RIT Capital Partners

[Dod101]

I see that the Chairman Lord Rothschild is retiring but as is typical with well run trusts, there is a smooth transition to Sir James Leigh Pemberton who is very familiar with the Trust.

Incidentally after the comments about Schroder proposing an apparently ill qualified Schroder family member to be a director, Lord Rothschild got away with appointing his daughter a few years back. She was I think as ill qualified, being very active in the arts field, as Ms Schroder. These things are bound to happen.

Dod

[OhNoNotimAgain]

The Schroder daughter was eminently qualified to be a NED. She sits on a large amount of stock that she cannot sell so has every reason to urge the executives to do the right thing for the long term.

The alternative is a selection from the huge list of profressional NEDs that just rotate around listed boards and vote for the status quo without ever lifting up the carpets and ask what is really going on as should have happened at Carillion, Patissiere Valerie, Barclays, RBS, Tesco and so on.

[scotia]

I'm always puzzled by the apparent popularity of RIT Capital Partners and on the statement on its web site that it has "Exceptional" Long Term Performance. "Exceptional" compared to what? They have a global investment portfolio, so I had a look at the total return (HL website) on Fundsmith (fund), Lindsell Train Global Equity (fund), Scottish Mortgage (IT) and Foreign & Commonwealth (IT) over the past 5 years. RIT comes a poor 5th. OK - the highest flyer SMT displays considerable volatility, but if you are after "long term performance" does that matter? Why then does RIT sit with a premium of around 10%, when it has (in the not too distant past) sat at a discount of 10% ? That sort of variation would keep me well clear of it.
I'm not intending to buy RIT, but I would be interested to know why others clearly think differently.

[Itsallaguess]

I'm always puzzled by the apparent popularity of RIT Capital Partners and on the statement on its web site that it has "Exceptional" Long Term Performance. "Exceptional" compared to what?

They have a global investment portfolio, so I had a look at the total return (HL website) on Fundsmith (fund), Lindsell Train Global Equity (fund), Scottish Mortgage (IT) and Foreign & Commonwealth (IT) over the past 5 years. RIT comes a poor 5th. OK - the highest flyer SMT displays considerable volatility, but if you are after "long term performance" does that matter? Why then does RIT sit with a premium of around 10%, when it has (in the not too distant past) sat at a discount of 10% ? That sort of variation would keep me well clear of it.

I'm not intending to buy RIT, but I would be interested to know why others clearly think differently.

I don't own any RIT Capital Partners, but given their 'capital preservation' approach, could there be an argument to suggest that one of the best times to invest in it might be when it's low down on such 5-year rankings, and the best time to actually sell it might be when it's at the top of that 5-year list?

Cheers,

Itsallaguess

[Dod101]

I agree with ONTHA, for once.

As to RIT, it is a very good wealth preserver as well as a reasonable growth trust. It is also invested in many areas that most of us could not touch. That does it for me. It is low profile and makes no extravagant promises, and is simply a share in which to park long term capital and let it gently grow which it does better tan many.

One could criticise Scottish Mortgage if one had a mind to it because it is a much higher risk trust but it successfully navigates that. There are few managers like James Anderson and apart from the investments and the long term approach the main risk is his retirement. That is not currently on the cards but the man is at least 60 I think and for Baillie Gifford that is decidedly long in the tooth.

Dod

[SalvorHardin]

RIT has massively outperformed its benchmark since its launch in 1988. That's what I call a long-term record!

"Since 1988, RIT has delivered outstanding performance for its shareholders. £10,000 invested in RIT at inception in 1988 would be worth ~£326,000 today (with dividends reinvested) compared to the same amount invested in the ACWI¹ which would be worth ~£73,000. A shareholder who invested in RIT at inception will have seen a share price total return of 12.1% per annum"

It's this track record, combined with its habit of producing very good private equity returns, that have lead investors to consistently put its shares to a premium to NAV. That and it's somewhat idiosyncratic portfolio which is impossible for most private investors to replicate.

https://www.ritcap.com/financial-performance

[scotia]

OK - focussing on capital preservation may lead to exceptional short term performance (in exceptional times), but not usually to exceptional long term performance. But I do understand the "better safe than sorry" approach of a large number of investors. A lot of money went into "Absolute Return" investments with little or no real returns. RIT does not fall into that category, however its the premium/discount that really bothers me from a capital preservation standpoint. In two years around the beginning of 2011 it plummeted from a premium of 12% to a discount of 12% (approx). It is now sitting around a premium of 8.5% (having reached 10% earlier this year). I think I'd feel a lot safer in a fund with no premium/discount variations to worry about, or an IT with an effective premium/discount control.

[Aminatidi]

OK - focussing on capital preservation may lead to exceptional short term performance (in exceptional times), but not usually to exceptional long term performance. But I do understand the "better safe than sorry" approach of a large number of investors. A lot of money went into "Absolute Return" investments with little or no real returns. RIT does not fall into that category, however its the premium/discount that really bothers me from a capital preservation standpoint. In two years around the beginning of 2011 it plummeted from a premium of 12% to a discount of 12% (approx). It is now sitting around a premium of 8.5% (having reached 10% earlier this year). I think I'd feel a lot safer in a fund with no premium/discount variations to worry about, or an IT with an effective premium/discount control.

I struggle with the premium to the point that I would love to hold a decent chunk of it alongside Capital Gearing Trust to form the "defensive/not prone to move with markets quite so much" part of my ISA.

8-10% is just nuts though as in a stress period as you say that could be a 20% swing.

It's a shame as I'm not aware of many IT options that are similar.

