Ruffer

[Adamski]

Do you know if derivates/hedges played a part in Rica good performance this year to date? If so can you explain in simple terms.

[nmdhqbc]

this may give some insights. interview with the ruffer manager starts at 4:07
https://money-makers.co/2022/10/08/mone ... -oct-2022/

[mc2fool]

Recent article in the IC:

https://www.investorschronicle.co.uk/news/2022/10/06/a-wealth-preservation-trust-that-has-delivered/ for registered users
https://www.google.com/search?q=investors+chronicle+a+wealth+preservation+trust+that+has+delivered and click on the IC link for others

[Adamski]

Thanks for links/replies. Also found in Mail yesterday..

In the trust's financial year to the end of June 2021, a big chunk of its total return of 19.5 per cent was a result of a big holding in Bitcoin. Although it sold out of the cryptocurrency, MacInnes says other unconventional assets such as 'put options and illiquid strategies' are giving the trust's share price much needed ballast.
In effect, the trust is making money from betting on certain stocks – technology companies and European banks – falling in price.

Also graphic shows 21% assets invested in illiquid strategies and options.

[forrado]

Link below to the online Money Mail article referenced by Adamski ...
How investment trust RUFFER has been a port in the storm with its 'unconventional' tactics to keep returns positive

Whereas the Money Mail write-up compares the recent short-term outperformance of Ruffer v. Capital Gearing and Personal Assets. What the article omits to mention is the increased risk Ruffer (in the form of short positions) has taken on to achieve such gains.

To illustrate using Trustnet's Risk Score metrics, while admittedly best used as a share price volatility indicator, is nevertheless a reliable pointer to the potential risks lurking within an underlying portfolio.

If the FTSE 100 index is the anchor with a fixed risk score of 100, then Ruffer's share price currently scores 82, while Capital Gearing and Personal Assets score 60 and 50 respectively. Which is markedly lower, and as a result with less risk attached than the score of 82 credited to Ruffer. Though, as one would expect, all three trusts are rated less risky than the benchmark FTSE 100 index.

On condition Ruffer shareholders are comfortable with the increased risks associated with such actions, then kudos to them when it pays off. Though, in all honesty, I just can't see the more conservative-by-nature shareholders of Capital Gearing and Personal Assets allowing their fund managers to open similar short positions without serious questions being asked beforehand.

[Lootman]

Whereas the Money Mail write-up compares the recent short-term outperformance of Ruffer v. Capital Gearing and Personal Assets. What the article omits to mention is the increased risk Ruffer (in the form of short positions) has taken on to achieve such gains.

The article suggests that much of that short exposure is via put options.

That is certainly a version of being short, as it is a strategy that will profit when the underlying loses value. But it is a much less risky approach than actual shorting, which involves selling shares you do not own by first borrowing them, and then hoping you can purchase them later at a lower price. You also have to find the cash to pay out any dividends due whilst you are short.

The losses from shorting are potentially unlimited, but the maximum losses from holding put options is equal to what was paid for the option premium, typically a small fraction of the price of the underlying.

Also shorting requires margin but being long put options does not.

Buying options can certainly lose you money, given that most expire worthless. But you lose money only very slowly when compared to a naked short position that goes wrong.

[XFool]

On condition Ruffer shareholders are comfortable with the increased risks associated with such actions, then kudos to them when it pays off. Though, in all honesty, I just can't see the more conservative-by-nature shareholders of Capital Gearing and Personal Assets allowing their fund managers to open similar short positions without serious questions being asked beforehand.

...They certainly frightened the horses last year by their, temporary, investment in Bitcoin! (Via their holding in another Ruffer fund)

[richfool]

Ruffer's Monthly Update for January 2023:

RUFFER INVESTMENT COMPANY LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 41996)

LEI 21380068AHZKY7MKNO47


Attached is a link to the Monthly Investment Report for January 2023.

http://www.rns-pdf.londonstockexchange. ... 23-2-9.pdf

January was an extremely strong month for almost all asset classes - the best start to the year for US and European equity markets since 2019 and 2015 respectively. Bonds rallied strongly as well. Indeed, the only major asset that did not rise in January was oil.

