Information for details of the risks and charging structure.
If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn’t apply if held in a Fund and Share Account.
Performance
Since Ruffer Investment Company launched in 2004, it’s grown 220.63%*, which is an attractive return for a more conservative trust. This return is ahead of the Bank of England base rate which has returned 38.68% over the same period. It is however behind the FTSE All Share index, which has grown by 273.70%. Remember past performance isn't a guide to future returns.
The trust has lagged the FTSE All Share and the Bank of England base rate over the 12 months to 30 September 2023. MacInnes and Yeo are clear that the losses over the period are disappointing. They have been positioned for a recession that hasn’t happened, meaning many of their investments have lost value.
Specifically, investments in derivatives have provided significant negative returns. As have investments in index-linked bonds and overseas currencies. It’s not all been bad though, with investments in shares providing a positive return, while their gold holdings have overall been broadly flat.
At the time of writing the trust trades at a discount of -3.69%. All investments and any income they produce can fall as well as rise in value, so investors could get back less than they invest.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Sept 18 – Sept 19 | Sept 19 – Sept 20 | Sept 20 – Sept 21 | Sept 21 – Sept 22 | Sept 22 – Sept 23 | |
| Ruffer Investment Company Ltd | -3.48% | 8.33% | 20.58% | -0.69% | -6.60% |
| FTSE All-Share | 2.68% | -16.59% | 27.89% | -4.00% | 13.84% |
| Bank of England Base Rate | 0.75% | 0.39% | 0.10% | 0.77% | 4.14% |
Past performance is not a guide to the future. Source: *Lipper IM to 30/09/2023.
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