Ruffer Investment Company (RICA ) has bought back nearly £17m of shares as the £1bn ‘wealth preservation’ fund grapples with the fallout from 2023, the worst year in its 20-year history.

Half-year results this week confirmed that despite a stabilisation in the second half of the year, net asset value (NAV) fell 6.2%, the first time in a calendar year since the investment company’s launch in 2004.

The shares dropped 10.6% last year overall as investors expressed shock at the 3% hit the multi-asset fund took in the first half due to the credit protection that managers Duncan MacInnes and Jasmine Yeo had bought to insure against stress in the corporate bond market, which did not transpire.

With the derating of investment company shares intensifying last summer, the company launched its first-ever buyback, initially spending nearly £395,000 on its shares before purchasing a further £16.3m up to the end of February, a total of 1.6% of share capital.

Although the discount has come in from a low of 7%, at 5% below NAV the shares are still trading a long way from the small premium they previously traded at. The weakness in the share price means shareholders have suffered a 13.8% loss over the year to 29 February, worse than the 8.3% decline in rival RIT Capital Partners (RCP ), which last year experienced a well-publicised and criticised slump in fortunes.

The derating means that with dividends included, RICA shares have lost a total of 2% in the past three years, underperforming its closest defensive rivals Personal Assets (PNL ) and Capital Gearing (CGT ), which have made 11.8% and 3.8% respectively. Over five years, however, it is ahead of both, with a 32.1% total return that also beats the FTSE All-Share index’s 27.7%.

RICA chair Christopher Russell said the company had generated an average 7% annual investment return since launch, with a risk-adjusted underlying total return that was 80% higher than the FTSE All-Share, proving the valuable role it could play in investors’ portfolios.

Nevertheless, he hinted that more drastic action could be taken, such as a tender offer to buy back a larger amount of stock, to revive a share price that at its current low rating is undermining Ruffer’s claim to be a reliable guardian of investors’ capital.  

‘The board makes its own independent judgement on whether it deems the discount to be a temporary aberration or a longer-term signal for which action other than a share buyback may be required,’ he said.

MacInnes and Yeo admitted: ‘There is no hiding from 2023 being a disappointing year, the worst in the history of Ruffer Investment Company – narrowly topping 2018’s -6.1% NAV TR [total return]. However, zooming out a little does provide some perspective, and shows a more balanced outcome.’

The cost of defensive puts and VIX volatility index derivatives to protect against stock market falls detracted another 2% from the fund’s returns as global markets were pulled higher by the Magnificent Seven US tech giants.

While RICA had small weightings in Amazon and Meta, its bearishly low 20% allocation to equities meant these were not a significant benefit.

Long-dated index-linked bonds, which the managers value as protection against a bigger inflationary problem than the overall market expects, did well towards the end of the year but throughout the year suffered from an earlier rise in interest rate expectations.

The pair’s bet on Japanese monetary policy returning to normal by holding yen, which served the portfolio well in the 2008 global financial crisis, proved premature as the currency fell 12% against the pound, detracting 1.8% from returns.

Having had a difficult year and further de-risked the portfolio in December in anticipation of markets and economies struggling with the delayed impact of the interest rate hikes of the past two years, the managers said the portfolio offered a variety of protective assets that were ‘cheaper and more interesting’ than a year ago.

‘This gives investors a golden opportunity. We have seen what inflation volatility can do to portfolios and now we have a second chance to prepare. A second bite at the cherry,’ they said.