What drove such a strong month? The answer lies in the market's expectations of future events and how they have changed since October. Three factors matter most: firstly, a more emollient tone from the Federal Reserve in the US. As inflation and economic data has softened, and the Federal Reserve has reflected this by slowing the pace of interest rate hikes, the market has moved quickly to rule out the possibility of the US being driven into a significant recession.

Secondly, the warm winter in Europe has allowed energy prices to fall dramatically (European gas prices have now fallen 85% from their peak in August) and thus eliminate the concerns over European stagflation. And finally, the chaotic and rapid Chinese reopening has driven up market expectations of global economic growth in 2023, particularly in those spots where it was weakest such as European manufacturing and Chinese real estate.

https://www.investegate.co.uk/ruffer-in ... 00034978P/

I continue to hold RICA (and a smaller holding in PNL).

[richfool]

Ruffer not doing well this year, despite its wealth preservation mandate:

Ruffer roughed up

Ruffer Investment Company (RICA) is currently winning the competition of which wealth preservation fund can disappoint investors most. This year the fund that famously made money in the 2008 financial crisis has seen net asset value fall over 7%, which is considerably worse than the 3.6% decline in arch rival Capital Gearing (CGT) and far worse than the 1% gain in Personal Assets (PNL).

That’s not what shareholders have come to expect and, in a de-rating reminiscent of a few years ago when Ruffer last disappointed, the shares have fallen 14.7% this year to stand on a 7.1% discount that makes RICA the UK’s cheapest investment company with a one-year Z-score of -4.4.

That’s prompted fund managers Duncan MacInnes and Jasmine Yeo to each splash out around £39,750 this week to buy 15,000 shares apiece to demonstrate their faith in the defensive multi-asset fund and their affinity with shareholders. News of that helped lift the shares 1.7% today to 268.5p.

This was Yeo’s first purchase since being named co-manager last October.

According to today’s stock exchange announcement by RICA, MacInnes now owns 58,100 shares, which at their current price are worth £166,166. I can’t help thinking that looks a little light for someone who has worked on the portfolio since October 2016 and who became lead manager when Hamish Baillie left a year ago.

Perhaps I got the wrong impression from last month’s ‘Skin in the Game’ report from Investec which showed Ruffer fund managers and principals owned a more impressive total of 420,000 shares worth £1.17m.

https://citywire.com/wealth-manager/new ... &utm_pos=2

I hold Ruffer (but not PNL or CGT).

[JohnW]

About 1% of such funds have outperformed a mixed asset index-type benchmark on a risk adjusted basis over the last 10 years, so we’d be surprised if Ruffer didn’t have some rough years. https://www.pipsbenchmark.com/2023/05/d ... hmark.html

[richfool]

Ruffer update and portfolio summary for June 2023:

https://www.rns-pdf.londonstockexchange ... 23-7-9.pdf

[Jam2Day]

The article suggests that much of that short exposure is via put options.

That is certainly a version of being short, as it is a strategy that will profit when the underlying loses value. But it is a much less risky approach than actual shorting, which involves selling shares you do not own by first borrowing them, and then hoping you can purchase them later at a lower price. You also have to find the cash to pay out any dividends due whilst you are short.

The losses from shorting are potentially unlimited, but the maximum losses from holding put options is equal to what was paid for the option premium, typically a small fraction of the price of the underlying.

Also shorting requires margin but being long put options does not.

Buying options can certainly lose you money, given that most expire worthless. But you lose money only very slowly when compared to a naked short position that goes wrong.