[Dod101]

I think I'd feel a lot safer in a fund with no premium/discount variations to worry about, or an IT with an effective premium/discount control.

If you are holding it for the long term the premium/discount is not an issue. Look at the numbers that SalvorHardin has produced. That is an excellent return, and although I called it a wealth preserver it is much more than that. But if the premium /discount really bothers you then you could always buy Personal Assets, the perm bears. I do not think you will get the returns of RIT from them though.

Dod

[scotia]

RIT has massively outperformed its benchmark since its launch in 1988. That's what I call a long-term record!

Yes - but is it all in the past? I'm sure its constituents have changed dramatically in 30 years. And currently it appears to be a very middle-of-the-road performer (on a 5 year return) which does not appear to warrant the current premium. If my reading of the HL data is correct, the RIT total return over 5 years is 75% - and this includes an approximate 13% rise in its discount to premium over the period. Fundsmith and Lindsell Train Global Equity both increased by about 166% over the same period (with of course being funds there is no discount or premium to worry about). Why then do investors pile in to purchase RIT at a price well above its NAV? This I cannot understand.

[Itsallaguess]

Why then do investors pile in to purchase RIT at a price well above its NAV? This I cannot understand.

Could this simply be attributed to the investor-equivalent of the 'End-is-Nigh' placard guy?

Does the premium tend to creep up after relatively long bull-markets?

Cheers,

Itsallaguess

[SalvorHardin]

If my reading of the HL data is correct, the RIT total return over 5 years is 75% - and this includes an approximate 13% rise in its discount to premium over the period. Fundsmith and Lindsell Train Global Equity both increased by about 166% over the same period (with of course being funds there is no discount or premium to worry about). Why then do investors pile in to purchase RIT at a price well above its NAV? This I cannot understand.

Your figures look right. The thing is that a lot of of us have held RIT for a long time and we don't consider a premium to be much to worry about and certainly not a reason to sell. Tax is a big issue for some of us.

I first bought RIT almost 20 years ago and last bought them about 9 years ago. I have quite a bit of CGT to pay if I sell (my net proceeds after CGT if I sold today is quite a bit less than NAV).

Now if I was looking at them as a new investor I wouldn't buy at a premium. But I'm not. So it's a hold recommendation from me.

Bear in mind that RIT's NAV is usually a couple of weeks out of date (they don't publish daily NAVs). That reduces the current premium by quite a bit (maybe a quarter?).

Finally RIT's past record means that many investors will be more generous in valuing its unquoted shares that other trusts' unquoted shares.

[scotia]

Why then do investors pile in to purchase RIT at a price well above its NAV? This I cannot understand.

Could this simply be attributed to the investor-equivalent of the 'End-is-Nigh' placard guy?
Does the premium tend to creep up after relatively long bull-markets?

It could well be as you suggest.
I also wonder how many of the investments into RIT are carried out by Financial Advisers or Family Solicitors - on the basis that if its good enough for the Rothschilds, its surely good enough for my clients. Rather like the old saying in the computer industry - "You never get sacked for buying IBM" (whether or not it was the correct purchase decision).

[buzz]

Fundsmith and Lindsell Train Global Equity both increased by about 166% over the same period (with of course being funds there is no discount or premium to worry about). Why then do investors pile in to purchase RIT at a price well above its NAV? This I cannot understand.

Perhaps because they already have substantial holdings in those two large-cap equity funds that have a lot of similarities and want diversification? One part of investment is getting good returns, the other part is hanging on to them.

I have well into six figures in LTGE and a fairly large investment in Fundsmith. Both have done well for me but I'm aware that sort of out-performance won't last indefinitely. A ten-year bull market isn't the norm. Nor for that matter, do I have any guartantee that RIT will do as well as it has historically. Just because it's outperformed Scottish Mortgage over the last 25 years, as it has, doesn't mean it will do so in the future. As you said, those figures are in the past as are those for LTGE and Fundsmith. If you do give serious consideration to data from the past it needs to be at least over a full cycle, not just five years. (LTGE was launched in 2011, well after the 2007-8 hoo-ha; Fundsmith a few months before.)

What I do know is that the old ways of trying to get balanced diversification with some equities, some bonds, and perhaps a smidgeon of gold (à la PNL and many others) doesn't work too well any more. RIT gives access to diverse investments that are hard to come by elsewhere: which was why I invested some years ago when the discount was just below par.

It's a pain that so many ITs are at record premiums at the moment and the reason why I'm more comfortable with funds than most ITs at this stage of the cycle. Would I buy RIT at the current premium? Would depend on my investment horizon and how useful it would be in my portfolio.

[StOmer]

Bought RIT on a discount over the years, initially because of the Rothschilds but latterly as I liked its portfolio and ethos. Have now sold out due to the 10% premium and a desire to derisk the portfolio with a move into cash last year. Have looked at it again this year but decided it was too expensive.

[scotia]

Thanks for all the responses to my comments on RIT.
I still remain puzzled by its popularity. Lets think of another similar IT - with a large wealthy family connection, a flexible investment policy (including non quoted investments), a performance over the past 5 years that is roughly similar to RIT, and of a comparable size. Caledonia seems to tick all these boxes, but it is sitting currently at a discount of 17% compared to the 7% premium of RIT. I remain puzzled!

[Dod101]

Caledonia is sitting at a discount quite possibly because over the years it has not been able to buy back any/many shares because of the large holding by the Cayzer Concert Party, without triggering the requirement for the CCP to bid for the entire company.

Mind you I am not aware that RIT has bought back any shares either.

Anyway I hold both and am perfectly happy with them. As a long term holder, I simply do not care about premiums or discounts.

Dod