Why Ruffer Investment Company is An Attractive Investment

Takeaways

• What is Ruffer Investment Company

• Why is it so interesting?

• Mix the old with the new!

What is Ruffer Investment Company?

Ruffer has a focus on preserving its clients capital. Although it offers several different funds one of its funds is often covered in the financial press and for good reason. This fund is called Ruffer Investment Company (trade code: RICA) and It has a simple aim:

Consistent positive returns, regardless of how the financial markets perform. 

In practice this means it is often holding less risky assets than most over funds. It remit is wider than most, allowing it to hold many different assets classes. This is an advantage over other funds whose remit is focused on one style of investing only.

As a result of its investment freedom and focus on capital preservation, the Ruffer investment company positioning can often be described as contrarian. This can be a good reference point for investors wishing to see what assets are worth investing in that no-one else has invested it.

How is it typically positioned?

There is no typical for Ruffer Investment Company! Anything is possible... even cryptocurrency. As a fund focused on capital preservation, it always invests with a margin of safety. As a result whatever their positioning you are likely to see holdings of gold and US treasury bonds.

Being a UK-based fund, they regularly have holdings of UK Iindex-linked bonds. This is because their focus on total return means they do not just focus on preserving your money in capital invested but also from inflation. Inflation is why we all invest money: to protect our purchasing power.

With this last thought in mind, equities have regularly been a strong part of the assets held. Equities are high risk assets but Ruffer slants the equities its holds to ensure the rise it takes is reduced. It therefore focuses on larger established companies with solid financials. Examples would include companies who can create cash whatever the economic backdrop.

Current situation

At the time of writing, it only held 13.6% in equities with the majority of its assets held in Bonds. A large position (19.6% of the fund) held in an 'Illiquid strategies and options' may appear odd but is consistent with its capital preservation mandate. The options is holds are most likely for protection purposes in case of volatilty in the equity market.

Its fee structure at 1% annual management charge is neither particularly high or low. Some forward-thinking funds charge close to 0.5%, whereas any fund charging you more than 1% should not make it into your portfolio.

To the future and beyond

In their latest fund report, Ruffer details what their thinking is in terms of the near future. This is interesting in terms of monitoring how they are investing but also in managing your expectations.

It is refreshing to see a fund not only admit they are not sure what will happen but to also have some suggestions as to what they could do. In their case, they believe we are in a period of lower growth but with increased volatility.

As a result they seem to be keeping an open mind as to what to do. This includes being prepared to 'trade' as opposed to invest.

Bitcoin position

In November 2020, Ruffer Investment Company started building a position in Bitcoin, which it exited in April 2021. This position amounted to 2.5% of the then £21billion the fund had under management. This was a strange position to take, but according the the manager of the fund, this was appropriate when you are in the risk-taking business.

To say this bitcoin position was perplexing is obvious. For a conservative fund to invest in a high-risk, incredibly volatile asset seemed weird. No end of polished explanation can explain why. Although this 'trade' (they only held it for 6 months) was very successful, one wonders if they got lucky. Indeed a month later the bitcoin price collapsed and has not come near to recovering.

The downsides of Ruffer Investment Company

This fund may not appeal to everyone. For those whose maximum risk tolerance is higher than its low risk, lower return-focused investors may not necessarily find it appealing.

It's performance compared to the S&P500 over 5 years is not brilliant, at 35% return versus 53% (December 2022). Yet S&P500 has been very volatile at times, where as Ruffer's low risk approach has meant you are able to sleep soundly at night.

Conclusion

This fund is one for the forwarder thinker. It is too easy to get absorbed by the latest trend or sales pitch. As a sensibly run fund with an emphasis on capital preservation, you will not loose your money, but you will make some in the process.

This should be your focus, yet few (novice) investors are prepared to embrace this. Not only will the conservative investing introduce you to new assets but you will also have the benefit of reading some forthright commentary, which can help you with the remainder of your asset positioning.