The board of Ruffer Investment Company (RICA ) believes the struggling trust is still ‘roughly right’ for a market correction that could well be in the offing. 

The board reiterated its support for the investment team, even after two years of consecutive losses in share price terms.

In the £874m defensive multi-asset trust’s half-year report for the six months to the end of December, chair Nick Pink acknowledged that shareholders’ patience had been tested with disappointing returns. Over the six-month period, Ruffer’s net asset value (NAV) was down 0.4%, while its shares were up only 0.2%.

In 2024, the NAV was broadly flat and the shares dipped 0.7%, far short of the 9.5% gain enjoyed by the FTSE All-Share which is sometimes used as a comparator.

In February, Duncan MacInnes stepped down as manager of Ruffer, after nine years at the defensive multi-asset trust. His responsibilities were taken over by co-manager Jasmine Yeo, with two other managers joining the team – Alexander Chartres and Ian Rees.

Pink acknowledged that Ruffer had fallen short of its aim to generate consistent positive returns regardless of market conditions. He said disappointing performance was down to the ‘alchemy of the market holding two opposing ideas at the same time and retaining the ability to function’.

‘The investment manager correctly foresaw a more inflation-prone and volatile environment, fears over debt sustainability and the risk of higher rates. Ruffer carried protection accordingly,’ Pink explained.

However, even though the 10-year US treasury yield came close to breaching 5% at the end of 2024, counter-intuitively equity markets rose ‘concentrated almost entirely in the US and the ‘Magnificent Seven’’.

The board was encouraged to see Ruffer deliver during the ‘flash crash’ in the US stock market on 5 August 2024, with the strategy up 6%, gains that were not retained.

Quiet before the storm

Pink put Ruffer’s recent run of disappointing performance down to its 30-year history which shows the trust lags the market ahead of a correction. The chairman views the past two years as an example of this.

He highlighted a quote from Andy Haldane, former chief economist of the Bank of England: ‘In a world of uncertainty it is better to be super safe ex-ante than super sorry ex-post, roughly right than precisely wrong’.

Pink added: ‘The board is not complacent but continues to have confidence that the investment manager is positioning the investment portfolio to be roughly right for the uncertain times ahead.’

While it is not possible to predict when a drawdown may occur, he said it is worth noting that over the past 30 years, Ruffer’s periods of dull performance before drawdowns typically lasted two to four years.

‘Whilst there is nothing to indicate that this bull market will be longer or shorter than others, the recent unwind of speculative excess and froth might suggest that for Ruffer’s shareholders, 2025 will be closer to the end than the beginning.

‘The board is confident that the investment manager can capitalise when markets turn,’ he concluded.

During the last six months of 2024, the board bought back 24.8m shares (equating to 6.9% of the share capital) at an average discount of 5.1% in a bid to narrow Ruffer’s discount. This boosted NAV per share by 1.1p or 0.4%.

Since the start of this year, the board bought back a further 16.9m shares, equating to 4.4% of the share capital. Up to 14.99% of the shares can be bought back. If this allowance is fully utilised before December, the board will seek to renew the buyback programme early.

Over the past three years, Ruffer’s shares are down 7.5% which compares to a 1.8% gain by the average trust in the AIC’s flexible investment sector. Ruffer currently trades on a 3.9% discount to its assets.