The Ruffer Investment Company (RICA ) manager trio, made up of Alexander Chartres, Jasmine Yeo and Ian Rees, is urging investors to rethink diversification as a ‘regime change’ in global markets redefines traditional safe havens. 

In a ‘year end review’ for the 12 months to end of June, the £854m all-weather trust encouraged readers to ‘reappraise their approach to diversification’ in response to persistent high inflation and a shift away from the US exceptionalism narrative.

The managers explained that the high inflationary environment has prolonged the positive correlation between bonds and equities – traditionally used as a hedge against each other – while speculation over a rotation out of US assets has called into question the reliability of the dollar as a safe haven currency.  

‘While concerns about inflation and doubts over US exceptionalism are widely discussed, investor portfolios remain largely unadjusted,’ they said. 

‘As this regime change evolves, there is a greater need for genuine diversifiers, with an overarching focus on flexible, dynamic and active management. We believe this will be necessary to deliver true uncorrelated returns and liquidity which allows allocators to step into opportunities that arise amidst the volatility.’

Flexibility in action 

The team lived up to this sentiment over the year, making frequent changes in response to volatile markets.

Long-dated non-UK inflation-linked bonds were cut by 11.7% overall. The managers initially increased exposure to US Treasury inflation-protected securities as real yields spiked last summer, but the position was exited as prices recovered and yields fell during the first quarter of this year. 

‘Our successful trades in August 2024 and Q1 2025 reflects the role we think fixed income now plays in portfolios as a tool for delivering tactical returns, rather than as a reliable offset to equities,’ the managers said. 

Exposure to short-dated nominal bonds increased by 8.6% over the year, to 41% of the portfolio, as managers capitalised on the strength of the yen by selling a portion of the portfolio’s yen call options and increased yen cash exposure through short-dated nominal bonds in Japan.

The trust continues to hold the yen ‘for its protective characteristics’, according to the managers, who noted it ‘typically appreciates sharply in response to market stress’.

In terms of RICA’s credit and derivative strategies, the overall picture was unchanged over the year but fluctuated during the period, with the team saying VIX call options ‘proved critical’ in the Liberation Day sell-off. 

On the equity side of things, the trust continued to build its exposure to Japan, which grew 2.1% over the year, hoping to profit from recent corporate governance reforms.

A year of two halves 

The active approach paid off overall, with net asset value total returns up 5.3% in the year to 30 June.

Managers noted it was ‘a year of two halves’, with US exceptionalism causing returns to be roughly flat in the second half of 2024, but rising to 5.8% in the first half of 2025. The portfolio produced positive performance during all three phases for stock markets during the first six month of this year.

In local currency terms and before fees, the portfolio made 3.3% during the market rotation from the US to Europe and China in January and February, 1.1% during the sharp sell-off in March and April exacerbated by President Trump’s reciprocal tariff announcements and 1.7% during the relief rally that followed.

For a point of comparison, the FTSE All-Share index rose 11.2% during the year, but was significantly more volatile.

As tariff-related concerns drew investors away from the US in April, top performers included Chinese e-commerce giant Alibaba, British insurance and asset management firm Prudential and Luxembourg-based steel manufacturer ArcelorMittal.

A weaker US dollar also provided a foot up for gold and precious metal exposure.

Over the 12 months, the portfolio’s allocation to gold mining equities – held primarily via the WS Ruffer Gold fund – delivered a standout return of more than 43%. Holdings in silver (+22%) and platinum bullion (+32%) also made ‘meaningful contributions’.

According to Deustche Numis’ Ewan Lovett-Turner, RICA remains ‘an attractive portfolio diversifier’ with ‘a record of insulating against market falls, most notably during 2022, Covid-19 and the global financial crisis’.

He noted shares have traded at a persistent discount of about 4% following a bad run during the mega cap rally in 2023, noting ‘there have been several changes to the management team in recent years, and investors are likely looking for a period of consistency of returns from the new team.’

The board actively bought back shares over the period, totalling 56 million for a total of £153m.