RIT Capital Partners (RCP ), the Rothschild-backed multi-asset fund suspended from the Fidelity investment platform last week over apparent concern with its high charges, has spoken of the ‘compelling’ value in its shares trading at a hefty 18% discount to net asset value (NAV).

Sir James Leigh-Pemberton, chair of the £3.6bn portfolio, said the underperforming fund had spent £105m buying back 5.6m shares between February and June, effectively increasing investors’ stake in the portfolio at a bargain price, a move he said, ‘we continue to believe … is a compelling investment for shareholders.’

His comment came in half-year results which showed a stabilisation after last year’s 13% slump in NAV which horrified long-standing holders of the self-styled capital preservation fund.

NAV dropped 1% to £23.64 per share at 30 June and with dividends included slipped just 0.2%, although the shares slid over 11% as investors worried about the trust’s 40% exposure to private assets.

That marked another huge underperformance of its target to deliver a real 3% return over inflation, a benchmark that required 5.5% to beat in the first half.

In addition, it contrasted with the 11% gain in the MSCI All Country World index which the global fund also uses to measure its performance, despite maintaining a low 37% allocation to equities, or shares, as the managers survey the weak economic outlook.

The interims did contain some reassurance for investors in relation to the investments in unquoted companies and private equity funds.

Although overall these fell slightly in the first half, the direct holdings in companies such as broker Webull had returned 4.5%, adding a modest 0.5% to NAV and accounting for 11.9% of assets in June.

On the private funds that account for 28% of the portfolio, Leigh-Pemberton said 93% had submitted fresh valuations at 31 March, easing concerns that the investment trust’s NAV was out of date after last year’s growth selloff.

These showed a slight gain and partly offset the first quarter decline when some of the positions were written down when end of December valuations were released, he said.

RIT did best with its quoted equities. Because of the focus of its private investments on digitalisation, the trust’s managers at J Rothschild Capital Management (JRCM) avoided the big US tech stocks that soared on the back of AI speculation. 

Instead, their stock picks in Japan, healthcare and hot ‘reflation’ trades such as US distributor Builders FirstSource saw this chunk of the portfolio return almost 7%, adding 2.6% to NAV.

Unfortunately, the strength of the pound weakened the contribution from non-UK assets and knocked 2.9% off NAV.

‘Given the outlook for the US and the UK economies, we continue to believe that sterling’s recent strength could leave it vulnerable,’ said managers Francesco Goedhuis and Ron Tabbouche.

They added that the allocation to private assets would naturally decline as public stock markets improved and more private companies could seek to float through initial public offers (IPOs).

‘Over time, we expect the share of NAV in private investments to naturally rebalance to a lower level as the IPO market reopens, our funds continue to make distributions, we take advantage of other opportunities to crystallise gains and fewer new investments meet our very high hurdles,’ they said.

The results also announced that Nick Khuu, JRCM’s head of public markets, had been promoted to co-chief investment officer with Tabbouche.

Mick Gilligan, head of managed portfolio services at wealth manager Killik & Co, said the trust’s consistent share buybacks showed conviction in the private portfolio valuations and, with fewer new investments being made, suggested buying the portfolio at a discount was the best use of investors’ capital.

‘This looks like good capital allocation in my view,’ he said.

However, Gilligan remained critical of RIT’s high ongoing charges which were 1.8% last year. ‘ This is a premium price and therefore needs to be substantiated with premium performance or the pressure will grow to reduce costs,’ noting it was already discouraging wealth managers.

RIT shares dipped 10p or 0.5% to £19.30.