The managers of £1bn Ruffer Investment Company (RICA ) were cheered by positive returns in December but declared overall performance was ‘disappointing’ last year leading them to rejig their portfolio to ensure it was ‘properly balanced’ for 2024.

RICA’s net asset value (NAV) rose 2.1% in December and the share price doubled that, up 4.2% in the month. However, despite the positive month and final quarter to the year, the company still saw its NAV drop 6.2% in 2023 and the share price slid 10.6% as the discount widened to 3.8%.

In the final month of the year, fund managers Duncan MacInnes and Jasmine Yeo benefited from their fixed income exposure, which added 1.5% to asset value as yields fell on statements from the chair of the Federal Reserve that another interest rate rise was unlikely. Their US equity exposure also added to returns as the pre-Christmas ‘Santa’ rally sent shares higher, while their exposure to gold proved helpful.

The fund’s ‘protective positions’, which suffered as equities rose and credit spreads narrowed, limited the upside. However, this did not dissuade the duo of their necessity as they maintain there is ‘significant risk’ to markets.

They said the credit positions and derivative strategies that make up 13.3% of investments would serve as barriers for the portfolio if ‘liquidity conditions and the economy do deteriorate’.

‘The bond market is now pricing six interest rate cuts in 2024, double the amount anticipated by the Fed,’ they wrote in their monthly factsheet. ‘We believe a soft landing is now close to fully priced, leaving the market exposed to any pushback from policymakers or the data.’

In anticipation of a pushback, the pair cut their duration by ‘roughly half’ from its recent peak and sold US bonds and gold.

However, they added that a soft landing is ‘not an impossibility’ and the fund has more than a quarter in equities and commodities which would benefit if the market rallies along with the remainder of the fixed income positions and gold equities.

At the end of December the portfolio was 18.2% invested in equities, 6.8% in commodities, 7% in long-dated index-linked gilts and 4.2% in gold. The bulk of the portfolio, 48%, is in short-dated bonds.

‘Portfolio balance, which was painfully elusive at points last year, is now much more secure – evident in recent months as markets have rallied and the fund has delivered a positive return, despite its defensive positioning,’ the managers said.

‘We enter the new year with the mindset that we are continuing to travel towards the danger, rather than away from it, and we will not let a disappointing 2023 obscure what we see in front of us.’

The company has seen a decline since the start of the year with shares down 1.5% to trade at 268p, a 6% discount to the December NAV of 286p.