RIT Capital Partners (RCP ) sank nearly 10% yesterday after the Daily Telegraph’s influential Questor column withdrew its previous tip for the Rothschild-backed multi-asset fund.

Taking his cue from broker Investec, which last month downgraded the £4.2bn global portfolio on account of a near-doubling in its private equity and off-market investments, Questor editor Richard Evans recommended his readers ‘sell’ the trust he backed in March 2021.

RCP shares, which had already tumbled 19% in the past year, dropped 9.6%, or 210p, to £19.90 on Thursday, widening their discount to the underlying net asset value (NAV) from 9% to 17% and putting them on Numis Securities’ ‘cheap’ list with a ‘Z-score’ of -2.2.

Bargain hunters are holding off with the shares slipping another 13 points, or 0.7% to £19.76 this morning. The stock has now plunged 26% over one year, reducing its market value to £3.1bn.

In his note in early December, Investec analyst Alan Brierley expressed concern at the ‘material increase in the risk profile in the past couple of years’ with the amount allocated by RCP’s fund managers to private market equities and funds rising to 45% from 24.2% two years ago.

Brierley said late-stage venture capital investments had not fallen nearly as much as publicly-traded shares, implying a big markdown could be imminent.

Evans said: ‘There is clearly a danger that when this “price discovery” takes place and is reflected in RIT’s net asset value, a sharp fall will be the result.’ 

Preferred rivals

While accepting that RCP’s other assets could offset these losses, he believed the risk was too great for a big portion of what was meant to be a ‘wealth preservation’ fund, saying he preferred less volatile rivals such as Ruffer (RICA ), Capital Gearing (CGT ) and Personal Assets (PNL ). 

Two weeks after Brierley published his note, RCP provided some reassurance that its valuation was up to date saying 92% of its private market funds were marked at 30 September valuations. The company said its NAV per share with debt at fair value at 30 November was £24.54. This was up 1.4% over the month but down 7.8% over 12 months. Numis estimates the NAV has since fallen to £24.09.

Following this, two board directors demonstrated their faith by buying shares at £20.02 and £19.88. The board has continued to buy a modest amount of shares in a bid to narrow the discount but may have to do more in response to the latest derating.