Indeed. This is an interesting subject in the context of today's markets where we are seeing considerable capital growth for want of a better description, much of which is obviously fuelled by pure speculation. After all, value is value and that can disappear at the press of a button, or should that be the tick of a logarithm. All hardened members of the HYP Club are very familiar with the 'you can't eat value' mantra. However, apart from gearing and share issue, I suspect some overlook the fact that many 'income funds' generate cash flow with the use of derivatives (especially useful in volatile markets) which invariably end up as dividends, subject to P&L reserves in the balance sheet. Take a closer look at a handful of IT's with the 'Income Fund' job description and you will surely see signs of this capital recirculation in process to a greater or lesser extent. Let's face it, income generation has been quite a challenge more many years now with the government printing presses going full bore in an effort to fund their follies and pay for it by inflating away the very debt they generate. Hardly surprising that a nimble minded and fleet footed fundmanager might decide to ride that wave in what some might see as 'tail chewing'. However, the increasing rise in the cost of capital must surely cast a potential shadow over the 'capital conversion to income game'. I think we are already seeing signs of funds reappraising their strategy for the next decade if we see a sustained and sustainable cost of cash. Government funksters will doubtless look to reducing interest rates at some point but some of us must be wondering if they can get away with the 'golden goose' routine indefinitely. Well, that must surely depend on whether they can easily implement their CBDC plans in which case we will have well and truly arrived in La La Land where entities can do as they please without accountability. That will surely pose a new set of challenges and rules of engagement .

[richfool]

I went to post this yesterday, but couldn't get in to the website, as I had been banned. ( I spent many hours pondering in what way I had sinned). I don't think anyone has posted it in the meantime:

It seems that Ruffer has not got it right and defended our investments very well this year.

23 Aug, 2023
Slump forces Ruffer to buy back shares for first time in 19 years
Losses incurred by the defensive multi-asset fund this year have rocked investor sentiment, forcing the board to buy back discounted stock for first time ever.
By Gavin Lumsden

Ruffer Investment Company (RICA) has undertaken its first-ever share buyback after a slump in performance by the defensive multi-asset fund rocked investor sentiment.

The £1bn Guernsey investment company yesterday joined dozens of other closed-end funds that have been forced to repurchase shares this year as the sector has derated in response to soaring inflation and interest rates.

According to a stock exchange announcement this morning, it spent £394,875 on buying 150,000 shares at £2.6325 each. That’s just 0.039% of the total in issue.

The transaction – the first since Ruffer launched in 2004 – came as its shares fell to a discount of more than 6% below net asset value (NAV), putting it in Numis Securities’ ‘cheap’ list with a Z score of -2.6. Analysts regard a score below -2 as significantly below a trust’s usual trading range.

Numis analyst Ewan Lovett-Turner said this represented a big turnaround for Ruffer, a previously popular fund that ranked among the sector’s bigger share issuers as its stock habitually traded at ‘par’ or a small premium above NAV.

This year the company has raised £57m from new shares but stopped the issuance in mid-May when the fund fell to a discount. Issuing shares below NAV is viewed as bad practice as it dilutes the stakes of existing shareholders.

Shares in Ruffer have tumbled 15% this year as investors have sold out of the wealth preservation fund in response to an alarming 8.6% drop in NAV. Ruffer has been hurt by a simultaneous double blow to its inflation-linked bonds (which are meant to protect the fund against rises in living costs but have been undermined by rising interest rates) and its growth assets in commodities and shares, which have suffered from the slowdown in China.

Unlike direct rivals Personal Assets (PNL) and Capital Gearing (CGT), which has also had performance problems, Ruffer does not operate a zero discount policy, issuing and buying shares to keep their price as close to NAV as possible.

‘It will be interesting to see whether buybacks from Ruffer continue and at what scale and frequency,’ said Lovett-Turner. ‘Larger portions of the portfolio are liquid and therefore it should have some firepower to undertake buybacks.’

If buybacks – which seek to rebalance supply and demand for shares – do not succeed in narrowing the discount, Lovett-Turner suggested Ruffer’s board might deploy the fund’s annual redemption facility in November to buy up to a quarter of the shares. It last did so in 2007 when stock markets peaked before the 2008 crash, when investors sold back 16% of the shares.

Ruffer fund managers Duncan MacInnes and Jasmine Yeo last month sought to encourage investors back to the stock, buying £39,750 of shares each.

