RUFFER INVESTMENT COMPANY: Going off track to maintain positive returns

How investment confidence RUFFER has been a port in the storm with his ‘unconventional’ tactics to keep returns positive



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investment trust ruffer belongs to a small group of funds that strive for positive annual returns, regardless of the prevailing stock market conditions. Trusts with similar objectives include Capital Gearing and Personal Assets.

It’s a target that has proved increasingly difficult to achieve this year, as prices for conventional assets – stocks, bonds and commodities – have all fallen.

Yet Duncan MacInnes, fund manager of this £1bn listed fund, has refused to be beaten and has employed ‘unconventional’ tactics to ensure the trust’s share price and asset value continue to rise.

As a result, the trust has returned 3.4 percent in the past year — and 38 percent over three years.

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By contrast, both Capital Gearing and Personal Assets have posted losses (albeit small) over the past year and respective three-year returns of 14.5 and 15.6 percent.

“Conventional assets are struggling to deliver returns this year,” MacInnes says. “So we had no choice but to explore unconventional assets. It’s an approach we’ve taken successfully before and we’ll continue to do so if it helps us achieve the positive returns our shareholders expect.”

In the trust’s financial year to the end of June 2021, much of the total return of 19.5 percent was the result of a large stake in Bitcoin. While the cryptocurrency sold out, MacInnes says other unconventional assets such as “put options and illiquid strategies” are giving the trust’s stock price much-needed ballast.

In fact, the trust makes money by betting on certain stocks – technology companies and European banks – which are falling in price.

“We will do everything we can to ensure that we preserve the capital of our shareholders,” MacInnes said.

The fund manager has also been making money for shareholders in recent weeks trading long-term indexed gilts.

MacInnes did this by exploiting wild swings in the prices of these gilts, triggered by the market turmoil over the unfunded tax cuts announced by then Chancellor Kwasi Kwarteng in his mini-Budget.

In fact, he bought when their prices plummeted and waited for them to bounce back.

“Having enough or close to cash in a crisis means you can be agile and buy assets at competitive prices,” he adds. ‘It’s exactly what we did. As the saying goes, when it rains gold, grab a bucket, not a thimble. We had our bucket ready and waiting.’

Ruffer’s defensive stance is such that it has only 15 percent of its assets in stocks – a record low for confidence. Of the stocks held, most are involved in oil exploration, such as BP, Shell and US-listed Chesapeake Energy.

MacInnes says, “Interest rates are going higher and higher, although we are closer to the end of the rate hikes than we are to the beginning. Investors redeem their shareholdings and cash is becoming more and more popular. We wait in the wings to buy stocks when we think the price is right.”

Analysts at Investec Bank think Ruffer now represents a ‘buy’. In a research note issued in recent days, it described the trust’s investment approach as “agile and opportunistic.” It also said its “unconventional toolkit” could provide “significant value” to shareholders in the coming months.

The trust’s shares are currently trading at around £3. Dividend payments are made semi-annually and amounted to 2.75 pence per share in the last financial year (until the end of June this year). The trust’s annual fee totals 1.08 percent, the exchange identifier is BO18CS4 and the market ticker is RICA.


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