Investec analysts, who have been among the most bearish critics of RIT Capital Partners (RCP ), have upgraded their rating of the Rothschild-backed multi-asset fund after another weakening in its share price.

With the shares trading 30% below net asset value (NAV) earlier this week, compared to 26% when the £2.5bn listed global fund issued annual results in March, analysts Alan Brierley and Ben Newell replaced their ‘sell’ advice of 13 months ago with a cautious ‘hold’, saying fair value would see the shares trade on a discount of between 25%-30%.

Since the note was published yesterday, RIT shares have edged 0.6% higher to £17.60.

While impressed with the trust’s £184m of share buybacks in the past 15 months, which they said was a better use of capital than making new investments, the analysts said this had failed to reverse a ‘brutal derating’ in the shares, with the portfolio’s asset value having ‘flatlined’ over three years when global equities had rallied 27%.

They remain wary of the trust’s large allocation to private investments, which provoked their first downgrade to ‘hold’ in December 2022. This has fallen from 45% to 36% and is set to decline to 25%-33% in the next two years with the company in the process of selling several stakes that might boost NAV.

‘Our central thesis is that [the private book] is vulnerable to a valuation reset, following a period when a tsunami of easy money drove valuations of late-stage venture capital to extreme levels in 2020 and 2021,’ the analysts said.

Brierley and Newell welcomed the significant changes made at RIT’s wholly-owned fund manager, J Rothschild Capital Management which has been shored up by two appointments from the investment trust’s board.

In January former Ontario Teachers pension fund manager Maggie Fanari moved across to replace Francesco Goedhuis as JRCA’s chief executive, following investment banker Maxim Parr’s arrival last September to be its chair.

In addition, Nick Khuu, JRCM’s former head of public markets was promoted to chief investment officer after Ron Tabbouche emigrated to Israel in November.

The analysts hoped Fanari would provide ‘more institutional discipline and vigour’, adding a key challenge of the new team would to be reinvigorate performance of the trust’s quoted investments.

Although these performed in line with the MSCI All Country World (ACWI) index last year, which they conceded was a ‘credible outcome’ given the absence of ‘Magnificent Seven’ US tech stocks in the £3.6bn portfolio, over 10 years these investments had underperformed, generating a return of about 6.5% a year against the benchmark’s 9.5% annualised return.

‘This is particularly disappointing given that a meaningful proportion of this portfolio would have been sub-contracted to external managers, where we would typically look for their alpha generation to be closely correlated with fees paid,’ they said.

‘While this may appear blunt, the harsh reality is that RIT is facing up to a lost decade,’ they said in relation to its performance.

Since the start of 2014, NAV and shareholder total returns are 113% and 66.1% vs RIT’s equity/inflation hurdles of 166.9% and 93.6%. Meanwhile, as an additional point of reference, the MSCI ACWI total return (sterling adjusted) is 219.5%,’ they said.