The derating of the shares means shareholders have received a total return including dividends of 18.8% in the past five years, compared with the 27% investment return generated by its highly diversified portfolio. Nevertheless, this beats the FTSE All-Share’s meagre 13.7% and the fund’s official target of generating twice the return of the Bank of England base rate.

https://citywire.com/wealth-manager/new ... &utm_pos=1

The article goes on to talk about RIT Capital Partners.

I hold RICA (only of those mentioned)

[dundas666]

I went to post this yesterday, but couldn't get in to the website, as I had been banned. ( I spent many hours pondering in what way I had sinned).

Ha, I got 'banned' yesterday too, also not sure why we were on the naughty step.

[Alaric]

Ha, I got 'banned' yesterday too, also not sure why we were on the naughty step.

It was a general outage.

See viewtopic.php?f=104&t=40413

[richfool]

Ruffer's Monthly Report as at the 31st August: (the pdf link lists the ten largest equity holdings and 5 largest bond holdings)

Ruffer Investment Company Limited

An alternative to alternative asset management

Higher global yields and fears about slowing economic growth in Europe and China saw the major
bond and equity markets decline in August. The fund retreated, too, as market declines were not sharp
or deep enough to trigger our potent derivative protections.
No single factor drove global yields higher. Instead, a smorgasbord of drivers included: ‘higher for
longer’ interest rate policies amidst persistent inflation; heavy planned US Treasury issuance; robust
US economic data; and Fitch’s US government credit rating downgrade, which highlighted the scale of
the Federal deficit – already a whopping 6.5%, with full employment! The fund’s long-dated UK and
US inflation-protected bonds suffered from the rise in yields. These should rally in the event of
recession.
In Europe, flash PMIs (economic outlook indicators) pointed to a sharp contraction. Meanwhile,
China’s re-opening is spluttering. Its c $60tn property market is reeling after years of regulatory
pressure, deteriorating demography, shaken household confidence and a broken Ponzi-esque funding
model. Piecemeal stimulus measures from Beijing have so far failed to reassure investors, but there’s
little in the price for good news. We believe fatter market tail risks from China’s economy – and politics
– will remain with us for years to come. Expect surprises.
China stocks aside, equity markets’ August retreat was relatively orderly. An uneventful earnings
season plus a lack of policy or inflation shocks has kept volatility (‘vol’) in markets low. That has kept
the vol-targeting machine-led investment strategies – so powerful in today’s markets – invested. The
fund’s small equity allocation retreated with indices but, given the steady nature of the market decline,
our derivatives have yet to kick in, so were a small performance drag. The same goes for our c 16%
position in the yen, which declined modestly despite the Bank of Japan’s relaxation of yield curve
control in July. Just like the derivatives, a significant market shock could see dramatic yen
appreciation. Our c 8% oil position was the primary positive contributor, helped by continued OPEC
supply-side discipline.
Markets still believe in a ‘soft landing’ – inflation dissipates without a recession. Yet we stick to our
increasingly unfashionable belief that record monetary tightening’s full impact has yet to be felt.
Locked-in low rates and faster nominal GDP growth have likely deferred – but not de-fanged – the
biting point. Even America’s remarkably robust economy is displaying cracks. Covid-era excess savings
have been spent; consumer confidence is slowing; Q2 GDP growth and recent payrolls were revised
lower; US department stores are reporting rising credit card delinquencies.
Central banks could soon find themselves in a much trickier situation as inflation ‘base effects’ and
(now rising) energy prices switch from being disinflationary tailwinds to inflationary ones. If
economies continue to slow, this could raise recession risk by forcing central banks to stay
inappropriately tight. But if economies reaccelerate – especially in the US – it raises the spectre of a
second inflationary wave, with further rate hikes. From our derivatives to dollars, yen to bonds, the
fund remains well-positioned for the reassertion of gravity in financial markets, and the opportunities
that will lie beyond.

https://www.rns-pdf.londonstockexchange ... 3-9-10.pdf

[richfool]

Ruffer's 2023 annual report:

https://www.rns-pdf.londonstockexchange ... 3-10-3.pdf

or

https://www.ruffer.co.uk/2023-ric-annual-report